TCS Daily


Trade Tyranny

By Evgeny Morozov - April 20, 2006 12:00 AM

From energy to trade, Russia is amassing an arsenal of weapons to undermine the pro-Western governments of its neighbors. The intended consequences of Russia's ban on Georgia's and Moldova's alcohol products -- the mainstay of their economies -- go far beyond bankrupting these countries. The ban purports to make both governments vulnerable to the irredentist claims of the separatist and pro-Russian regimes in Abkhasia, South Ossetia, and Transdniester.

It is high time for Russia's partners in the Group of Eight to reverse the Kremlin's rising tide of economic terrorism and make Russia's entrance into the World Trade Organization (WTO) conditional on its adherence to the norms of free trade, democratic governance and, above all, non-interference in the politics of its neighbors.

Securing WTO membership has always been a top priority for Russian President Vladimir Putin. Although Russia applied in 1993, it was only after Putin took power that Moscow started a well-orchestrated effort to get in. For Putin, membership is a form of recognition of Russia's modernized economy; in its symbolism it is akin to Yeltsin's fixation on making Russia part of the G7.

Without any other way to wield soft power (Russia does not aim to join the EU, and its expulsion from the G8 is unlikely), the EU and the US have only one way of soliciting corrective action from Kremlin: delay Russia's entry into WTO and attach further conditions to it. The EU has already reconsidered its earlier support for Russia's membership. Now, Brussels wants to obtain further guarantees over Russia's abolishment of the air taxes for EU planes flying over Siberia. However, conceding the air tax -- in itself, just a petty footnote to Russia's other sacrifices -- would invite changes to other parts of the agreement.

Brussels should use the air tax cause to reopen broader negotiations with Russia, forcing Moscow to deliver on its commitments on energy security. This means persuading Russia to ratify the Energy Charter Treaty, which will start the liberalization of the Russian energy sector, opening it up to foreigners beyond retired German chancellors.

The US plays an even more important role in Russia's admission to the WTO, being one of the three countries that have not yet signed bilateral treaties with Kremlin. In this year's Trade Policy Agenda, the US criticized Russia's economy on a host of issues, ranging from too many sanitary restrictions to the ubiquitous violation of copyright law. There is no sign that Russia will improve on any of those dimensions—or, as in the case of liberalization of the financial sector, that it even aspires to. The compliance timeline of four to six weeks cited by Putin's aides is not realistic; Kremlin should be told to develop a long-term strategy to address those concerns.

The US should also offer more vocal support to two other WTO members -- Georgia and Moldova -- who, because of their opposition to Russia's unconditional WTO membership, are now suffering from the wine wars. The Kremlin must learn that the political extortion, which accompanies the recent trade disputes, is not becoming of a WTO applicant. George W. Bush, instead of taking Russia's WTO talks under his personal control, should be the man to communicate that to his friend Vladimir.

Of paramount importance to the US and the EU should be having Ukraine join WTO before Russia. This will award the genuine trade liberalization efforts of Viktor Yuschenko's administration, and ensure that the pro-Western Kiev gets a chance to complete its trade negotiations with Moscow outside of the energy "tit-for-tat" framework.

Ukraine should not deal with the Kremlin alone, especially if the newly formed government of Yulia Timoshenko voids the murky gas deals the previous government had concluded with Moscow. The lifting of the Jackson-Vanik trade clause was a step in the right direction. Now, Ukraine, which has five more bilateral deals to conclude than Russia, should be given a fast-track to membership.

One can sense Kremlin's vulnerability all over the irritated remarks coming out of Moscow. Last week the Duma requested one of its committees to prepare an appraisal of the benefits and costs of the Russian admission into WTO, given the new pressure that is now being put on Russia by the US. The speaker of Duma, Boris Gryzlov, commented that Russia's accession to WTO should "take place only on favorable terms". Even participation of the American firms in the Stokman natural gas project has been put at risk; many Western analysts believe that Russia will use Stokman to secure its timely and smooth admission into WTO.

"For us it is not a question of whether or not we join the WTO...It is more important for us on what terms we join," said Putin at the traditional meeting with the country's oligarchs in late March. Putin is not entirely sincere. For the G8 giant that Russia claims to be, the failure to join the WTO would be a big fiasco. Therefore, the terms set by other WTO members should be high enough to teach Putin that economic terrorism -- whether prior or subsequent to membership -- is not welcome in their organization.

The author is a columnist for the Moscow-based Akzia newspaper.

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1 Comment

Free Trade Cuts Both Ways
There is something incongrous in saying that for Russia to discourage trade is "tyranny" & then advocate a policy of discouraging trade (which is what denying WTO membership on political grounds entails).

Will we also see TCS calling for the expulsion of the USA from the WTO because of their "tryannical" refusal to import Cuban cigars.

All the NATO countries would also face expulsion because of their trade sanctions on Serbia. The comparison of Yugoslav wines being as unavailable in western shops (while Hungarian, Rumanian & Blugar are plentiful) as Transdeinester are in Russia has been made previously.

To say that Ukraine is more free-marketish than Russia is nonsense - it is merely more pro-NATO.

The EU has already guaranteed its support of Russian membership of the WTO in return for Russia's signing Kyoto. This may have been a particularly stupid deal on the EU's part (as a climate sceptic I think it was) but the western powers have to often proven that their word is valueless (for example our guarantee under the Helsikni treaty to "take no action against the territorial integrity or unity" of other signatories. Ultimately the coinage of international affairs is a country's word & we are printing junk bonds.

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