Russia’s entry to WTO ends 19 years of negotiations

Russia's entry into the World Trade Organisation has been a long time in coming. Negotiations began soon after the breakup of the Soviet Union and the demise of communism and have been rumbling on – with many setbacks – for the past 19 years.

The accession means that the last major economic power has joined the global trading system. Russia was the only member of the G8 group not be in the WTO and the Kremlin will be hoping entry will provide the sort of boost enjoyed by China after it was admitted to the club in 2001.

That looks unlikely for three reasons. The economic climate is much frostier than it was in 2001, when the global economy was about to embark on its strongest period of growth since the late 1960s and early 1970s. China's economy was much better equipped to reap the benefits of WTO membership, with a strong manufacturing base contrasting with Russia's over-reliance on oil and gas. Finally, just as it proved impossible for other EU countries to replicate Ireland's Celtic Tiger period, so China gained from being the first former communist giant to join the WTO.

There are, of course, still potential benefits to Russia from WTO membership. Moscow is hoping for a surge in foreign direct investment that will help make Russian industry more efficient. Russia's exporters will gain to the tune of $1.5bn to $2bn (£950m to £1.3bn) a year from the dismantling of foreign barriers. Lower tariffs on imported goods should lead to cheaper goods in the shops, boosting the spending power of consumers.

But WTO membership comes at a price. Dismantling protective barriers means that large chunks of Russian industry may struggle to compete. Already, there are doubts about the viability of the automobile sector to survive in a more open trading system. The Kremlin has sought to make the transition less painful by negotiating a phased-in opening up of markets.

The WTO has agreed to this, in part because the Geneva-based body needs the accession of Russia to show that it is still functioning despite the stalling of the Doha round of trade liberalisation talks. But it does mean – given Russia's reputation for being a difficult place to do business – that foreign firms are likely to take a cautious approach to new investment.

Pascal Lamy, the director-general of the WTO, says Russia's entry is not a "big bang" accession. China's accession was a pivotal moment in the history of globalisation. Russia's entry looks more like the tidying up of loose ends.

The Guardian