Russia is widely regarded as the sick man of Europe, but is nevertheless one patient that the US seems very eager to nurse back to health. The best explanation for that would, of course, be the symbiotic relationship that exists between doctor and patient, policeman and traffic violator, or even mainliner and drug-dealer. After all, the US is heavily export dependent. Exports came to 13% of GDP in 2008, and growth in exports accounted for 47% of overall American GDP growth over the prior three years. No wonder the US remains committed to supporting Russia?s WTO entry.
Driven by strong oil prices, Russia?s $169.8 billion trade surplus in 2008 actually gained from chemical fertiliser and pesticide exports to the US. Moreover, the world?s 8th biggest exporter, Russia shipped $471.6 billion worth of exports in 2008. Principal Russian exports include petroleum, natural gas, wood, metals, chemicals as well as civilian and military manufactured goods. Based on 2008 statistics, Russia?s largest export clients were the Netherlands (10.8%), Italy (8%), Germany (7.8%), Turkey (5.9%), Ukraine (5.9%), China (4.5%) and Poland (4.4%).
As for imports, the CIA World Factbook says that Russia imported $302 billion worth of foreign goods last year, including vehicles, machinery, plastics, medicines, iron, steel, consumer products, meat, fruits and nuts. Leading suppliers were Germany (13.4%), China (12.8%), Japan (6.5%), Ukraine (6.3%), the US (4.4%), Italy (4.3%) and South Korea (4.1%). In total, Russia?s international trade amounted to $773.5 billion or 46.1% of its overall GDP. This compares with 25% for the US and 59.5% for Canada.
But recession also accounts for why Russia?s economic growth has bucked its trade performance and hugely decelerated?to just 5.6% in 2008 after 8.1% in 2007. The effect of that on unemployment has been serious, and worse is to follow since the economy is expected to contract by 7.9% over 2009. This is strange going indeed for what used to be the third-fastest growing Bric economy, after China and India.
Given the recession, no wonder it is not yet a WTO member, or anywhere near as open as Brazil, China, India, Indonesia or Mexico. That contrasts with many other G20 members who have also raised trade restrictions (mostly import tariffs) in the period under review. But, even then, their governments are attentive to the beneficial role that lowering trade restrictions can play by reducing consumer prices and producer costs, stimulating aggregate demand and helping to reverse the contraction of global trade.
The current global economic crisis provides another opportunity also to examine the link between antidumping actions and the business cycle. In 2008, the number of anti-dumping initiations increased by 28% compared with 2007. Eighteen WTO members reported initiating a total of 208 new investigations compared with 163 initiations reported for 2007. Even the number of new measures applied increased by about the same rate as in 2008. (A total of 15 members reported applying 138 new anti-dumping measures, 29% higher than the 107 new measures reported for 2007.) These are amongst the more pressing reasons why Obama went to Russia!
North America has become a dangerous place for trade: trade relations among Nafta partners have deteriorated, with preferential trade suffering the most. The US tightened border restrictions on intra-Nafta overland transportation, and Mexico retaliated by placing penalty duties on 80 US export items. Mexico has seen its GDP contract sharply, as has Canada to a lesser degree.
Yet, US exports to Russia have been trending up and narrowing the bilateral trade imbalance since the last presidency. What President Obama seems to be chasing is not so much the receding chimera of prospective commercial growth, but the attained impetus of ever-higher exchange. Exports of US merchandise to Russia went up by 57% in 2007, slashing the bilateral deficit by $3.1 bn, to $12 bn. Even on the FDI front, this year?s World Investment Report by Unctad says that US direct investment in Russia stood at $2.0 bn (2008) after having jumped from $1.5 bn (2007).
But more must be done by Russia in the form of lowering barriers to trade and investment. The USTR has a list of ?dos?, which includes issues like agricultural support, IPR violations, subsidies to state-trading enterprises and onerous regulations against the entry of US exports into Russia. High value-added items are at risk: encryption packages, American SUVs & luxury cars, foreign airplanes have high tariff barriers. Decrees and regulations complete the picture. Meanwhile, even the new IPR legislations passed by the Duma do not address pharma products. Even if Russia passes legislation to align customs regulations with WTO norms, it will have to forego frequent changes, and publish all.
Also, the US will have to work hard to succeed with Russia?one of the most closed economies, ranked at just 114th in the WEF?s Global Enabling Trade Index 2009. (Indeed, Russia even queered its WTO pitch by demanding to join, not individually, but as a customs union.)
About the only sector in which the Russian economy is more open than otherwise is the one for services (banking, insurance, distribution). In these, it is open even to US suppliers.
Yet the ?green shoots? promise some impressive resurrection and the Bank has been even praising Moscow?s response to the recession. Labelling it ?swift, coordinated and comprehensive,? it assesses that to be the reason why the Russian stock market has rebounded from its nadir in 2008.
That apart, now the US and Russia have even laid down a framework to reduce nuclear arsenals?Obama and Medvedev working together to draft a new arms control agreement to eventually supersede START I (Strategic Arms Reduction Treaty).
And there is more: this year?s first Moscow Summit resulted not only in a commitment to enlarge bilateral trade, but also pegged US FDI higher. Russia is clearly eager to reformulate the world order with other Bric economies?something it revealed at Yekaterinburg, too, on June 16, through its call for a new reserve currency.
Finally, Russia seems to be very serious about adopting western ways in shielding, and supporting its industrial and financial sectors.
?The author is a fellow at the Maulana Abul Kalam Azad Institute of Asian Studies, Kolkata. These are his personal views