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Abstract
Economic modernisation in Russia will require rapid and sustained productivity growth. The available evidence suggests that a key ingredient of productivity growth is an increase in the intensity of economic competition. This article considers the role that Russia's accession to the World Trade Organization (WTO) might play in increasing competition in the Russian economy and, in turn, facilitating economic modernisation. It is argued that while WTO accession provides an opportunity to help those in favour of a competition-based model of economic modernisation in Russia, accession without any corresponding reform of the existing system of political economy in Russia will be unlikely to yield significant results.
Notes
1 All data, unless otherwise specified, are taken from the World Bank Development Indicators database.
2 On the distinction between limited and open-access orders, see North et al. (Citation2009).
3 All data on trade openness are taken from the World Bank Development Indicators database.
4 The Balassa RCA index is the ratio of the share of a product group i for country j and the share of the exports of the product group i in the total export for a group of countries. The RCA index indicates whether or not country j has a comparative advantage within a certain product i. The index for country j, product i, is RCA ji = 100 (Xji /Xwi )/(Xjt /Xwt ), where Xab is exports by country a (w = world) of product b (t = total for all products). Values higher than one indicate a comparative advantage in that product.
5 A full description can be found at WTO (Citation2011).
6 WTO members are required to set limits or bindings on tariff rates. Frequently the bound tariff rates are higher than the actual or applied tariff rates, allowing the country some flexibility in its tariff policies but also providing to exporters the market assurances that tariffs will not exceed established ceilings.
7 Just under 40 per cent of Russia's tariff lines will have their final bound rates implemented upon accession, and over 80 per cent will have their final bound rates implemented within three years.
8 Within the wider group of manufactured goods, Russia has, after the full implementation periods, committed to reduce tariffs on machinery, construction equipment, electrical machinery, medical equipment, high-tech instruments, chemicals and plastics, steel products, agricultural equipment, consumer goods, and IT products. Significantly, Russia also committed to eliminating all industrial subsidies, or to at least ensure they are not dependent on exportation or favour local goods over imports.
9 TRQs allow countries to establish a specific volume of products that can be imported at a relatively low tariff rate, but impose much higher tariffs on imports over the quota.
10 Russia refused to allow foreign banks to open branches in Russia, but will allow foreign banks to open subsidiaries (so-called daughter banks) which come under the regulatory control of the Russian central bank. Russia has agreed to discuss the issue of bank branching upon the initiation of negotiations for membership of the Organisation for Economic Co-operation and Development (OECD).
11 However, it is by no means clear that Russia's poor performance during the Great Recession can be explained by its economic structure alone. There is cross-country evidence that, if anything, countries that are more reliant on natural resource exports experienced milder growth decelerations during the recession (Connolly, Citation2012). Instead, it is likely that Russia's particularly poor performance can be explained by a combination of: exposure to the drop in commodity prices; poor institutional characteristics that encouraged a rapid depletion in inventories (Hanson, Citation2011); and an openness on its capital account that is unusual for an economy at its stage of development.
12 See Pavlova (this issue) for a study of corruption and its effects on Russian society.
13 This section draws heavily on Connolly and Hanson (Citation2012).