After waiting for nearly two decades, Russian appears to be on the brink of joining the World Trade Organization (WTO).
Marshall Goldman, the former associate director of the Davis Center for Russian Studies at Harvard University and author of numerous books on the Russian economy, talked to RFE/RL correspondent Tom Balmforth about the implications of membership.
RFE/RL: So, is Russia’s 18-year wait to join the WTO really finally over?
Marshall Goldman: Well, it seems to be that that’s the case. I think there’s more and more willingness from the outside world to include Russia in international events and not to make it an outcast and an outlaw, but to include it, co-opt it in effect, and to soothe the savage beast, so to speak.
RFE/RL: When Russia formally joins, what will this mean in practice? What will it mean for entrepreneurs, consumers, and ordinary Russians in general?
Goldman: Well, on the assumption that Russia joins wholeheartedly and doesn’t try to set up exclusion zones for certain forms of behavior, I think it would be good.
Russia has many natural advantages certainly in terms of raw materials, and to include that with investment from the outside world is good. It’s better to have them inside the tent than outside and feeling excluded.
RFE/RL: Are you saying that Russia may try to join the WTO with certain conditions? And would it be deemed acceptable to do so?
Goldman: It’s not allowed, no. The idea is that if you join, you join. But it’s not one individual decision-maker who says we’re part of it. You’ll have to have cooperation by different parts of the economic framework to make sure that everyone’s cooperating.
If you have a large enough number of people who try to set up separate operations to exclude it one way or another, then the whole purpose is defeated and you don’t want that. But there will be some people whose economic circumstances will be adversely affected and they are certainly going to try to frustrate the effort.
What you have to do is have enough of those people within Russia who see the advantage of membership doing everything they can to co-opt the opponents and have everyone join in. But that doesn’t happen overnight.
I don’t want to say that Russia would be the only country where you would have this internal battle. Every country has that internal battle where there are those who say they want tariff protection and those who say that we all stand to benefit if everyone cooperates and participates. It’s not a simple matter — it really depends on who is the most outspoken and who is the most effective politically in bringing this about.
Unsettling Change, For Some
RFE/RL: There is some opposition to membership from influential people in the business community, where some will need to change the way they operate. Could you elaborate on this a bit?
Goldman: I think you can expect a big battle on their part. They have a lot to lose. Russia is not unique in that sense — this struggle has taken place in every country that’s joined. There are those that say, “We don’t want to have outside competition and we are going to do everything to sabotage that effort.” Russia is not unique in the sense that people are opposed to relaxing of tariff protection.
It will be an interesting struggle. We’ll see just how strong those who want to integrate Russia into the world economy are compared to those who do not.
RFE/RL: Which sections of the business community do you expect to be the noisiest in their opposition to WTO membership?
Goldman: I think we have to wait and see until the struggle begins because some people who you would think eager to join may suddenly decide that it’s too dangerous for them. It’s going to involve change and change is always unsettling for people who have strong positions in the status quo.
I would assume that people would be opposed to it in the automobile industry. Right now domestically made automobiles have protection in Russia. To the extent that tariffs are reduced, you are going to have more competition from manufacturers outside Russia. I think that’s where the struggle’s going to take place: between those who feel they have been able to operate within the tariff walls and those who worry that once those walls come down they will be driven out of business.
I would again say that Russia is not the only country where that struggle takes place. It’s universal. There is always that sense. It takes somebody with a lot of foresight to see that everybody is a lot better off in the long run once those trade restrictions are reduced and that you have a comparative advantage. But there is no doubt that there are going to be shifts in political power and that is unsettling to those who feel threatened.
More Winners Than Losers
RFE/RL: Will WTO membership help in Russia’s efforts to modernize its economy and diversify from its dependence on commodities?
Goldman: Traditionally in economic theory and in economic history that’s the way it’s been: that after a similar tumultuous period of adjusting that some people are certainly going to suffer. The expectation is that in the long run there are going to be more people who benefit from that operation than those who will be put out of business.
But it takes a lot of political will to subject yourself to that kind of experiment. I’m not sure how willing Russian businesses will be to risk that unknown. If you’re strong now [then you’re thinking]: “I’m strong now, Jack, and doing very nicely now — why do I need to undergo some new kind of life that’s just too dangerous?” But you have to give them credit for their willingness to try.
RFE/RL: It’s been 18 years since Russia began its bid to join. Why did it take so long, and why is it finally happening now?
Goldman: When you’re a big country like Russia, you think that you have all your comparative advantages within the country because you’ve got so many different wealth situations and so many different manufacturing situations. It’s always a little unsettling to think that there might be foreign businessmen who will come in and gain an advantage over domestic manufacturing and that’s part of the process of growing and developing.
In the long run, it’s not only the world that’s better-off if Russia’s integrated — Russia’s better-off. But as an individual, it’s hard to see if you do know that you may have to experience trauma in the process and you say: “I don’t need that. I’m alright, Jack, I’m happy now.”
It’s not an easy process. I think it’s important to understand that concerns within Russia are similar to those concerns within every country that’s undergone that transition. The United States is no exception. When we joined, we had very strong tariff protection against the outside world in the 1930s. To try and reduce that kind of protection was not an easy political process. I think the Russians will need some support, but they are the ones who are ultimately going to need to bear the sacrifice and it will be an interesting process to watch.