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Streetwise Professor

December 30, 2010

A Putin Torpedo Fired at the WTO?

Filed under: Economics,Politics,Russia — The Professor @ 4:08 pm

I’ve been skeptical all along about Russia’s–read Putin’s–intentions regarding Russia’s entry into the WTO, and if it does enter, its intention to adhere to the rules.  Today a couple of stories from the horse’s mouth bolster this skepticism.

From the first story:

Prime Minister Vladimir Putin said on Wednesday that questions remain over Russia‘s entry into the the World Trade Organisation but that Russia can be expected to join the trade rules body in 2011.

Putin told reporters that Russia could use protectionist measures other than tariffs to support domestic industries once it joins the WTO, and expressed concern about the effects of membership on Russia’s automotive industry.

From the more extensive article:

Putin said questions remain over Russia’s campaign for membership of the WTO, which has been helped by Obama’s public backing. The eventual membership is also expected to boost foreign investment.

“There is no final result yet but we have agreed the main parameters with our main partners,” Putin said.

Russia “can be expected” to join the WTO in 2011, he told reporters, in line with predictions by other officials.

The government has raised a number of export duties as part of Putin’s new economic policy aimed at the revival of Russia’s industrial might. Putin indicated that Russia could implement protectionist measures even after WTO accession.

Putin said he was especially concerned with the post-accession future of the auto industry which saw massive state support and foreign investment. He said levels of protection in the United States, western Europe and China were higher than in Russia.

“If we see that our car industry is not treated on equal terms we will find such protection mechanisms,” Putin said. He later specified that the measures would be applicable under the WTO rules and will relate to technical regulation.

Putin’s remarks were likely to raise concerns among WTO members over Russia’s behavior in the global trade body and complicate talks currently underway in Geneva.

One reasonable hypothesis is that Putin wants to complicate talks.  As I’ve written before, protectionism is one of the tools that Putin uses to allocate rents in order to sustain political equilibrium.  A rule-based system is antithetical to such a discretionary approach which is essential to maintaining the balance between competing factions and interests within Russia.  Russian admission to WTO–with the responsibilities and constraints that go along with it–has serious disadvantages from Putin’s perspective. (That said, there is truth in Putin’s criticism of the policies adopted in the US and elsewhere to prop up domestic auto sectors.  And few governments have not attempted to manipulate or evade WTO strictures to benefit powerful domestic constituencies.)

There may be another motive as well.  WTO is more amenable to Medvedev and his (in Russian terms) more economically liberal, modernizationist, faction.  And if this article from Argumenty Nedeli is to believed, Putin is “seething” over Medvedev’s uppitness in thinking that he just might like a second presidential term (no link: via JRL):

This year made it plain that maintenance of the so called tandem in the operational condition until 2012 is Dmitry
Medvedev’s job now. Moreover, it is also clear that Medvedev is up to the task. Before Vladimir Putin, retirement of the head of state was extremely painful so that no leader resigned if and as long as he could help it. Putin demonstrated in 2008 how it could be done without any loss of political influence.

Medvedev will probably strengthen this trend and set the precedent of planned rotation of the presidential power within a narrow circle of senior functionaries.In any event, the premier’s team is still seething over reports in the media on presidential aspirations of Medvedev in connection with 2012. It is believed in the circles close to the premier that this information is constantly leaked to the media from at least two groups close to the president -his friends (Ivanov, Vinnichenko, etc.) and pro-American lobby (Voloshin,
Dvorkovich, Prikhodko).

There is also the third group of support, external one. The premier’s team perceives it to be located in Washington where the current U.S. Administration will definitely welcome Medvedev’s re-election.

It is said in the meantime that the circles close to the premier persuade Putin to refrain from an open and direct
confrontation with Medvedev. The premier seems to be listening to the advice. His latest initiatives clearly aim to weaken Medvedev and the clout he wields.

Undermining WTO would certainly be consistent with aims “to weaken Medvedev.”

That said, I take all tea-leaf reading about what goes on in the Russian government with considerable caution.  Who knows what games are being played.  But Putin’s provocative remarks about WTO are consistent with his interest and his system of rule, and at the same time put Medvedev in something of a compromising position.  Given that Medvedev is arguably less invested in the Putin system, and is certainly critical of it rhetorically, Putin’s words could have broader implications.

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14 Comments »

  1. If even you accept that non-Russian governments within WTO protect their domestic industry, I don’t see any problems with Putin stating that he’ll be able to do the same thing from the WTO. It stops domestic worrying, and I’m sure other governments aren’t stupid enough not to know that Russia isn’t alone in being protectionist.

    Comment by Andrew #2 — December 30, 2010 @ 5:52 pm

  2. The most amusing thing about all this is that Putin genuinely seems to think the Russian car industry is some undeniable good that needs protecting. If he had any economic sense, he would let Russians buy imported cars without restrictions, thus making them wealthier. If it is jobs he is worried about, then he should lower the barriers to entry such that foreign car plants in Russia can compete without protectionism. But propping up an underperforming car industry makes no sense whatsoever, as the British found out and Obama is doing his best to avoid finding out.

    Comment by Tim Newman — December 30, 2010 @ 9:14 pm

  3. That depends on whether you are a keynesian or not. Remember digging holes in the ground? (comparing to that russian car industry is some undeniable good)

    Comment by a.russian — December 31, 2010 @ 9:00 am

  4. Some areas of Russian industry would benefit greatly from straightforward competition, and the auto industry – such as it is – is one of them. It’s not like Russia could fairly claim a threat of being undercut by a lower-paid workforce. However, simply invoking the implication of protectionism as a means of regulating trade is hardly a spittle-flecked threat. As Andrew #2 correctly points out above, Russia would hardly be unusual in using selective protectionist policies to safeguard its own position. In the case of WTO rulings, if it got that far, it would also be far from the first to ignore them if it chose to do so.

    Comment by Mark — December 31, 2010 @ 12:39 pm

  5. Russia’s–read Putin’s–intentions regarding Russia’s entry into the WTO, and if it does enter, its intention to adhere to the rules

    But, Craig, surely Russia will not be able to violate the WTO rules as colossally as USA does. How can “free trade” square with the fact that the US government continues to totally economically boycott another WTO member – Cuba – and even punish those, who bring Cuban-made goods into USA with up to 10 years in prison and $500 000 fines.

    That’s totally unique. Only Comrade Stalin was equally brutal towards those, who brought goods from “enemy” countries. He too gave them 10 years. But that was more than 50 years ago.

    Comment by Ostap Bender — January 1, 2011 @ 9:51 am

  6. @Tim,

    Yeh, Putin’s protectionism of the Russian car industry is not good, but certainly not nearly as gross as USA’s protectionism of, say, the steel industry.

    Could the powerful lobbies have something to do with such acts of protectionism? In fact, it’s time that the US government admitted the truth and changed its motto “for the people and by the people” with “for the powerful lobbies and by the powerful lobbies”.

    And the slogan “Give me liberty!” should be replaced with “”Give me a big re-election campaign contribution!”

    Comment by Ostap Bender — January 1, 2011 @ 9:59 am

  7. OSTAP BENDER:

    Your hysterical gibberish makes Russia look like a nation of lunatics.

    Are you REALLY ready to accept that US behavior is the standard for Russia? If so, then since Russia doesn’t have contested elections with public debates and genuine opposition in the parliament, it is automatically an illegitimate state which must be disbanded.

    What’s more, your perverse analogy to Cuba is the result of a diseased brain. Are you really suggesting you think Russia might hesitate for a second because of WTO rules to punish Ukraine or Georgia as the US is doing in regard to Cuba if the US attempted to install offensive ballistic nuclear missiles in one of those countries? You also totally ignore the fact that the USA bows to MANY, MANY WTO strictures that could be argued to be against its national interests because it respects the rule of law. Russia has NEVER done this, and there is NO evidence it EVER will. Certainly none is to be found in the odious pronouncements of its proud KGB spy dictator.

    The problem with emotional, hysterical neo-Soviet idiots like you is that you can’t think even for a second before you spew out your impulsive gibberish. Exactly this same fault had the entire world rolling on the floor in laughter at the outbursts of the Soviet cretins, and the neo-Soviet ilk is no better.

    Only when the day comes that Russians can justify their behavior on its own merits, rather than by saying “the USA does it so we can to,” will Russia ever hope to claim the status of a civilized country.

    Comment by La Russophobe — January 1, 2011 @ 5:49 pm

  8. Sorry, LR, for getting you all upset. It is hard to follow your “logic”. but let me give you some general answers.

    First of all, Russia is ruled by two men who enjoy the trust of the vast majority of voters: Medvedev and Putin. On the other hand, USA is ruled by a man who enjoys support of a minority of voters, while the majority are redneck morons who hate Obama. Since democracy is the rule of the majority, Russia is more democratic than USA these days.

    More importantly, the entire US electoral system is NOT a democracy. It is a duocracy: the rule of the Republicans-Democrats tandem who have written laws and rules in such a way as to make it impossible for a third party to ever become viable. Even the insulting “plurality” rule, which says that if, say, 10 candidates vie for Presidency, a candidate can be elected with as few as 11% of the vote. This makes voting for minor party candidates a “wasted vote”. REAL democratic parties like the Libertarians can never become popular.

    In democratic countries, this problem is solved by having run-off elections between top 2 candidates. But USA is not among democratic countries.

    USA is ruled by the tandem of Reps-Dems, who answer to nobody except the wealthy lobbyists and who rob the poor taxpayers and give to the rich Wall Street, oil and military-industrial corporations.

    Only when the day comes that Russians can justify their behavior on its own merits, rather than by saying “the USA does it so we can to,” will Russia ever hope to claim the status of a civilized country.

    But you and I are NOT Russian citizens. We are Americans. And to be honest, the problems in Russia concern me 100 times less than those in my own country – USA.

    But you constantly insist that you don’t give a damn about your own country – USA – and are only concerned about Russia, a country that’s across the Globe from you, even though you know nothing about its language, culture or life.

    So, why are you so indifferent to your own country – USA? Why do you not give a damn about making your own country better, LR?

    You don’t care about USA, you hate Russia, China etc. So, what country do you care about and love?

    I bet the answer is: none. You are a person severely and unjustly discriminated against by Mother Nature. That’s why you hate and envy Masha Sharapova so much.

    Learn to live with your handicaps, be they in the area of brains or looks. And don’t take it out on the world by devoting your entire life to xenophobia, La Russophobe.

    I

    Comment by Ostap Bender — January 2, 2011 @ 4:08 am

  9. Soit dit en passant, “La Russophob”e, pourquoi avez-vous choisi une plume à consonance française-nom?

    Snobbery? Pretension? Inferiority feelings about your own American culture? All of the above?

    Comment by Ostap Bender — January 2, 2011 @ 4:40 am

  10. Here goes deviant Ostap Bender again, spouting his lies as usual.

    When talking about the crash of the Polish Presidents Tu-154, he commented why the Poles use it when the Russians had grounded it, which was a bald face lie.

    Russian airlines should ground Tu-154s, watchdog says

    Two dead as Russian plane lands
    Crash focuses attention on Tupolev-154
    Russia’s airlines should ground their Tu-154 planes, after a fire in Siberia which killed three people, the country’s transport watchdog says.

    http://www.bbc.co.uk/news/world-europe-12105506

    Russian Airlines still use the Tu-154 in great numbers. Everything Ostap the bender says should be considered a lie unless proven otherwise.

    Comment by Andrew — January 2, 2011 @ 11:55 am

  11. Here goes deviant Ostap Bender again, spouting his lies as usual.

    When talking about the crash of the Polish Presidents Tu-154, he commented why the Poles use it when the Russians had grounded it, which was a bald face lie.

    Russian airlines should ground Tu-154s, watchdog says

    Crash focuses attention on Tupolev-154
    Russia’s airlines should ground their Tu-154 planes, after a fire in Siberia which killed three people, the country’s transport watchdog says.

    http://www.bbc.co.uk/news/world-europe-12105506

    Russian Airlines still use the Tu-154 in great numbers. Everything Ostap the bender says should be considered a lie unless proven otherwise.

    Comment by Andrew — January 2, 2011 @ 11:56 am

  12. Yeh, Putin’s protectionism of the Russian car industry is not good, but certainly not nearly as gross as USA’s protectionism of, say, the steel industry.

    Agreed. All protectionism, especially that adopted by the EU and USA, are counterproductive and costly to the general population of the country concerned.

    Comment by Tim Newman — January 2, 2011 @ 10:15 pm

  13. Actually Ostap, I recall you claiming that you had both Russian and US citizenship.

    All these lies Ostap……shame on you.

    Comment by Andrew — January 3, 2011 @ 8:16 am

  14. Andrew,

    You are a moron and a liar. I never claimed to be a Russian citizen, because I am not. Please leave me alone with your constant “recollections” about citizenships and Tu-154 and other crap. You have the mental and emotional development of a 4 year old hermaphrodite. You are also a thief. You work for a construction company in Georgia, receive a large salary, but devote your entire day to posting to the Internet.

    Look, ever since I made fun of your stupidity and lies awhile back, you are totally preoccupied with trying to get back at me by responding to every single post that I make to SWP and LR. You are like a Pavlovian dog that salivates each time a bell rings.

    There is a good Russian saying: “Don’t touch sh*t, lest you want a stink”. I am sorry I ever engaged in a conversation with you. I don’t want to talk with you any longer. It’s a waste of time.

    Comment by Ostap Bender — January 4, 2011 @ 11:23 pm

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