Streetwise Professor

July 15, 2011

Who Will End Up Behind the Wheel

Filed under: Economics,Politics,Russia — The Professor @ 7:36 pm

On several occasions I’ve opined that when push comes to shove, Vladimir Putin could not countenance joining the WTO and adhering to its rules that would restrict his ability to shuttle rents around to maintain the political equilibrium.  Here’s more evidence:

He said no trade-off is possible between Russia’s new car assembly rules and its membership in WTO. “Our position, can’t be changed,” Mr. Putin said.

The rules, which effectively trade off the low import duties on car components and the billions of investment in the Russian car industry are opposed by U.S. and EU.  To get the carrots, the car makers have to boost the capacity of their existing facilities or build new ones, and source components locally.

Russia’s trade partners consider the rules dangerous for the global car trade, as varying import duties on cars and parts — and linking the lower duties on parts to higher production capacities — would distort the global car trade and could end up artificially  stimulating the export of Russian-built cars.

. . . .

“It’s a red line we can’t cross,” Mr. Putin said, talking about the new car assembly rules on Friday. “We can’t trade-off the interests of our car makers.”

WTO presents a great example of the dissonance between Putin and Medvedev.   The latter routinely mentions his ambitions for Russia to join the WTO; the former routinely throws up roadblocks and raises doubts.  You can’t go to long with two sets of hands on the steering wheel: I’m betting Putin will eventually grab sole control–especially since Medvedev appears to be somewhat challenged in the driving department:

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