05.10.2008
October 03, 2008 (the date of publication in Russian)
Andrey Kobyakov
THREATEN MOSCOW MORE FREQUENTLY!
Pressure from the West may provide a reverse effect, expanding Russia's economic opportunities
The perverted logic of Washington's propaganda, describing Georgia, a real aggressor in the latest Caucasus conflict, as an "innocent victim", and Russia that intervened to save the real victim, South Ossetia, as an "aggressor", was supposed eventually to arrive at a logical result: the aggressor's punishment, effected by the already advertised penalties, including economic sanctions.
The irony of the situation is in the fact that possible sanctions would more affect the West than Russia. Most of the potential sanctions can be rightfully interpreted as an advantage for Russia. Moreover, the ammunition used against Moscow may be turned against the adversary.
In case the West decides to curtail imports of Russian raw materials, Moscow would eventually realize that the nation also requires these resources for its own industrial needs, especially regarding the prospects of revival of real economy. In case the West unilaterally introduces an "iron curtain" for Russian citizens, the owners of Western resorts would be hardly pleased. Reduction or termination of Western investments would compel Russia to elaborate a long-required sustainable, self-interest system of support of the investment process, and promote a speedier development of relevant institutions, consolidating the financial system and increasing the degree of its independence and self-sufficiency. This is an indispensable precondition of true sovereignty.
Russian leaders are now learning to use the threats from outside for the nation's benefit. Take the example of the West's threats to impede Russia's entry in WTO. Before this idea was even discussed in details, Prime Minister Vladimir Putin acknowledged that Russia is going to withdraw from a number of WTO-related agreements that are patently unfavorable for the interests of the nation and its economy. This thesis was later elaborated by Vice Premier Igor Shuvalov.
The conditions of Russia's entry in WTO, requirements specified for our country in fact forbade us to make use of our natural advantages (that constitute the objective fundament of global division of labor and its efficiency, according to David Ricardo's foreign trade theory). On the other hand, under these conditions, Russia was not supposed to have any compensatory mechanism to counterbalance its irremovable disadvantages of climate, terrain, soil, and distance of deliveries, which cause higher costs of production and transportation. In other words, the conditions of WTO membership, approved at the preliminary stage of negotiations, admittedly deprived many Russian producers of competitiveness both at the domestic and international markets. Therefore, a precipitous entry in WTO could exterminate whole branches of Russia's economy.
Generally, the WTO system favors nations that export goods with a high value added, i.e. labor-intensive and science-intensive production. Meanwhile, Russian exports basically consist of natural resources: oil, gas, metals and timber. In case the structure of exports were dominated with machinery, equipment, vehicles etc., entry in WTO could make sense, as the member countries are supposed to suspend obstacles for access of one another's production to their markets.
Energy resources, delivered from Russia to international markets, belong to the first-process stage production. These commodities, comprising the basis of the importer's production cycle, are never levied with import duties. It is hard to imagine a country that would agree to raise gasoline or electricity prices by imposing customs tariffs on oil.
Therefore, Russia is unable to derive serious benefits from WTO membership unless the structure of domestic production is changed in favor of high technologies. Only in this case entry in WTO would be expedient.
Unfortunately, Russia has not undertaken any active measures to promote industrial policies in order to diversify the structure of economy during the last 17 years. Only during recent years, the Russian leadership advertised transition to some kind of an innovation policy, though only on the level of good intentions. Under these circumstances, entry in WTO is nonsensical and comparable to unilateral disarmament. This parallel is perfectly illustrative to identify the niche of Russia's WTO membership.
Why should we unilaterally disarm? Why should we provide free access for high-technology imports from other countries, thus destroying the remains or the embryos of domestic high-tech production? These industries will not have a chance to be competitive, especially lacking large-scale investments and access to long-term credit.
Actually, we need a protectionist approach. We should first incubate and nurture our domestic high technology industries, elevating them to a competitive degree, and only after that, Russia's entry in WTO would become feasible.
Thus, the pressure from the West may provide a "reverse effect" – an increase of the potential of Russia's economic development, national consolidation and improvement of state management. Due to industrial experience, scientific achievements and abundant natural resources, Russia possesses immense capabilities for self-sufficient growth attainable through active development of its territory, domestic markets and infrastructure.
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