Russia’s Entry to World Trade Organization will have Political Repercussions

Two major positive developments emanating from Russia.

One, Russians may have come to realize that state or crony capitalism has been doing them more than enough harm.

Signs of these have become evident with the latest election results (where Putin’s Party has lost the majority) and the unfolding street protests (over the election results) which could be portentous of a ‘Russian Spring’.

While displeasure over Vladimir Putin’s autocracy has led to a surge in communist followers, I’d say that this represents a default position for many, when seen from the perspective of Russia’s history, whom has traipsed from autocracy to communism and back to autocracy.

The Western concept of classical liberalism has hardly any influence to the Russians. Thus, free markets and economic freedom may seem as an alien concept.

But this is about to change dramatically, in my opinion.

As compliment to education, one way to introduce classical liberalism is to get people to feel the benefits from its exposure. Put differently, once people come to realize the benefits of freer domestic and external trade, then more will be demanded. And this will be manifested via political actions or policies.

And changes happens on the margins.

chart from tradingeconomics.com

The deepening of globalization trends in the 1990s accompanied by the collapse of the USSR (1991) has already been boosting Russian exports and imports.

Russia’s external trade consists of exports mostly dependent on natural resources and defense equipment (80% of total) while imports have been machinery, transport equipment, plastics, medicines, iron and steel, consumer goods, meat.

Since the transition away from USSR model and the desire to tap world markets, Russia has applied for WTO in 1993.

Timeline below of Russia’s WTO application from the BBC.

Also it is important to note that benefits accrued from Russia’s gradual opening of trade with the world has led them to pursue the WTO membership.

Thus, the approval of Russia’s membership to the World Trade Organization functions as the second and most important positive change.

Writes the China Daily,

Russia finally joined the World Trade Organization (WTO) on Friday, after 18 years of effort.

The world's 11th biggest economy is the last of the G20 countries to join the WTO and became its 154th member. Russia's entry means the BRICS countries (Brazil, Russia, India, China and South Africa) are now fully represented in the WTO.

Nigerian Trade Minister Olusegun Olutoyin Aganga struck a gavel to announce that the 8thWTO ministerial meeting here had agreed to accept the bid. Russia had to first reach bilateral agreements with 57 of its current 153 members to secure their support.

Like China, there will be mounting pressures from the collision of political forces from the escalating bottom-up forces vis-à-vis those currently benefiting from top-down political institutions.

Again like in China, an inevitable decisive choice would have to be made to tailorfit the politics with the economy: Either a return to communism to reinforce current political institutional arrangements along with the closing of their economies, or an evolution to a more representative form of government that would flow along with greater economic freedom.

And technology will play a crucial role in ascertaining the path to the resolution of these transitional conflicts.

Also, if the evolving trends will flow to the latter, then the important geopolitical implications would mean lesser risk of military confrontations, as political priorities will shift towards enforcing trade activities than to engage in brinkmanship politics which are premised on the politics of plunder that has encouraged conflicts.

When goods don’t cross the border, warned the great Frédéric Bastiat, armies will.

Apparently, the world seems to exhibit more signs in the acknowledgment of Bastiat’s wisdom, thus should be applauded and welcomed.

Overtime, if political economic trends persist on the path of economic freedom then Russia should be a prospective buy.