Breaking the Apple-Pie Ceiling: Russia’s Accession to the WTO

Uncle Volodya says, "A problem cannot be solved using the same kind of thinking that created it"

Normally, the stuff I write here is a more or less immediate response to something I read elsewhere within the last few days; usually something current that simultaneously annoyed me, and suggested to me that it was likely to have annoyed a wider audience as well. Although this piece is – technically – in the same vein, as the issue has annoyed a wide audience, the matter has been simmering for 17 years. That’s how long Russia has been waiting for acceptance into the World Trade Organization.

In their excellent article for Foreign Policy Magazine this past June, economists Anders Aslund and C. Fred Bergsten argue in “Let Russia Join the WTO” that, well, Russia should be allowed to join the WTO. Since 17 years does seem like one hell of a long time to be kept waiting, there must be a good reason, right? Well, that’s what we’re here to find out.

If you’re a regular reader of this blog, you know I’m likely to be sympathetic toward Russia if they’re getting jerked around for no reason except that they’re Russian. I like to think I’m not sympathetic at all when Russia as a nation is clearly in the wrong, or if its critics have done a good, non-hypocritical job of substantiating their case. The best way to not look like a fool is to research the subject, so we’re going to do that; and even though it’s a complicated issue, we’ll try to make it as simple as we can. Ready? Let’s get started with a look at the WTO itself – who makes up its membership, and why is Russia interested in being a member?

In looking at who makes up the WTO, I’ve approached it with the objective of answering the Russia question immediately. If the WTO is exclusively made up of prosperous, progressive democracies who enjoy the rule of law, are attentive to national and global human-rights issues and boast a stable economy, I will have saved myself a lot of typing (which I’m not especially good at) and you a lot of pointless reading. Let’s take a look.

Well, it looks like we’ll have to pursue this a bit further.  Niger, Sierra Leone, Burkina Faso, Mali and Chad are all WTO members. Know what else they have in common? They’re the worlds’ five poorest countries. Ireland has been a WTO member since 1995 – hey, didn’t they just ask Europe for a $113 Billion bailout package, to prevent the continent’s soup kitchens from being overrun by leprechauns? Greece has also been a WTO member since 1995: you know where I’m going with that – that’s right, a $145 Billion bailout loan.

Did I mention Russia has the third-largest cash reserves in the world, and the lowest national debt in the G20? Okay, I think we can eliminate “fiscal responsibility” as a qualifier for WTO membership without belabouring the point further.

How about human rights? Well, let’s go back to our membership roll again. Oh, oh; I see a problem. Zimbabwe is a member, apparently in good standing, of the WTO, and has been since 1995. What does their human rights record look like? In a word, awful: according to Amnesty International’s most recently published report, Zimbabwe’s human rights situation continues to deteriorate. ” Prominent human rights defenders, political activists and their family members were abducted by groups of armed men believed to be working on behalf of or with the acquiescence of the Zimbabwean authorities. The abductions were conducted in broad daylight with total impunity”. National life expectancy is a pitiful 40.9 years. Good enough for the WTO, though.

Well, then, what about the rule of law? Let’s see; what do Chad, China, Cuba and Saudi Arabia have in common? They all made two lists that are of immediate concern to us – that of the 10 most repressive countries in the world according to Freedom House (which Russophobes love to quote when it says something bad about Russia)….and membership in the WTO. Burma twisted the needle right off the shitty-meter in terms of how horribly repressive, dictatorial and un-free the country is – hey, remember when Tropical Cyclone Nargis waltzed through there in 2008, causing the worst natural disaster in the country’s history? I remember it well, as I wasn’t far from there at the time. Do you remember the government’s response to earnest offers of international help? Let me refresh your memory, if you don’t: “…people are capable of rising from such natural disasters even if they are not provided with international assistance…people can easily get fish for dishes by just fishing in the fields and ditches. In the early monsoon, large edible frogs are abundant. The people can survive with self-reliant efforts even if they are not given chocolate bars from the international community”. Oh, you won’t find Burma in the list of WTO members. That’s because they changed their name to Myanmar back in 1989, under which name they are indeed – you guessed it –  a WTO member since 1995. Freedom House is just a little stubborn, apparently, or they just liked the name “Burma” better.

I don’t think we need to go any further with this line of inquiry – I daresay we’ve substantiated that it is not adherence to the rule of law, fiscal responsibility or  respect for human rights that is keeping Russia out of the WTO. Well, then, what is?

I should have asked, “who is”, because it’s the United States. According to World Security Network, “The United States is the last major country to put up obstacles to Russian entry to the WTO”. And that article dates back to 2006. Yes, back in 2006, Senator Bill Frist said – and I quote – “Russia’s disregard for the rule of law, human-rights violations and other anti-democratic tendencies color the position of the United States”. There’s no record of whether his tongue immediately began to smoke, turned black and fell out of his mouth onto the carpet. Hey, Bill; let’s try a little free-association: I want you to close your eyes, and say the first thing that comes into your head when I say the trigger phrase. Ready? Abu Ghraib.

Cat got your black, smoking tongue, Bill? Let me help you. Were you thinking, “naked, prostrate Iraqi prisoner crawling at the end of a leash held by a U.S. soldier”? Well, was it “amputations performed by non-doctors”? No? How about, “chest tubes recycled from the dead to the living”? “Attached a fake IV to a dead man’s arm (in a case later ruled a homicide) to create the impression he was still alive”? Any of this ringing a bell?

The photos of this exercise in the rule of law and human rights were released…that’s right, in 2006, just 2 months before Bill Frist’s self-serving assertion that  undemocratic behavior, failure to adhere to the rule of law and violations of human rights were keeping Russia from WTO membership.

I don’t think there’s anything to be gained from pursuing that any further, either. Suffice it to say the USA’s own record on human rights and the rule of law is a little tarnished by that disgraceful episode, and that WTO membership already includes several countries whose oppressive regimes make Russia look like Disneyland. Instead, let’s look at it as a practical matter, to see if there would be any benefits.

Why, yes; there would. It would be a benefit to world trade, for a start. Russia accounts for 2% of global commerce. Perhaps that doesn’t sound like much, but Russia is also 8th in the world in terms of purchasing power parity. How many of the smaller members would you have to group together to get that kind of economic clout? Well, I can help you there, too; if you look at this table, you’ll see Russia sits at number 5 for current account balance in the world. The negative-balance countries start at number 64, and the USA is at the very bottom, at number 181. I don’t mean to suggest Russia has more purchasing power than the USA; that would be ridiculous. But the USA is financing itself on credit, and many, many of the debtor nations cited are also WTO members.

I’m sure this philosophy has holes in it, because I’m not an economist. Economists might tell you that this parameter has no relationship to that parameter. But if an economist tells you there’s no relationship between money in the bank, an educated and underemployed workforce, a powerful energy-based economy and enhanced trade opportunities, he’s full of shit.

Joining the WTO would benefit Russia, too. According to economists Aslund and Bergsten, it’d add (potentially) 3.3% to the Russian GDP. The western press, especially the Russophobic element, is forever squalling that Russia’s is an energy-based economy that starves its people when energy prices are low and morphs into a robber baron when they are high. Well, here’s your chance to change that. Entrance into the WTO would open markets to Russian steel, chemicals, lumber and resource-based commodities, for a start.

What’s that? Oh, right: I forgot. The Jackson-Vanik Amendment. This 1974 cold-war holdover denies most favoured nation status to certain countries based on their restrictions on emigration, notably of Soviet Jews. Republicans, who apparently have noticed nothing since the end of the cold war and believe it is still going on, are strongly in favour of keeping Jackson-Vanik rather than repealing it (even though it has absolutely no relevance to modern Russia). They apparently don’t have a problem with Jackson-Vanik being waived for China, which – as I previously mentioned – is one of the world’s 10 most repressive countries. They didn’t have a problem with it being waived for Ukraine, either: by an astonishing coincidence, just as Viktor Yuschenko was heading into tough parliamentary elections following failure to deliver on most of the promises of the Orange Revolution. This probably isn’t the only instance of legislation designed for trade purposes being manipulated for reasons that have nothing to do with trade, but it’s certainly one of the stupidest and most transparent.

Come on, America. You’re out of excuses. Quit stalling.

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62 Responses to Breaking the Apple-Pie Ceiling: Russia’s Accession to the WTO

  1. aramis says:

    There is no good reason to keep Russia out of the WTO. To pretend that the WTO as an organization has any respect for democracy or human rights is laughable, and to block Russia’s entrance on those grounds is simply ridiculous. To hear this coming from Bill Frist is even more absurd. He was the guy who on a defense spending bill rather than allow an amendment banning torture and degrading treatment of prisoners. He was real humanitarian.

    • aramis says:

      Sorry about the bad formatting, I must have been tired. This is what I meant to say…

      There is no good reason to keep Russia out of the WTO. To pretend that the WTO as an organization has any respect for democracy or human rights is laughable, and to block Russia’s entrance on those grounds is simply ridiculous. To hear this coming from Bill Frist is even more absurd. He was the guy who canceled a vote on a defense spending bill rather than allow an amendment banning torture and degrading treatment of prisoners. He was real humanitarian.

    • Misha says:

      Just released (as of this posting) piece on the subject of Russia joining the WTO:

      The matter of Georgian opposition to Russia joining the WTO is mentioned in the above piece, with some discussion about that matter at this thread.

      • marknesop says:

        Thanks for the great link, Mike; this is excellent news! It sounds extremely positive to me, and remaining conditions with the exception of those imposed by Georgia appear reasonable. The movement and conditions imposed on the issue of visas also is encouraging. Even Georgia’s insistence on legitimizing customs points does not specifically sue for the return of South Ossetia and Abkhazia, unless that’s in the fine print or I have misunderstood the demand. If the demand turns out to run counter to U.S. interests (and if the U.S. can even agree on what constitutes U.S. interests), Georgia will simply be told to quietly drop the issue. Faced with the cutoff of all those lovely aid dollars and western support for its crazy leader, Georgia would comply with alacrity.

  2. Misha says:

    “They apparently don’t have a problem with Jackson-Vanik being waived for China, which – as I previously mentioned – is one of the world’s 10 most repressive countries.”


    Mark, a bit of a throwback to when Carter’s administration made human rights a comparatively bigger issue in the USSR, unlike the greater abuses, which were evident in China and Romania.The otherwise noble cause of human rights is periodically used as a propaganda tool.

    From an American realist Cold War era reasoning, Nixon-Kissinger saw a benefit in approaching China. Carter-Brzezinski continued that approach. Romania served as a nice pest within the Warsaw Pact.

    On how some selectively bring up human rights, I remember the huge ovation the Romanian delegation received when it entered the LA Coliseum during the opening ceremony of the 1984 summer Olympics. Not that athletes (at least IMO) should be viewed too much politically. I highlight this as someone who saw a good deal of politically motivated protests against Soviet athletes and teams visiting the US during the Cold War.

    In the present day, Brzezinski has been openly hypothesizing about Russia moving closer to the West, out of a fear of China. This remains to be seen, with a reasoned belief that such a scenario might not happen. In the post-Cold War era, China’s existing and growing economic prowess carries some clout – in a way that likely addresses the above excerpted.

    On the reference to Soviet Jews, Jackson-Vanik nurtured the scenario where Jewish identity was in some instances stretched as a means to leave the USSR. The honestly stated desire to leave for economic reasons was discouraged. On a somewhat related note, recall what the character played by Al Pacino said in the movie Scarface as a basis for seeking entry into the US. I know a Jewish neocon leaning attorney with the INS who became suspect of some of the stories he heard from people claiming a Jewish identity and discrimination. This observation doesn’t deny that problems existed. Ethically, these problems shouldn’t get belittled. At the same time, there was also some exaggeration.

    The aforementioned INS attorney gave credence to the view that the implemented policy on Soviet Jewry served to further encourage anti-Jewish sentiment in the USSR. Anti-Jewish propaganda had a theme of how Jews (as a group) had it comparatively well in the USSR, while having an easier time getting out.

    • marknesop says:

      I also would not deny the problem existed, or that there was good reason for the original policy (although 1974 was a bit late in the day to notice, if I may be so bold as to point it out). However, it is plainly now being used only as a barrier to Russia being accepted into the WTO – and that only at the behest of certain special interests – as emigration from Russia is now more or less unrestricted. It’s certainly no more restrictive than Ukraine, for whom the provisions were blithely waived to help Yuschenko out with the election.

    • Leos Tomicek says:

      I would say that Brzezinski is wrong on Russian and Chinese relations, but the mythical Chinese menace always lives in the minds of Western geostrategic planners.

      Can anyone think of a major war between Russia and China? Border scuffles yes, but no major war in my knowledge. In any case, today MAD pretty much prevents even border scuffles.

      And also, why would Russians seek alliance with the West in such an unlikely case anyway? They have the more relevant Central Asians and South East Asians to talk to about potential Chinese menace.

      • marknesop says:

        There hasn’t been a major war between Russia and China, and Anatoly Karlin had a great post on Sublime Oblivion – entitled “Why Russia and China Won’t Fight” – that suggests they will not.

      • Misha says:

        One of the interesting aspects of the recent WikiLeaks is the suggestion that China would be willing to see a united Korea under the South Korean government, with Chinese business playing a key role.

        The MAD (Mutually Assured Destruction) concept encourages nuclear powers to refrain from attacking each other directly. This explains the Cold War era superpower wars via proxies.

        Regarding the present: in addition to MAD, China and Russia have other concerns besides confronting each other.

        I suspect Brzezinski’s recent claim that Russia might move closer to the West out of a supposed fear of China is a new era wishful thinking. It’s also misguided for assuming that Russia will have its tail between its legs in a situation where it will not get to see its interests respected.

        That mindset touches on the kind of strings attached approach evident within neocon and neolib circles.

        I’m all for Russia and the West moving closer to each other. It’s a mistake to simply take Russia’s perceived national interests as unrealistic.

        • Yalensis says:

          Good points, all. Brzezinski is engaging in the wishful thinking of an irrelevant old man, and maybe also trying to stir up trouble. He would love to sit and watch as Russia and China fought each other, like ancient gladiators in the ring, just for his amusement. But alas for him, it is never going to happen.

          • Misha says:

            Brzezinski tends to be more rational when the subject isn’t Russia.

            Like Sikorski, he has no problems with closer Russia-West relations, if Russia is run by Russian versions of Uncle Tom.

            Brzezinski went vintage Brzezinski bonkers when the 2008 war in the former Georgian SSR started.

            In the US, responsibly pro-Russian views continue to face an uphill battle.

            I saw much of the interview Larry King did with Putin last night:


            It could’ve gone smoother. Image is important, along with substance.

            • marknesop says:

              Ha, ha!! “Russian versions of Uncle Tom”. Damn, that’s funny. I suspect you just dropped off Boris Nemtsov’s Christmas-card list, but it was worth it.

              • Misha says:

                I’ve had my share of experience with such individuals.

                Ditto with others who’re not quite what some think.

                I’ll leave the last comment as is, as a kind of samizdat point.

            • Yalensis says:

              Good points, Misha. Just one tiny quibble: the ex-literature major in me must stand up for the much-maligned image of “Uncle Tom”. I have read and enjoyed “Uncle Tom’s Cabin”, maybe not greatest work of literature, but good story and many interesting characters. I especially like the characters of Uncle Tom and Eva, they are fully described human beings and enjoy a beautiful mutually-respectful friendship. Uncle Tom is not the obsequious slave of the stereotype, he stands up for himself and resists tyranny as best he can, considering the situation he is in. I highly recommend book for everyone, both adults and children!

              • Misha says:

                You’re right Yalensis about the actual depiction of Uncle Tom.

                I first got gist of this on an episode of the 1970s American TV sitcom called “The Jeffersons.”

                However, a certain image of him has been presented to the point of becoming popularly accepted.

                I’m wrong for using the Uncle Tom term, as it goes against my earnest attempt at being as accurate as possible.

                As you probably know by now, I consider the Russian Civil War era Whites as not being in the popularly utilized Uncle Tom category – rather in a Russian patriotic light, albeit with some faultlines among themselves.

                • marknesop says:

                  You’re also right, though, that “Uncle Tom” has become synonymous with the “Yes, Massa,” Steppenfetchit obsequiousness of slave to master, and even blacks use it to disparage one another or to express admiration for one who can imitate it well, as a form of sarcasm. In the context you used it, to suggest that Russia would be more acceptable to some western leaders if it would only learn its place and tug its forelock to the master (or elect leaders who would publicly express fealty), you were perfectly correct.

                • Misha says:

                  Thanks Mark.

                  Yalensis has a point as well that pertains to how an ongoing and unchallenged repeat of something misinformative can get popularly accepted.

                  In other instances, this scenario leads to some considerable inaccuracy, in line with the Nazi concept of the big lie.

  3. “I’m sure this philosophy has holes in it, because I’m not an economist. ” Don’t worry; nor are the economists. Excellent post.

  4. kovane says:

    Russia and the USA reached agreement on the terms of WTO accession. The only remaining obstacle is Georgia, and from what I know, it’ll be so for a long time. No WTO for Russia in the nearest future.

  5. Yalensis says:

    Not being an economist either, I never could figure out if WTO membership would be good or bad thing for Russia. Russian political leadership seems to believe it would be a good thing, so they hopefully know what they are doing when they apply for membership. In any case, agree with kovane the issue is probably moot now, it will be a long time before Russia gets in, and who knows, maybe this is blessing in disguise? I keep reading that Gruzia vetoes Russian membership. How does that work? 1.) Is Gruzia member of WTO? 2.) Does each member have veto power, or all decisions must be made by consensus? Does anyone know how that works?? @Misha: by the way, excellent points made about ideology war and Jackson-Vanik, etc.

    • kovane says:

      1) Yes.
      2 Before accession, every country must resolve all issues with other members of WTO. Link

      • Misha says:

        A Russian non-recognition of Abkhaz and South Ossetian independence could’ve been noted to Georgia as a basis for supporting Russian entry into the WTO.

        On the other hand, this quite likely might not have been enough for Georgia – when considering how it wants Russian forces out of South Ossetia and Abkhazia.

        From a point of view of Russian interests: is it mistake for Russia if it didn’t make such an off record pitch? The answer relates in part to how important Russia views WTO membership.

        A withholding of Abkhaz and South Ossetian independence recognition, with a continued Russian troop presence in the two disputed former Georgian SSR territories wouldn’t have been a diplomatically spineless cave in. Rather, this scenario could’ve been reasonably presented as Russia maintaining a consistent stand on disputed former Communist bloc territories.

        In this situation, Russia could expect an easier time at increasing pro-Russian support in Georgia. Agree or disagree, Georgians are of the view that South Ossetia and Abkhazia are Georgian territories. With extremely rare exception, the rest of the world agrees. South Ossetia and Abkhazia have limited options.

        Russia benefits from having the whole former Georgian SSR on good terms with it, as opposed to the current scenario.

        • marknesop says:

          Russia likely wants admission to the WTO simply because it’s now the only major country kept out, and some of the others who are likewise not members have horrific human-rights records, so that the comparison is not at all favourable. But from a purely commercial standpoint, it probably doesn’t matter in the short-to-medium term, as an energy economy doesn’t need to worry about selling its product at a competitive price. Competing in other venues under WTO rules would force some painful changes in the short term, but would ultimately be to Russia’s benefit in any early moves toward diversifying away from an energy-dominated economy. The first few years would likely be of little direct benefit beyond highlighting rot and areas that needed immediate fixing.

          • Misha says:

            Mark, the ongoing issue is at what price?

            The goal posts are moved back with hypocritically applied conditions.

            I like the idea of seeking other options. For example, the second guessing of seeking EU membership among a good number in Moldova, Ukraine, Croatia and Serbia partly relates to this point.

            There’s some arrogant thinking out there on how to best advance a given country.

            • marknesop says:

              The article makes the point that the WTO needs Russia more than vice-versa, and as long as Russia is happy to remain an energy-dominated economy, they have no immediate worries about marketing. Maybe that’s why they’ve reemphasized the priority of their proposed customs union with Belarus et al; possibly to include Ukraine, from what I hear. But critics who suggest Russia must modernize and purge its business practices if it is to be competitive and attract investment have a valid point. Acceptance into the WTO would render that modernization unavoidable, and cut through a lot of delay.

    • Misha says:

      Reading between the lines isn’t something completely exclusive to the peoples of the former USSR Yalensis.


      Be nice to see structures like the EU and WTO operate in a mutually beneficial way. If not, there’s reason to proceed with caution. Beware of carrot and stick like suggestions that come from neocon to neolib leaning circles.

      In Russia, I sense a differential between strict economic/business types versus those with a politically mainstream Russian foreign policy view. The former are apt to sacrifice the latter. IMO, the responsible elements in the latter offer a prudent route of caution.

  6. Yalensis says:

    In other news, I realize this is off-topic, but still very interesting: in today’s news I was just reading some Wikileaks disclosures about tactical nukes in Europe:
    In recent years USA has positioned 20 nuclear warheads in Belgium, 20 in Netherlands, undetermined number in Germany, 130 in Italy, and 90 in Turkey. These are tactical nukes, something called B-61 (?)
    In retaliation, in May 2010, Russia moved some tactical nukes into Kaliningrad oblast’, but the article does not say how many nukes were placed in Kaliningrad/Koenigsberg. These Russian nukes are pointing at the Americans Patriot missiles positioned in Poland, and their job would be to take out the Patriots in case of NATO vs. Russia conflict.

    • Giuseppe Flavio says:

      Hi Yalensis,
      this news about Russia placing tactical nukes in Kaliningrad has been officially denied link.
      Besides, this news didn’t make sense. That US tactical nukes are deployed in European countries is a well known fact since a long time (from the Cold War), so there is no reason for Russia to react on May 2010.
      Russia announced during the Bush term that in case US anti-missile defense were deployed in Poland, it would deploy tactical ballistic missiles in Kaliningrad, without specifying the warhead type (nuclear or conventional).

      • kovane says:

        Giuseppe, sorry for an offtopic question, but I can’t pass this opportunity. You’re from Sicily, right? Can you clarify one matter for me? I’ve heard that Italy has some kind of confrontation between rich north and poorer south. People from north consider themselves more European, and look down on southerns. Organized crime is more prevalent in south (Sicily, Naples), and even last names ending on “o” treated unfairly (sign of a lowly origin).

        Also regarding the famous scene from “True Romance”.

        Is it true? People from Sicily have a share of black blood? If so, is there racist overtones in the confrontation?

        • Giuseppe Flavio says:

          Yes, I’m from Sicily and there is a confrontation between north and southern Italy, often with racist overtones. The Northern League political party built his consensus on this confrontation and also on a similar confrontation with central Italy. They used to refer to the central government as “Roma ladrona” (robber Rome). Later they toned down this rhetoric because they entered in the government and allied with parties having a strong electoral base in the South, and started bashing immigrants.
          It’s true that organized crime is stronger in Southern Italy but that names ending in ‘o’ are of lowly origin and thus treated badly is false. The family names that indicate a noble origin are those formed with two or more words, like “Magnano di San Lio” or “Filo della Torre”.
          As for your last question based on that movie scene, the answer is “Yes and No”. Sicily was dominated by Arabs between the X and XI centuries, at the height of Arab civilization. But Arabs aren’t blacks, they belong to the white race.

  7. Yalensis says:

    P.S. I forgot to say: great post, Mark. WTO is pretty dry stuff, but you made it more interesting, and I like the way you broke everything down in a logical fashion to make more understandable for your readers. 🙂

    • marknesop says:

      Thanks, Yalensis! It’s an issue I had been considering for some time, but I didn’t realize just how unfair it was until I brought up the list of present members. After that, there was no question of not going on with it.

  8. Nils says:

    Mark this is amazing. Everytime we discuss something in class, you write a blog entry about it.

    I would add that the admission of Russia to the WTO is not the main idea. The main idea is the reforms which governments have to push trough internally. The admission is simply the last step. In reality, Russia is indeed practically ready to join. For example, Russia has almost abolished all of its importariffs already (except for cars).

    Indeed, we can state that it is partly a problem of the world which seems to use Russia’s admission to the WTO as a tool to reach political objectives which has nothing to do with the economy. But I would add that Russia is to blame as well. Not the federal government in general, they have always been in favor, Putin in particular. However, there are strong lobby’s in the Russian government (like everywhere else) which are afraid that their sectors will be hard hit once Russia joins. The Russian ministry of Trade is very in favor of the admission but the Russian ministry of Industry has strong reservations.

    Maybe I should explain how admission works. When a country states it wants to join the WTO a working group is formed. All members of the WTO can join this working group and express their issues vis-a-vis Russia (in this case). Then these problems are usually resolved on a bilateral basis. For a long time the EU and Russia discussed the tariffs which western airliners had to pay to Russia for access to the airspace of Siberia (this money is used to subsidise Aeroflot), the export duties on timber was a particular issue between Russia and, on the other side, Sweden and Finnland which have a considerable paper industry. One of the most important issues has been the double energy pricing in Russia. Domestic firms usually pay a lot less for their energy in comparisson with companies in the West (this regime was dubbed “the Virtual Economy” by Garry and Ickens). Russia has now agreed to gradually abolish it. Usually however, the energy industry is not subject of WTO discussions although Ukraine can block Russian entry over some made-up or minor issue as a way of lowering the price for gas.

    The car industry is a very problematic industry for Russia. Recently however, we have seen some interesting developments. First of all, the Kremlin raised tariffs for imported cars (remember the people in Vladivostok were really pissed). This is a process one calls importsubstitution in the economy. Because the Russian market is so lucrative practically every car company now has a production company in Russia (with Volkswagen recently announcing that they are only using Russian parts now). Thus, creating Russian jobs. On the other hand, Renault now has a big share in Avtovaz, rumors circulate that Renault is ready to produce Dacia’s there as well. If u ask me Renault should demolish the whole place and then build a brand new factory there (like happened with the Wartburg production company in Eastern-Germany).

    As a consequence of WTO acession Russian companies will finally be forced to reform. In the recent years (as a consequence of the double energy price) many companies have just stumbled on. Bankrupcy proceedings will increase, without a doubt. But that is what always happens and should have happened more in the recent years altough I understand the problem from a social point of view. Maybe, entire industries will disappear from Russia but that is a consequence of specialisation in the economy. 50 years ago we also had a textile industry in Holland, is gone now, we also produced cars (DAF) which is gone as well. Britain had a car industry as well, not competetive enough, closed down. In the short term it will create problems but for the long term Russia will have to face such a reform.

    Neverthelss Russia needs to improve its business climate as well.

    • marknesop says:

      Hi, Nils; I have a pinhole camera and audio recorder behind a picture in your classroom – that’s how I know what you’re talking about, but don’t tell anyone.

      Thanks for the excellent explanation; it’s very instructive and relevant. The reference article did point out that there was no reason the USA and Russia could not resolve all outstanding issues by common agreement, but I didn’t know at the time I read it that Georgia was making trouble. Since they are a U.S. surrogate, the USA would be able to drop all its objections and continue working through Georgia to deny entry.

      Actually, the issue of WTO admittance forcing reform on Russia is an important point that really should have been in the last couple of paragraphs of the post, with the points of where it would be good for Russia. Not immediately, as you point out, but I believe Tim satisfied even zealous doubters in the last post that Russian business and industry need to shake the old layers-of-bureaucracy Soviet way of running things. It would be far better for Russia in the long run, and with their massive natural resources base, they can’t lose unless they give it away.

      Building cars seems to be one of those businesses where the world can only support so many. Canada had a car business, too, but now all our auto building (to the best of my knowledge, and its not a field I know much about) consists of building American brands for American companies, and a little bit of Japanese work along the same lines. Our main profit in the auto sector comes from making and selling spare parts to the USA.

      • Yalensis says:

        Ha ha! By secretly auditing Nils’ classes, Mark gets a free education! And not just Mark, all blog readers get the benefit of reading Nils’ term papers. Thanks again, Nils!
        Re. Gruzian opposition to Russian entry in WTO. Sounds like this is a real show-stopper. I am ALMOST convinced now, from blog discussion, that WTO might be good for Russia. However, it is all moot. If Gruzia has this veto right, they will never agree, and even Americans cannot force them to go along. Gruzians are a very proud (and very pissed off) people. They would only be happy if Russia totally caved in to them, and that can never happen. Gruzians can’t have South Ossetia back, because they cannot be trusted with portal to Roki Tunnel. (They would hand it over to NATO.) They can’t have Abkhazia back because Abkhazians have something to say about that. Therefore, Russia cannot back off. So we have what Americans call a “Mexican stand-off.” From that it follows that Russia must simply shrug shoulders and give up on WTO membership. Maybe come back and try again in 10 years. My advice to Russia: Play more coy next time, don’t appear so eager-beaver to join this club!

        • cartman says:

          The United States keeps Georgia’s economy afloat. Therefore, the US can make Georgia do anything.

          • Misha says:

            Dr. Frankenstein lost control of his monster.

            Sometimes, science fiction and reality go hand in hand.

            • cartman says:

              Georgia’s economy is terribly dependent on aid, it has a huge trade deficit, and it is difficult to find investors who like to be told that they will lose their money as soon as war breaks out in (Russia? Iran? Chechnya? Nagorno-Karabakh?) The decision still rests in the halls of Washington, not Tbilisi.

                • marknesop says:

                  Ha, ha!! That’s like waving a red rag under a bull’s nose! Who is this nut?

                • Misha says:

                  For me, the ongoing critical talking point are some of the sources which do and don’t get propped. Mass media establishment talk about improving the situation has limits. The culture (or lack thereof) encourages folks looking to get more involved to limit what they say and don’t say.

                  As is true in Russia – Ukraine has a number of folks from North America with roots to the former USSR – who spin a certain line.

                  The situation improves by getting people who know how to best counter such slants. There continues to be room for improvement on this matter at venues like RT and InoSMI.

                  Here’s another very recent example of a questionably selective imagery:


                  By the way, I’ve been informed that the FSB built a chapel in its headquarters to serve in part as a memorial and penance for the innocent victims of the Cheka, NKVD, etc.

                  Yes, Masha Lipman can be legitimately second guessed, with some who carry on like they prefer that such second guessing not happen.

                  Someone from Russia sent me this one:


                  The sender of this article said:

                  “Surprised that The MT piece says that US diplomats reporting from Russia heavily rely on articles from the international press, gossip, and talks with the 5th column.”


                  The above quoted explains why the likes of ourselves often appear to know better than them.

                • Misha says:

                  So there’s no misunderstanding , the reference to InoSMI doesn’t second guess all of its selections. I’m glad to see that this blog is frequently picked up there.

                  The issue is to improve upon the existing situation by bringing in effectively competent source material that hasn’t been propped over the comparatively so-so options. There’s a relatively objective enough way to gauge this.

  9. carpenter117 says:

    Re: December 2, 2010 at 11:26 am

    Don’t worry, Yalensis! To paraphrase quote from my favorite Guy Ritchie’s movie “Snatch”:
    “For ever action, there is a reaction. And a {Russian} reaction… is quite a fucking thing”

    Gruzians don’t want Russia in WTO and gonna “ban” our entry? Fine! But, erm… what about Gergian state dept? You know, this proud “children of mountains” owe us (i.e. Russian Federation) a huge pile of money. And what will stop Saakashivili personal Nemesis from demanding debts repayment ASAP, nearly\tatally bankrupting his country?

    • Yalensis says:

      Hi, carpenter! “children of mountains…” I like that! Do you happen to know off top of head, how much $$$ do these childrens of the mountains owe to the Russian Federation?
      @ Misha and Mark, just one more on “Uncle Tom”. True that Uncle Tom’s supposed obsequiousness is commonly accepted, but inaccurate trope. I don’t necessarily object to its use, I just wanted to plug important classic of American literature. However, maybe “would-be quisling” (instead of “Uncle Tom”) would have been a better trope to apply to the likes of Boris Nemtsov?

  10. Oleg says:

    Saakashvhili is in a much stronger position in Georgian politics these days for the first time since his Rose Revolution peak During a recent visit to Tbilisi, Thomas de Wall commented that he can appear to ride both sides of many debates. “More than any other politician I can think of, Saakashvili is a magician, who succeeds in being all things to all people. He is by turns Atatürk (the state builder), George W. Bush (the neocon), Zviad Gamsakhurdia (the nationalist) and Vladimir Putin (ruthless centralizer). He also reminds me of Bill Clinton, the natural communicator, and of Boris Yeltsin, who also squared political circles that others never managed to,” De Wall writes. “Consider how Misha (as everyone calls Saakashvili) manages to be the friend of both Senator John McCain and Belarussian leader Alexander Lukashenko. He still wows Republican audiences in Washington but sets up a visa-free regime with Iran. He is the man who prides himself on his stellar World Bank rating for “ease of doing business” in Georgia but also presides over an economy where monopolies are firmly entrenched.”

    There is no evidence that suggests Saakashvili or his supporters have organized their own “strategy of tension” behind these bombings, but it seems clear that they are the ones to benefit the most from it. Perhaps as more information comes to light, such a wild theory can be handily discarded. I certainly hope so, because as Thailand has shown, these attempts to foment moral panic and rule by fear always end up in a very bad place.

    • kovane says:

      Oh, what rubbish. You could also say that he is Alexander the Great (military leader). In 2008 Saakashvili was elected with 53,47 % and mass opposition protests, so his position is far from unchallengeable. If the Georgian economy slows down its development (which seems to be the case now), he will not hold his chair.

    • marknesop says:

      That’s likely what you’d think if you got your information from Georgian state media. His crackpot appointment of a 28-year-old Economics Minister who has spent less than 6 months as an adult in Georgia has resulted in the lowest first-quarter FDI figures in the last five. Ms. Kobalia has apparently discovered a new way to drive economic indicators, as prices fetched by producers declined an average 7.6% (agricultural) and 8.4% (clothing and footwear), but the prices paid by consumers actually rose by 3.7%.

      It’s quite true there is no evidence – so far – of Georgian government influence in the bombings, although you’re correct it is they who would stand to benefit most. It’s also quite true that there is no evidence – so far – of Borisov’s hand in the bombings, while Russia would stand to benefit least.

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