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Sectoral and Regional Analysis of Russia's Accession to WTO: A Cost-Benefit Analysis | 01-02-2002
The project was carried out with the support from the Moscow Public Scientific Fund and the financial support from the U.S. Agency for International Development.

Start Date: February 2002
Completion Date: July 2002

Project Summary:

Russia’s accession to the World Trade Organization (WTO) is considered one of the most important goals of its current international economic policy despite the fact that there is no societal consensus on the issue. Opinions on and assessments of Russia’s possible accession vary widely among business people and academics largely because the costs and benefits are unclear for different sectors of the Russian economy and for different regions of the country.

This study analyzes the entire range of issues related to Russia’s accession. It focuses not only on the cross-effects for different producers that will appear, but also on the cross-effects for different sectors of the economy and implications for various Russian regions. In doing so, it tests the following hypothesis:
  • The existing level of protectionism in the Russian economy leads to significant loses in economic efficiency. Its elimination will positively affect consumer surplus at different stages of the consumption process.
  • In the medium run, the expected increase imports will not lead to a decrease in the domestic industrial production. Instead, it will stimulate an increase in the efficiency of domestic industry through greater market competition.
  • Certain Russian regions will likely experience more negative consequences from WTO accession than others and their labor forces will need special protection. We will identify such regions.
  • The existing protection of the financial sector is inefficient. This sector will be positively affected by WTO accession, leading to economic growth in the country.
  • Accession to WTO will lead to attraction of larger FDI flows through the creation of a more attractive investment climate.
  • The expected increase in foreign direct investments in the services sector will not only increase the competitiveness of this sector, but will also increase consumer surplus and positively effect the country’s industrial development.

The study identifies those regions that will be negatively affected by WTO accession. Based on our analysis, we make specific public policy recommendations for Russia’s negotiations with the WTO, Russia’s terms of accession, and post-accession policy.

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