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President of Russia Vladimir Putin: Good afternoon, colleagues,
We are here today to discuss an issue of great importance and complexity, namely, how to protect our national security and economic interests as we enter the initial phase of full membership in the World Trade Organisation. Russia’s accession to the WTO was undoubtedly one of the year’s big events. The accession process took 18 years, as you recall. I think even with China the negotiations were quicker, some 16 or 17 years. We worked consistently towards our goal, without haste I note, aware of the need to secure our economic interests. We debated long and hard with our partners to protect our interests. Membership has its risks but also its advantages. We now are to make the best possible use of these advantages. At the same time, we have to be clearly aware of the risks and problems that WTO membership will bring.
We have had quite good macroeconomic results over recent years but still lag behind the developed economies in labour productivity and energy efficiency. Many companies must overhaul their fixed assets as their products often fall short of modern standards in quality, value, and price. WTO membership poses a big challenge to our competitiveness in general, and especially for companies of the kind I just mentioned. But it is precisely for this reason that we hope that joining the WTO will create the incentive required to modernise our economy, improve our business climate, help Russia in the medium term to gain a better place in the international division of labour, and make our market more attractive for capital and direct investment.
“Russia’s accession to the WTO was undoubtedly one of the year’s big events. We worked consistently towards our goal, without haste, aware of the need to secure our economic interests.”
I stress the point that we can make the most of the advantages WTO membership offers only if we follow a goal-focused, effective and coordinated policy. Such a policy involves actively promoting Russian goods on other countries’ markets and raising large-scale foreign investment for new production facilities that will produce goods not only for the domestic market but for exporting to the global market too.
Most goods these days are manufactured through a process of international production and sales cooperation and manufacturing and sales chains. We should integrate into these chains, into the links that bring the highest value added.
I note too, that as a member of the WTO we can play a full part in setting the rules governing international trade, and this will put us on an equal footing with the other member countries in obtaining favourable conditions for our goods on foreign markets.
Finally, we will have more possibilities for supporting our interests in the World Trade Organisation’s dispute resolution bodies. Obviously, joining the WTO does not mean that we are abandoning our policy of supporting the national economy. But we will need more sophisticated and flexible regulation instruments, including broader use of protection, compensation and antidumping measures, all the more so as our companies often complain that the bodies responsible for taking protective action are indecisive and the formalities take too long. In this area we can and have to learn from the old timers in the WTO, who use a variety of very sophisticated measures without violating any rules.
We should realise that our economy will have to make a big adaptation effort and reach a new level of competitiveness and openness during the initial period of our functioning within the WTO. It is possible we will encounter some difficulties in the short term, especially at the moment when global growth rates have slowed down.
The global market today is characterised by low demand and investment activity. This creates the risk that we might not get quick positive results from WTO membership. But pursuing an effective policy to attract investment could partially offset the negative impact of global stagnation.
“As a member of the WTO we can play a full part in setting the rules governing international trade, and this will put us on an equal footing with the other member countries in obtaining favourable conditions for our goods on foreign markets.”
The fact remains though, that the crisis situation on the global markets increases the risks related to these new obligations we have taken on, above all our obligations to lower import duties on a number of goods.
Colleagues, let me remind you that all of us, even those not directly involved in the economy, realised during the concluding stage of the negotiation process to just what extent the global economy could slide into recession, and we realised full well that our partners made concessions in many areas and agreed to some of our demands, understanding the obligations as we did, and trying to secure guaranteed access to our markets. We made a conscious decision to accept these risks. Overall, I can say that we have joined the WTO on far more advantageous terms than did many of our neighbours and partners, but this does not lessen the risks related to global recession.
We did everything necessary during the negotiations to give our companies the chance to adapt to the new situation and rules. Nevertheless, some sectors could face particular problems, above all in some areas of livestock farming, agricultural machinery, the automotive sector, light industry, food processing, pharmaceuticals and manufacturing medical equipment.
I note too that in the global crisis situation Russia’s membership in the WTO could create additional difficulties in regions with little economic diversification, in single-industry towns, for example. The closure of loss-making, ineffective companies, especially big enterprises, could increase unemployment and create social risks. There is also the risk of regional budgets seeing their revenue fall. Ultimately, this could increase the gap between regions in terms of social and economic development, and this is a serious challenge. We must minimise these risks and negative effects and protect our people’s interests.
Colleagues, we discussed this a year ago in the previous Government, and together with the previous Presidential Executive Office began to draft a package of measures to reduce these risks. We are here now to discuss these measures.
The Government is to draw up an action plan for adapting particular economic sectors to the new situation that our WTO membership creates. Some of the required measures have already been carried out, but these are just the first steps. We now have to make a thorough analysis of the situation at every level of government, identify the systemic, sector-specific, and regional problems, and act fast to solve them.
Of course, we must make a serious effort to establish the institutional structures and mechanisms that will protect and promote our country’s interests, including within the WTO’s dispute resolution body. In this respect I want to draw the following points to your attention.
“The Government is to draw up an action plan for adapting particular economic sectors to the new situation that our WTO membership creates. We now have to make a thorough analysis of the situation at every level of government, identify the systemic, sector-specific, and regional problems, and act fast to solve them.”
First, we are to make a comprehensive assessment of the effect WTO membership will have on our labour market. Unemployment has fallen steadily over the last decade in Russia. Even during the most difficult period, the crisis year of 2009, unemployment was only 8.4 percent, and today it is not more than 5.2 percent of the working population.
We should maintain these positive trends and not allow unemployment to rise in the single-industry towns and regions with a high concentration of businesses in the risk groups I mentioned before. The Labour Ministry and the Government’s economic officials have to analyse thoroughly the effects joining the WTO will have on our labour market and propose within the coming months specific measures to minimise the negative effects.
Second, as I said, we will continue to protect our industry’s interests. Our partners all do this, whether the EU countries, the USA, or other WTO members. We too should draft a package of long-term measures to protect key economic sectors. These measures are needed at both the federal and regional level.
But I want to stress that support should go first and foremost to companies that are examples of best production practice. Only effective companies producing competitive goods that have a future should receive this support. Propping up technologically backward businesses, poor quality products and low-paid jobs is a dead-end road. In their respect it is other issues – social issues – that we have to resolve.
Third, WTO membership will require all of the economic agencies to improve their work, and we will need to improve the quality of our economic diplomacy. Russia’s trade missions abroad have the task of monitoring the situation on foreign markets and signalling hostile action taken towards Russian companies. The Economic Development, Trade and Industry, and Foreign Ministries, for their part, must act to remove discriminatory sanctions imposed on our companies.
It is of principle importance that all of the basic information on our economy’s functioning within the WTO is open and that Russian business has access to it. In this respect, I ask the Economic Development Ministry to organise publication of an electronic bulletin on WTO issues and publish all of the documents on its official website.
“Joining the WTO offers us many new tactical and strategic advantages and will encourage our economic development and help to raise people’s living standards. But we must take all possible steps to protect ourselves against the potential risks too, and reliably guarantee our country’s and people’s security.”
The fourth point is closely linked to the third point. We are to train people able to provide qualified assistance in securing Russian companies’ interests in the new environment and take an active part in working in the WTO’s key organisations.
The qualities and skills that people who will work in this area should have is also something we are to discuss today. I would like to hear the views of the Economic Development Ministry and Foreign Ministry representatives present.
Finally, Russia must continue its integration into the global economy. We are currently continuing our negotiations on joining the Organisation for Economic Cooperation and Development and hope to complete the accession process soon. This is something we also have to keep in mind for the future.
Colleagues, resolving all of these tasks will require systemic and coordinated work from every branch of power and all of the regions, as well as from the business community and public organisations. I am sure that this cooperation will go ahead.
Let me say again that joining the WTO offers us many new tactical and strategic advantages and will encourage our economic development and help to raise people’s living standards. But we must take all possible steps to protect ourselves against the potential risks too, and reliably guarantee our country’s and people’s security. This is clearly a very complex matter that concerns the interests and possibilities of many ministries and agencies, and this is why we decided to meet in this expanded format today to discuss this issue in the Security Council.
Let’s start work.