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Economy-Wide and Sector Effects of Russia's Accession to the WTO

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  • Jensen, Jesper
  • Rutherford, Thomas
  • Tarr, David

Abstract

In this paper we employ a computable general equilibrium model of the Russian economy to assess the impact of accession to the World Trade Organization (WTO). We assess that Russia will gain from accession to the WTO due to improved market access to markets of its trading partners, from improved resource allocation an improved access to modern technologies due to increased competition in goods markets, and most importantly from access to higher quality and technologically superior business services as a result of lowering of barriers to foreign direct investment in services. We estimate that Russia will gain about 7.2% of the value of Russian consumption in the medium run from WTO accession and up to about 24% in the long run, when the potential positive impact on the investment climate is taken into account. Export intensive sectors, such as ferrous metals, non-ferrous metals, chemicals and timber, wood, pulp and paper products are the sectors that expand the most as a result of WTO accession. Sectors that do little exporting and are relatively highly protected will lose in the short to medium run. Foreign direct investment in the business services sectors is likely to: (i) increase the demand for labor in these sectors; (ii) present opportunities for Russian firms to form joint ventures with multinationals; but (iii) induce a decline in wholly owned Russian firms that do not form joint ventures with multinationals. The numerical model is innovative as it recognizes that foreign direct investment or the availability of foreign expertise is necessary to have foreign firms compete in key business services.

Suggested Citation

  • Jensen, Jesper & Rutherford, Thomas & Tarr, David, 2004. "Economy-Wide and Sector Effects of Russia's Accession to the WTO," Conference papers 331217, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331217
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