Will the European Union recognize Russia as a market economy?
Europe is an old continent, and its nations are old as well. This is most likely the reason why Europe doesn’t make haste about anything; however, America is a very young nation. The moment young America understood that Russia was ready to admit that the USA has the right to destroy terrorists anywhere in the world, and when Russia agreed to allow America to use old Soviet military bases in former Soviet republics in Central Asia, the US Commerce Department quickly recognized Russia as a market economy. However, Europe still hesitates to declare Russia a market economy, yet it seems that our day will come.
Director of the European Commission Directorate General for Trade Fritz-Harald Wenig came to Moscow. Yesterday, he organized a press-conference to tell Moscow journalists that the European Commission will recognize Russia as a market economy.
Mr. Wenig said: “We don’t doubt that the EU Cabinet of Ministers will do it tomorrow. As a matter of fact, it’s a formal decision, as the European Commission has already approved the conferring of this status on Russia. That is why no special discussions will be held in the Cabinet of Ministers at all. The approval will take just several minutes.”
To confer market economy status on Russia, important amendments must be introduced into the EU anti-dumping legislation and to take Russia off the list of non-market economy countries. The European Commission wrote the amendments on August 19, right after European Commission Chairman Romano Prodi’s statement made during the Russia-EU summit in Moscow in May. Now, the EU Cabinet of Ministers is to approve the amendments, which, as Mr. Wenig himself says, will be just be a minute formality. After that, the amendments will be as valid as EU laws, which is rather good for Russia.
This is because, until now, Russian exporters were severely discriminated against by the European Union. For instance, the European Union seemed to perceive no differences between Russia and Mexico or other non-market countries when it held anti-dumping investigations. No explanations by Russian businessmen were taken into account at all. This was obviously done on “principle.” So, if some goods are expensive on other markets of the world, why are they so cheap in Russia? Probably, Russian comrades, this is dumping?
Due to formalities toward Russia, the European Union managed to introduce 12 anti-dumping sanctions on Russian products within the past 15 years. In 1987 – on urea, in 1998 – on silicon carbide, in 1992 – on potassium chloride, in 1995 – on ammonium nitrate, and in 1996 – on broad transformer steel. Within the last several years, sanctions have been introduced on Russian zinc, seamless pipes, wallboards, and aluminum foil. An anti-dumping inquiry concerning Russian cables, steel ropes, narrow transformer steel, technical carbon and hollow steel profile is still carried out. The Russian government estimates the total damage caused by these European sanctions to the domestic industry to be 230-240 million dollars per year.
Moscow expects that that conferring of the market economy status on Russia will allow Russian exporters to challenge some of the anti-dumping sanctions introduced against the country. Russian metallurgy specialists are sure that the EU decision will considerably strengthen the positions of metal exporters not only on the European market, but on the world markets as well. In addition, the period within which anti-dumping inquiries are carried out concerning Russian producers will be considerably reduced.
However, it’s obviously too early to celebrate. Why did the European Union hesitate to confer market economy status on Russia? The EU was probably scheming how to recognize Russia a market economy and immediately deprive it of all advantages of this recognition. Russian Deputy Minister for Economic Development Maksim Medvedkov (he is also a negotiator on Russia’s incorporation into the WTO) told the Russian media that the EU Cabinet of Ministers was also considering other amendments to European laws.
In his words, the European Union will introduce amendments concerning subsidies. These amendments provide for the definition of “some definite situation” when during the anti-dumping investigations, the EU cannot take the producer’s price into consideration. In other words, “the definite situation” occurs when there is an artificial competitive advantage, low prices for energy resources, for instance. And Russia is quite naturally subject to such amendments. However, there are some loopholes as well. If low prices for energy resources are admitted as a natural competitive advantage, the arguments of producers will still be taken into consideration. Europeans were obviously very impressed by President Putin’s speech about Russia’s natural advantages.
However, Fritz-Harald Wenig explained that the situation was not that simple. “If a hydroelectric station is situated close to a manufacture, then the low price for electricity won’t be considered as an artificial advantage.” And how it will be considered if a hydroelectric station isn’t situated close to a manufacture? And spending of Russian enterprises on the remuneration of labor, which is considered low according to the European standards, turns out to be quite “a natural advantage” of the country as well. “Lower wages in Russia are a natural advantage, which allows firms to achieve lower spending on labor. We will agree with it and accept these conditions,” Fritz-Harald Wenig added at the end of the press-conference.
However, this is rather unfair, indeed. It would be better to raise wages in Russia up to the European level. How long will the Russian people work for such low wages? Europeans probably understand perfectly well that low wages mean low-quality products. That’s exactly what they require! This will make Russia less dangerous to the European economy.
To tell the truth, it takes a lot of trouble to come to an agreement with the Europeans; the situation is much simpler even with the Chinese. However, we are actually grateful for the market economy status.
Photo: EU with back to Russia, with face to the USA
Kira Poznakhirko PRAVDA.Ru
Translated by Maria Gousseva
Read the original in Russian: http://economics.pravda.ru/economics/2002/7/21/64/2593_RussiaEC.html
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