Dmitry Medvedev chairs an expert meeting on Russia’s economic development following accession to the WTO


“Our goal is to make maximum use of the advantages of WTO membership, while at the same time minimising the risks to the industries that are most vulnerable to this process.”

Transcript of the beginning of the meeting:

Dmitry Medvedev: Good afternoon, everyone. As we agreed, I have invited you here today to discuss with the experts how we can adapt the Russian economy to meet the WTO entry requirements. Everyone here knows this issue very well; you have attended expert meetings and have your own views, feelings, fears and proposals. Our goal is to make maximum use of the advantages of WTO membership, while at the same time minimising the risks to the industries that are most vulnerable to this process. The issue of ratifying the protocol on Russia’s WTO accession will be discussed at a government meeting tomorrow and will then be submitted to the State Duma. Therefore, we need to get actively working on it now.

The World Trade Organisation is a new format for us. It is important that we monitor the situation from the very beginning, analyse our experience of cooperation with other partners and, most importantly, take effective targeted measures where necessary, obviously within the framework of the existing WTO rules. I am confident that the work of this expert group, and expert work on this issue in general, will continue after our accession to the WTO is completed. This is what every country does, and that’s what we’ll do too.

We are joining the WTO in order to make better use of our competitive advantages in foreign and domestic markets. We must do all we can to support our domestic producers, and I hope that this will also be the objective of the expert council which is shortly to be established under the government as part of the work within the Open Government project. I’ve said before that the council’s contribution to key decision-making is a major priority for me. I plan to rely on this expert council and hence on your contribution when making vital decisions. This is how we will work. This is why I have invited you here. After opening this meeting, colleagues, I expect the deputy prime minister, the two ministers and other colleagues present here to talk about the practical aspects of the issue at hand. Our work tomorrow and for the immediate future will depend on what we do today.

Let’s start the discussion. Who wants to go first? Please, Mr Medvedkov (Maxim Medvedkov, Director of the Department of Trade Negotiations at the Ministry of Economic Development), it would make sense for you to start.

Maxim Medvedkov: Thank you. Colleagues, we have prepared for the government three plans for how to adapt Russia’s economy to meet the WTO entry conditions. You have been sent the summaries. I’d like to say a few words about the essence of these plans. This document contains about 400 measures, half of them proposed by the business community and the rest by the federal executive authorities. The goal is, on the one hand, to adopt the necessary regulations for fulfilling our commitments by the accession date, and on the other hand, to exploit the flexibility of our WTO commitments in order to minimise the risks, above all those that will be created by the weakening of our tariff protection system.

We have held hundreds of meetings with business representatives over the past six months, and I can assure you that what most companies fear above all is the weakening of tariff protection, much more than Russia’s broad commitments or obligations in the services sector, many of which they support and even welcome.

Approximately 200 of these measures concern industry and agriculture; they are currently being scrutinised by federal executive agencies. Decisions have been made on some of the measures, though only a small part, because I hope that we will have some time left – four to six weeks – before we have to implement these measures. In particular, decisions have been made on monitoring the import of sensitive products. It has been decided to issue subsidies to agricultural producers, especially pig breeders, and regulatory enactments have been adopted specifying preferential procurement of domestic products within the framework of state contracts. Active work is underway on other issues, and the decision has not been made yet. We obviously need to accelerate this work, but I think that the Economic Development Ministry as well as the Ministry of Industry and Trade and the Agriculture Ministry would like to know your opinion: do you think the planned measures will be enough, or do we have to do something else so that Russia’s accession to the WTO is as smooth as possible? So that we face no problems at all, or, if there are any, we would know what tools we must use to cope with them. Thank you.

Dmitry Medvedev: Thank you Mr Medvedkov. Please colleagues, go ahead with your comments. We can still discuss things in front of the media for a while, and then go on to a private discussion. Who wants to go first? Please.

Arkady Zlochevsky (President of the Russian Grain Union): Mr Medvedev, colleagues, we have supported Russia’s accession to the WTO from the very beginning, unlike many other representatives of the agricultural sector, who were wary of growing risks. We voted to join that international organisation for a number of reasons. We believe that joining the WTO is a bitter but effective pill for our ailments. It will allow us – even force us – to move from treating the ailments of our agriculture to curing the underlying causes of these ailments.

The national project and government programme certainly played a colossal role later and gave powerful momentum to the development of Russian agriculture, but the main targeted support and many incentives were created for livestock farming. There are no such drivers in crop farming at this stage. Therefore, the fact that Russia pushed its way into the global grain market is not the result of state support, but rather the result of the enormous pressure on agricultural producers.

Dmitry Medvedev: Not “thanks to” but “in spite of.”

Arkady Zlochevsky: Exactly. But we have “conquered” the world market with dumping, selling below the market, which is painful for producers, while exporters are not badly hurt by this policy. An exporter can always shut down the business if it is not profitable. But an agribusiness is impossible to just shut down: it would entail enormous losses, even if production is only cut but not halted entirely. Therefore, they have to sow and harvest crops even at a loss.

One of the ailments characteristic of crop farming is unstable economic conditions. This instability stems from two fundamental reasons, two major problems: one of them is the constant lack of funds for technological modernisation, or poor accessibility of funding (technological modernisation and retooling requires long-term financing and does not yield quick profits). We have insufficient funds, especially in crop farming. But this is exactly the resource that was provided to livestock farming, enabling domestic producers to jumpstart growth. We crop farmers also need this kind of springboard. The other reason is volatile prices, which often push us down into the red. Once in the red, producers see their debt burden grow. Businesses have to service their debt, and we constantly seek solutions, which we certainly do, thanks to government support: we try to restructure debt or extend the terms of previous loans. This is possible due to government decisions.

But here again, we are addressing the effects rather than the cause. The reason for this situation is their inability to repay their debts. The WTO will not allow us to continue this practice – I am referring to government cash injections as a way to resolve problems. We won’t be able to do this anymore and will have to develop new ways and resources to help producers. But, from our point of view, proactive measures are needed. It is better to prevent a fire than to put it out.

In general, we studied international experience in considerable detail (in particular, the experience of Brazil and South Africa) and have drafted a system for dealing with such issues based on integrated international experience. Risk management is a comprehensive, all-embracing, multilevel system that includes such mesh platforms as BigLion, Groupon and other websites offering coupons on the consumer market, only for the agrarian sector. It also includes scoring, which must have a verification system incorporating navigation equipment on vehicles connected, of course, to the GLONASS. We need this verification and ranking system to determine farms’ reliability as borrowers. In other words, it will be a kind of a credit rating on which loan rates will ultimately depend.

The system should also include futures trading, which, combined with the above systems, would cover commercial risks, which insurance companies do not cover now. That is, our insurance system cannot cover commercial risks; it is only good for insuring against natural disaster and the like. There are many more elements, but I don’t have the time to describe them here. But the most important thing is that this system allows for offsetting commercial risks, increasing the reliability of producers as borrowers, enhancing market transparency, and shifting part of state support measures to the WTO green box. We are ready to advance this proposal, and I understand that this system has a number of advantages. I hope that it will be supported because it does not require any budget allocations, only administrative resource, which is very important.

What’s more, this system gives the state an opportunity to influence the technological basis, precisely the technological production basis in the agriculture sector, which creates an impetus for its development. In general, I am only asking for an opportunity to present this system to Mr Dvorkovich (Deputy Prime Minister Arkady Dvorkovich) and Mr Fyodorov (Agriculture Minister Nikolai Fyodorov). If they support it, we will discuss it at a special meeting, possibly within the framework of the expert council. Thank you.

Dmitry Medvedev: Thank you, let’s do it as you suggest. Prepare a detailed proposal for Mr Dvorkovich and Mr Fyodorov, and then we will take a decision. Who wants to speak next, please? Let’s give the floor to our colleague who is monitoring all our efforts regarding accession to the WTO. Please, Mr Mordashov.

Alexei Mordashov (head of the Commission on Integration, Trade and Customs Policy and the WTO at the Russian Union of Industrialists and Entrepreneurs): Thank you, Mr Medvedev. Ladies and gentlemen, as the head of a working group of the Russian Union of Industrialists and Entrepreneurs on Russia’s WTO accession, I attended many discussions on accession. I wholeheartedly support what you said at the beginning of your address – that the main goal now is to minimise possible negative consequences and to exploit, at long last, the benefits of our accession, towards which we have worked for such a long time.

Speaking about negative consequences, I’d like to mention the following fact: our working group has been assessing possible negative consequences with support from invited experts. It should be said that virtually none of the industries mentioned any grave negative consequences. The media hardly ever report this, as we tend to give more attention to negative assessments. Colleagues from the agricultural sector said they support Russia’s accession in general. I believe that they do not expect major negative consequences because the Russian economy is widely open to international competition and the level of its domestic protection is very low compared to the overwhelming majority of countries. I would like to stress that the process of accession, which took so long, was absolutely open and the Ministry of Economic Development and Trade and the Ministry of Industry were ready to listen to all those who wanted to take part in the negotiations. I’d like to thank the government and the relevant ministries and departments for this attitude.

We must work out smart mechanisms in order to mitigate any negative consequences. There are a number of very sensitive industries, for instance, the automobile industry. As far as I know, no decision has been made on this, although the Ministry of Industry is dealing with this issue. Tentatively, we will become a WTO member on September 1, and by that time the government must have adopted some decision on the proposals of carmakers. This is a very serious issue and I think it requires the attention of high-ranking government officials. There are some highly sensitive moments. I’m sure Mr Medvedkov knows them better than me. They are not numerous but they are very important and I think they deserve attention. Practice shows that ministries and departments move forward faster when they feel the attention of their superiors and the government. We know this from experience… It is very dangerous that one day – and we know it is not far off – we will be in the WTO and be subjected automatically to a whole range of measures that will adversely affect our industries, primarily carmakers, unless we take measures to soften them. I’m referring to imports of used cars. Our colleagues from the automobile industry are working on that, but I understand they haven’t yet come up with the package of measures that is so urgently needed.

I was very pleased to hear our agricultural producers speak about proposals that could make our agriculture much more effective. There are some problems in agricultural machine-building as well. Our production of harvesters is not yet at the most advanced world level but it exists, and the level of our domestic market protection will change drastically for it following our WTO entry. There are many other sectors to be affected as well.

By the way, there are a number of technical mistakes. Thus, after the change in the GATT classification (the international classification system), the classification of paper has been somewhat altered as compared to what was used during the discussion of the Russian negotiating position and the formation of…

Dmitry Medvedev: Codes.

Alexei Mordashov: Yes, codes – the Harmonised Commodity Description and Coding System. They are also very important. The Russian negotiating team is working on this. In fact, it is necessary to alter the text a little, the agreement on accession, as regards the codes in order to have some protection. This is very urgent now.

It is important to make information about the WTO as accessible as possible. Of course, the Ministry of Industry and Trade and the Ministry of Economic Development have their own sites. There is also an unofficial text of the accession agreement that has been translated into Russian. Maybe, we could venture to have the official Russian text, which could be used in court? The accord has been signed in English.

Dmitry Medvedev: We should think about the official text because we will have to use it correctly and different interpretations are possible. I have no doubt that we will argue with the WTO on its interpretation. Naturally enough, we will defend ourselves when we are attacked and we need a canonical text. I think this is fair. I don’t really know how it is produced but we must draft some official document. How to do this? I’ll instruct the government to get to the bottom of this. Let the Ministry of Economic Development and high-ranking government officials look into this too. I agree.

Alexei Mordashov: Thank you very much. We must continue organising conferences and round tables more actively because the WTO is still an equation with many unknown quantities for our economy. For some reason we often hear negative statements on the WTO from those who do not take an active part in world trade and don’t know much about the WTO. As we have said several times, it may be useful to introduce a WTO-related programme in the leading Russian universities. It should not necessarily be a university subject, but maybe an enhancement programme, or some other enhancement courses on the WTO that would be open for all those who want to attend, at Moscow University, the Foreign Trade Academy or MGIMO… Perhaps they could do well in the Higher School of Economics. Such courses may be in demand on a commercial basis but this is something for the Ministry of Education and Science to consider.

Speaking about the benefits of WTO membership and the ways of using them to the utmost, I’d like to focus on two aspects. First, we should discuss the Russian position in the WTO in two formats – in the government and at the talks between the government and the business community. Tentatively, we will join the WTO on September 1, and we should be able to say what model of agriculture we support – market-oriented or multifunctional? Do we support the European Union or the Kern Group? Today, the WTO is talking about expanding…

Dmitry Medvedev: You know what? We won’t support anyone. We should support our own selves. Why should we join some bloc of communists and non-party people? We should think about ourselves.

Alexei Mordashov: Maybe, Mr Medvedev, but we should make this decision anyway. Suppose we don’t support anyone. In other words, the non-market nature… We’ll have to abide by default by the decision we are supposed to make even if we don’t make it. This is why I think it would be better if we make it conscientiously. Moreover, we see that today the WTO is trying to regulate more spheres, such as the movement of capital and workforce. Our position on this issue is very important if we want to protect our own interests, and we can only elaborate it by using certain mechanisms. It would be very useful to continue the government’s practice of consulting the business community and even to institutionalise it.

One more aspect that I’d like to mention is supporting exports in the WTO. I’m referring not so much to the protection of the domestic market, although this is at the centre of attention today, but supporting exports as such, the need to gain access to the foreign markets. There is a whole number of measures that would be useful in this respect. We could improve the coverage of the issue, enhance the role of our trade missions abroad and support our exports, especially of high-tech products, directly with export loans. Obviously, our opportunities are limited in this respect, but we do export high-tech products. Thus, Silovyye Mashiny (Power Machines) could export more products and win more tenders, but quite often we have to compete with foreign companies such as Alstom even on our own market. There are also Chinese companies that their government agencies are supporting with loans – something we cannot afford for the time being. It goes without saying that the government’s attention on this issue and all-around support of exports would be very useful and would allow us to make the most of our WTO membership. Thank you.

Dmitry Medvedev: Thank you, Mr Mordashov. In general I support what you’re saying. Naturally I mean that it’s necessary to clarify some things because accession to the World Trade Organisation, on the one hand, is seen by some people as a threat that will irreparably damage some sectors of our economy – these people have no view of the overall picture, they simply say others will be able to enter the market and wreck everything, that it will open the market to imports and liberalise the rules and so on. But this perception is sometimes superficial for other reasons: our accession to the WTO is mostly advantageous because we will be granted access to open markets and will be able to sell our products there. The former and the latter are simplifications; that’s why it is necessary to work on this very seriously.    

As for our position within the WTO, we certainly should monitor global trends, and we will have to do this. But at the same time I suggest that we always keep Russia’s national economic interests as our first priority even within the WTO, because our economy is more important for us than the global economy, and our domestic policies are more important for us than global policies. However we shouldn’t forget that the world is advancing in a certain direction, and that everybody is struggling against protectionism, that there are a number of international trends that we generally share.  

Go ahead, please.

Andrei Danilenko (Rusmolko Board Member, Customs Union Agro-Industrial Association Board Chairman): Thank you. I’d like to say a few words on dairy farming. Due to the peculiarities of our industry we have a rather long ROI term and so our activity is very sensitive from the point of view of profitability. To be honest, Mr Medvedev, the WTO is not the worst problem for the dairy industry, it just adds to all the other problems, and so we feel a certain tension and have the feeling that we are running a risk. We also think that maybe this is positive, that it will force [the Government] to have a comprehensive view of the industry. We have some system-wide proposals that can generally improve the situation in the dairy industry and minimise any negative fallout from our WTO membership and, on the contrary, create generally a more positive situation in our industry. I won’t go into details now, we will provide the details to Mr Dvorkovich (Arkady Dvorkovich) and Mr Fyodorov (Nikolai Fyodorov) – they already have some idea about these issues. But I’d like to outline the basic points.

First, there are certain possibilities in terms of the WTO from the point of view of duties and protective measures, and we propose using them to the maximum; what currently makes it possible for us… Currently, Mr Medvedev, there is a bad situation with unfair competition in our market that is concerned with counterfeit dairy production that forces out 30% of our domestic production from our own market. This grey market production is purely an administrative issue for the Federal Antimonopoly Service and the Federal Service for Supervision of Consumer Protection and Welfare that could seriously change the situation in our market, and consumption would seriously change.   

The next issue is Russian dairy consumption per capita, which is considerably below medical standards, not to mention the EU’s standards. Many countries actively promote dairy consumption, milk for schools, food stamps and so on… We propose using these Western approaches to promote domestic products in our market like these other countries.   

The next proposal is a more system-wide approach to synchronising our work within the Customs Union. Of course, our Belarusian partners… or rather those with whom we have unequal competitive conditions; in fact we compete with a state machine which does not comply with market standards. We have no choice but to use the market rules, therefore a system of integration is needed and it is necessary to use the EU experience from the point of view of regulating competition.

And naturally, Mr Medvedev, there should be a programme of state support to 2020, taking into account the conditions of WTO accession, and this programme should stimulate modernisation and efficiency. It should stimulate production so that foreign investors wishing to operate in Russia can see that it is better to operate in Russia than to import into Russia.  

And the last thing. I think it’s great that we consult with experts, with local unions. I think it’s desirable to create a certain system-wide plan, a certain structural plan, and regularly monitor its efficiency. Whatever our current theoretical proposals are, coming from various branches, Mr Medvedev, we do not know for sure if they will work. So it is probably necessary to monitor and adjust this plan manually, as it proceeds, so we are asking that we monitor this system and be flexible enough to adjust it as necessary. And then, I think, we’ll have more pluses than minuses.  

Dmitry Medvedev: Thank you very much, Mr Danilenko. So this is what I want to say. Awhile back we began to hold a part of these consultations on this subject. We had a field conference, and we discussed these issues, not necessarily of dairy farming but of livestock farming, although these issues very often intersect or are similar. I’d like to support your point that the concerned agencies, particularly the Federal Antimonopoly Service and the Federal Service for Supervision of Consumer Protection and Welfare should be more aggressive in the area of counterfeit products and regarding the forcing out of our products from the market by similar Western products that often have an absolutely inferior quality… a programme of support for domestic production, without a doubt, yes. Most of the world is doing this. It is part of patriotism if you like, and part of a special feeling for one’s own country, and part of a pride for domestic products. Fortunately, we currently have high quality domestic products: they are hardly comparable with what we had in the Soviet period, so this programme should work without a doubt.

As for coordinating production distribution within the Customs Union, I’d like to support you here too. In a week I’ll participate in a “tripartite meeting” (it is this country’s custom to have a meeting between “all three parties” with my colleagues from Belarus and Kazakhstan and we will discuss this situation including its relevance to WTO accession.

The state programme for agricultural support, for the development of agriculture (and here I agree with you) must be reviewed and finalised with due consideration for WTO accession. It should be a working document, and not a set of abstract wishes or even some figures detached from the current context.

And finally, the last point, which I also agree with: this is a local plan that the Government should also create, based on our experts’ meetings. I’d like to confirm once again that I will hold these meetings and not only general meetings (this is a general meeting) but also local meetings. I have held a local meeting on the problems of livestock farming. This means that we can hold a meeting on dairy farming, and that we can hold meetings on other issues, sensitive issues, on the auto industry, which Mr Mordashov mentioned, and naturally on other issues needing the direct attention of the Prime Minister. The Open Government system will hopefully be an active part of this. Mr Abyzov (Mikhail Abyzov), please make a note of this.

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