group assignment international economics russias trade policy report

The Challenges impacted the Russia Trade Policy...121.1 COVID Pandemic...121.2 Rising Global Protectionism and Discrimination...131.3 Russa Trade Boomed after Invading with Ukraine...132

GROUP ASSIGNMENT International Economics

RUSSIA’S TRADE POLICY REPORT

LECTURER: Dinh Thi Phuong MaiClass: IB1703

GROUP 2Nguyen Khai Hoan – SS160683Pham Le Phuong Trinh - SA170284

Pham Tran Long - SE140640Ngo Dinh Tuan - SE173431Doan My Hao – SS170028Nguyen Manh Thang – SS150522

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I Overview about Russia 3

II Demographic Factors and National Resources 5

1 Demographic Factors 5

2 National Resources 6

3 SWOT Analysis of Russia 8

III Trade Police and Their Impacts 12

1 The Challenges impacted the Russia Trade Policy 12

1.1 COVID Pandemic 12

1.2 Rising Global Protectionism and Discrimination 13

1.3 Russa Trade Boomed after Invading with Ukraine 13

2 Liberalization and Facilitation of Trade in Goods 20

4 The Negotiations between Russia and Others 29

4.1 Russia and WTO 29

4.2 Russia and EAEU 30

4.3 Russia and China 31

IV The Future Outlook of Russia 33

V References 35

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I Overview about Russia

Russia is bounded to the north and east by the Arctic and Pacific oceans, and it has small frontages in the northwest on the Baltic Sea at St Petersburg and at the detached Russian oblast (region) of Kaliningrad (a part of what was once East Prussia annexed in 1945), which also abuts Poland and Lithuania To the south Russia borders North Korea, China, Mongolia, and Kazakhstan, Azerbaijan, and Georgia To the southwest and west it borders Ukraine, Belarus, Latvia, and Estonia, as well as Finland and Norway.

(Source: Encyclopadia,2023) Figure 1 The Russia’s Geographic Location

Since its first (and the last) WTO Trade Policy Review (TPR), the Russian Federation hasmaintained the course of economic diversification and increasing investment

attractiveness of the domestic market, improving legislative regulation, supporting and 3

developing the multilateral trading system, countering trade protectionism (inter alia in the form of unilateral trade restrictions),as well as effectively participating in regional integration processes together with further developing of the Eurasian Economic Union (EAEU) (The New York Times,2022)

This TPR covers the period when global recession and pandemic have changed the parameters of the world’s economies functioning Sanitary restrictions have led to a sharpslowdown in economic activity and an unprecedented disruption of some production chains The contraction in economic activity caused profound changes in energy markets, and the development of the recession gradually affected most sectors of the economy These changes substantially affected Russia’s foreign trade, causing problems comparable to those arising from the crisis of 2009

International trade, however, continues to have a significant impact on Russia’s economicdevelopment Despite a relatively low share of net exports (calculated as a difference between exports and imports) in the structure of GDP, this component significantly contributes to the dynamics of gross output Open and non-discriminatory trade, favourable conditions for capital flows and technology, as well as the stability and predictability of the universal rules of international trade lie at the core of the sustainability of Russia’s economic development.

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II Demographic Factors and National Resources

1 Demographic Factors

During the 1990s Russia began experiencing a negative population growth rate Primary reasons for this was a decline in the fertility rate (particularly of ethnic Russians) similar to that in Japan and in many western European countries There was also a steep drop in life expectancy beginning in the early 1990s, a result of inadequacies in the health-caresystem and poor nutrition; high smoking and alcoholism rates and environmental pollution were also considered contributing factors.(Britannica,2020)

Declines in life expectancy were more pronounced among men and resulted in a growing gap between the number of men and women in the country Higher rates of natural increase (population growth resulting from more births than deaths) continue among some minority groups, particularly those of Islamic background Until the 1990s migration from the European sector to Siberia was the primary cause of regional variations in population growth rates For example, in the 1980s, when Russia’s population increased by about 7 percent, growth exceeded 15 percent in much of Siberia but was less than 2 percent in parts of western Russia During the 1990s, however, easternSiberia (at least according to official statistics) suffered a dramatic population decline, a result of substantial outmigrations caused by the phaseout of heavy government subsidies, upon which it was heavily dependent.

The long-declining Russian birth rate has led to a progressive aging of the population In the early 21st century, for example, roughly one-sixth of the population of Russia was below age 15, while the proportion of those age 60 and above topped one-fifth The proportion of children was generally higher, and that of the elderly lower, among the non-Russian ethnic groups, which have maintained a somewhat higher birth rate An aging population and the drop in fertility rates led many demographers to foresee a long-term labour shortage.

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2 National Resources

Russia has enormous energy resources and significant deposits of many different minerals Most, if not all, of the raw materials required by modern industry are found within its borders Its coal reserves are particularly extensive The biggest fields lie in the remote Tunguska and Lena basins of East Siberia and the Far East, but these are largely untapped, and the bulk of output comes from more southerly fields along the Trans-Siberian Railroad About three-fourths of Russia’s coal is produced in Siberia—some two-fifths from the Kuznetsk Basin alone and the remainder from the Kansk-Achinsk, Cheremkhovo, and South Yakut basins and numerous smaller sources The production of hard (anthracite) coal in European Russia takes place mainly in the eastern Donets Basin and, in the Arctic, in the Pechora Basin around Vorkuta.

Privatization of the coal industry began in the 1990s, and by the early 21st century some three-fifths of overall coal production was coming from privatized mines However, the removal of state subsidies also forced the closure of many unprofitable mines The most severe cuts in coal output occurred in the Central and Ural economic regions and in Rostov province of the North Caucasus region Coal mines in regions with access to large reserves of oil and natural gas fared better.

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(Source: Britannica,2020) Fugure 2 Oil Well and Gas pipelines from Russia to Europe

Russia is among the world’s leading producers of , oil extracting about one-fifth of the global total It also is responsible for more than one-fourth of the world’s total natural gas output The great bulk of oil and natural gas comes from the huge fields that underlie the northern part of the West Siberia region Another significant source of reserves is the Volga-Ural zone, and the remainder is derived mainly from the Komi-Ukhta field (North region); the North Caucasus region, once the Soviet Union’s leading producer, is now of little importance Extensive pipeline systems link production sites to all regions of the country, the neighbouring former Soviet republics, and, across the western frontier, numerous European countries.

(Source Britannica,2020)Figure3 Russia: Breakdown of renewable energy by source

There are some 600 large thermal power plants, more than 100 hydroelectric stations, andseveral nuclear power plants that generate electricity About three-fourths of electricity is generated in thermal stations; some two-thirds of thermal generation is from oil and gas The remaining power output is produced by hydroelectric and nuclear plants Most of the hydroelectricity comes from huge stations on the Volga, Kama, Ob, Yenisey, Angara, and Zeya rivers Nuclear power production expanded rapidly before development was

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checked by the Chernobyl accident in Ukraine in 1986 Much of Siberia’s electricity output is transmitted to the European region along high-voltage lines.

Russia also produces large quantities of iron ore, mainly from

the Kursk Magnetic Anomaly (Central Black Earth region), Kola Peninsula, Urals, and Siberia Although there is steel production in every economic region, the largest steel-producing plants are located mainly in the Urals, Central Black Earth region, and Kuznetsk Basin Russia produces about one-sixth of the world’s iron ore and between one-tenth and one-fifth of all nonferrous, rare, and precious metals.

Nonferrous metals are available in great variety from many districts, but by far the most important are those of the Ural region, which is Russia’s main centre of nonferrous metallurgy Russia is a major producer of cobalt, chrome, copper, gold, lead, manganese, nickel, platinum, tungsten, vanadium, and zinc The country produces much of its aluminum from plants powered by the Siberian hydroelectric stations, but bauxite deposits are relatively meagre.

3 SWOT Analysis of Russia

Impressive military power.

Russia has a significant military force at its disposal, second only to China and the United States Russia has nuclear weapons in addition tohaving the most modern missiles and armaments for its air force and navy The rest of the world would suffer greatly if any of these three nations engaged in war.

High Inflation

High inflation has affected the purchasing power of Russians with little savings, and has caused headaches for the authorities in recent months (Reuters,2023)

Western sanctions have the potential to push up the prices of many goods in Russia even higher, especially as the Russian ruble has

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Taking advantage of economic streams.Much of the world's mineral, gas, and oil resources come from Russia The price of these resources is very prone to demand, which is both a strength and a weakness The relations betweenRussia and other nations have an impact on demand as well The inhabitants are looking to new industries, particularly the IT business, because the market is so unstable The majority of the globe is embracing new technology, therefore it's a wise choice To sustain this technology, new employment are required, and Russians are in need of new jobs.

lost about 40% of its value since the start of this year, making any goods that are not sold.Russian imports become more expensive for consumers.

The Central Bank of Russia has more than doubled interest rates to 20% and the government has implemented supportive measures.

"The sharp depreciation of the ruble and the imposition of sanctions by other countries onRussia will significantly increase inflation in the country in the coming months (Capital Economic,2022)

Profit from the entertainment value.One of Russia's numerous assets is its entertainment industry That can turn into an additional source of income for Russians Particularly in Moscow and St Petersburg, two of the most vibrant cities, tourism may rise These two places have the potential to gain popularity abroad and develop into desirable tourist destinations for visitors from abroad.

More technology, less fossil fuels.For Russians, the expanding IT market is of interest High-tech parks are currently available, but that is just the beginning The cost might be

Other country’s military weapons.Russia is not infallible, despite having one ofthe biggest militaries, as indicated in the article's "strengths" section The militaries of China and the United States are larger, but they also possess nuclear weapons These two nations are at odds with one another because they possess greater strength than Russia in many aspects Other nations see Russia as a danger, and if they ever did something dubious, it might not be good for Russia.

Decreased birth rates.

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prohibitive for the majority of people because thehardware must be imported Nobody knows when or if the Russian government will actually make the necessary investments in the technology If the government does turn its focus to the technological landscape, it will create new prospects and job openings.

The lowest birth rates in more than 20 years have been recorded in Russia In 2016, the birth rate was higher than that of Japan but lower than that of the United States BetweenJapan and Russia, there is hardly any distinction This hazard currently exhibits no evidence of self-healing.

In general:

Russia possesses a number of advantages, including strong military capabilities, resilient citizens, and access to minerals and natural resources that are essential to many regions ofthe world The government is big and corrupt, and the populace feels they can't be open about their emotions, which are two of their major vulnerabilities.

Despite Russia having the ideal opportunity to expand its technology market, new industries cannot flourish without government support One threat is the over-reliance on the government, but there are others as well, including the dropping birthrate and the tense ties with neighboring nations that influence Russia.

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III Trade Police and Their Impacts

1 The Challenges impacted the Russia Trade Policy

1.1 COVID Pandemic

Russia saw a substantial halt in economic activity during the shutdown, much like other nations In comparison to the same periods in 2019, Russia's GDP fell by 7.8% in the second quarter of 2020, 3.5% in the third quarter, and 1.8% in the fourth Sectors of the economy driven by demand experienced the most decline Nonetheless, the rate of contraction in fundamental industries was more modest (apart from trade).

Because of a previously established safety margin generated by steady and balanced macroeconomic policies, the Russian economy has been able to adapt to foreign shocks The effects of the epidemic have been lessened by actions such enacting a fiscal rule, keeping inflation at the desired level, fostering banking sector stability, and limiting reliance on outside sources The current account surplus decreased in 2020 as a result of lower exports and oil prices, however this was somewhat offset by lower imports By sales of foreign currency in accordance with the budget norm, the Bank of Russia has kept the domestic foreign exchange market in balance The economic recovery has been facilitated by measures taken by the government and the Bank of Russia, including transitioning to a soft monetary policy

The Government of the Russian Federation and the Eurasian Economic Commission haveput policies as part of their reaction to the COVID-19 epidemic The implementation of a duty-free system for the import of individual components and materials to create pharmaceuticals and disinfectants, medicines and medical equipment, and personal protective equipment was one of these initiatives, and it has been in place since March 2020 Moreover, some products are not subject to value-added tax And in order to maintain an uninterrupted and stable supply level of mass-produced goods The Russian Federation adopted a number of suggestions about conformity assessment for applicants and product certification organizations for the time period of 15 March - 31 December

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2020

1.2 Rising Global Protectionism and Discrimination

Russia still has a lot of issues to deal with before it can fully realize its potential as an international economic player Due to both bilateral and global difficulties, there is still a lot of protectionist pressure.

As a result of the surplus global steel production capacity, Russia, one of the top manufacturers of steel, continues to have significant issues Even before the pandemic in 2020, steel consumption fell by 1.7%, despite significant progress being made in decreasing the global overcapacity during the Global Overcapacity Forum in 2016–2019 Capacity growth has now restarted The OECD predicts that the long-term demand for steel will be equivalent to 1% a year At the same time, imports of steel goods are nevertheless subject to growing limitations.

Individual economies have continued to impose sanctions on Russia in the framework of the bilateral relationship A significant problem is the politization of international commerce and economic interactions The replacement of WTO principles with other "rules," together with unfair competition tactics, protectionist policies, trade wars, and unilateral penalties, have all impeded the inclusive expansion of the global economy All of this has caused the global economic climate to become more fragmented and badly impacted socio-economic growth Some of these actions have forced the disruption of well-established supply and manufacturing networks, necessitating the creation of import substitution strategies based on indigenous supply.

1.3 Russa Trade Boomed after Invading with Ukraine

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Countries vowed to sever economic ties with Russia and imposed sanctions that wereintended to cripple its economy after it invaded Ukraine But as one of the world’s mostimportant producers of oil, gas and raw materials, Russia has had longstanding andlucrative trade partnerships Breaking those ties is not easy.

In 2020, Russia imported $220 billion of products from the rest of the world, includingcars and car parts, medicine and computers, buying heavily from China, Germany, Koreaand elsewhere.

(Source: The New York Times, 2022)Figure 4 The imports of Russia before Invasion

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(Source: The NewYork Times, 2022)Figure 5 The Imports of Russia after Invasion

The volume of its imports has since plunged as sanctions and trade limits went intoeffect, according to a New York Times analysis of trade data But a few countries,including China and Turkey, have deepened their relationships with Russia since the warbegan.

Many countries have found living without Russian raw materials incredibly difficult.More than two-thirds of Russia’s exports by value before the war were oil, gas and keymetals and minerals, which help to power cars, warm homes and supply factories all overthe globe.

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(Source: The New York Times, 2022)Figure 6 The Exports of Russia before Invasion

That has led to a frustrating reality for Western officials who had hoped to undercutRussia’s war effort by punishing its economy: The value of its exports actually grew afterit invaded Ukraine, The Times analysis shows, even in many countries that have taken anactive role in opposing Russia.

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(Source: The New York Times, 2022)Fugure 7 The Exports of Russia after Invasion

Russia’s relationship with the world is continuing to evolve rapidly To assess the globalshifts, The Times analyzed years of country-level trade data compiled by the Observatoryof Economic Complexity, an online data platform Because the data is published with alag, the picture it provides is inherently backward looking Russia’s ability to trade withthe rest of the world could be further curtailed in the coming months as the Westintroduces new restrictions.

But so far, the data underscores how deeply intertwined Russia is with the globaleconomy, allowing Moscow to generate substantial sums of money as it enters its ninth

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month of war Attempts by Western nations to use sanctions and other measures to crippleRussia’s economy have so far had limited effects.

“It’s very difficult to live without Russian resources,” said Sergey Aleksashenko, theformer deputy finance minister of Russia and deputy chairman of its central bank “Thereis no substitute.”

As it drags on, the war, and the world’s response to it, are bringing about a remarkablechange in international trade flows Food is in short supply in many countries that rely onwheat and other staples grown outside their borders Prices for fuel and other productshave risen at a time of record inflation And Russia’s long-standing economic ties withEurope are gradually being unknotted, and new alliances are forming as goods arererouted to other countries, the data shows.

The European Union, the United States and the United Kingdom have imposed harsheconomic penalties on Russia, sanctioning hundreds of wealthy citizens and governmentofficials and largely cutting the country off from the international financial system Theyalso vowed to stop sending advanced technology and banned Russian airlines from flyingto the West.

Decisions by global companies to halt operations in Russia have also had a major impact.Container ships filled with foreign goods are no longer streaming into the port at St.Petersburg, a main point of connection with the rest of the world And inflation andeconomic uncertainty are causing Russian consumers to cut back on buying the productsstill on store shelves.

But sanctions on the Russian energy that helps power Western economies have beenslower to take effect The United States has already cut off purchases of Russian oil, and

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