Europe’s Russian connections

Aasim M. Husain, Anna Ilyina, Li Zeng 29 August 2014

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The conflict in Ukraine and the imposition of new sanctions against Russia by the US and the EU (second half of July) followed by Russia's counter-sanctions (August 7) signal an escalation of geopolitical tensions that has been strongly felt in Russian financial markets (see Chart 1). A deterioration in the conflict, as well as further escalation of sanctions and counter-sanctions, could have a substantial adverse impact on the Russian economy through direct and indirect (confidence) channels (IMF 2014a).

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Topics:  Europe's nations and regions Politics and economics

Tags:  Russia, sanctions, Eastern Europe

A way out of the Ukrainian quagmire

Thorvaldur Gylfason, Inmaculada Martínez-Zarzoso, Per Magnus Wijkman 14 June 2014

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At the Vilnius Summit in November 2013, President Yanukovich chose not to sign the Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU that Ukraine had spent five years negotiating.1 His decision was dictated both by Ukraine’s failure to fulfil the political conditions for signature set by the EU and by strong pressure by Russia on Ukraine to join the Eurasian Customs Union instead.2 His refusal to sign unleashed events in Ukraine that within six months led to the President’s flight to Russia, the installation of a new pr

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Topics:  EU policies Europe's nations and regions International trade

Tags:  Russia, EU, civil war, free trade agreements, Ukraine, diplomacy

Russia’s tit for tat

Peter A.G. van Bergeijk 25 April 2014

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Since 16 March 2014, the EU (in concerted action with the US) has frozen assets and imposed travel bans on 33 persons and an individual bank. On 20 March, Russia counteracted with the reciprocal blacklisting of EU and US officials. This pattern of tit for tat raises the question of the comparative vulnerability of the EU and Russia. In assessing this vulnerability, is not just the ability to inflict economic damage that matters, however, but also the way economic damage translates into political change. This means that one needs to consider the political system.

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Topics:  Politics and economics

Tags:  Russia, EU, sanctions, Crimean crisis

Russian volatility: Obstacle to firm survival and diversification

Alvaro González, Leonardo Iacovone, Hari Subhash 12 February 2014

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Limited economic diversification – where production is concentrated in sectors characterised by low technology spillovers – can limit productivity growth and expose an economy to the macroeconomic instability of a fate dictated by external events. Moreover, development and diversification appear to be related. Imbs and Wacziarg (2003) show that higher per capita incomes are associated with greater diversification and then with increasing specialisation at higher per capita incomes.

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Topics:  Development Industrial organisation

Tags:  Russia, economic diversification

Meeting Russia’s challenge to EU’s Eastern Partnership

Thorvaldur Gylfason, Per Magnus Wijkman 25 January 2014

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EU’s Eastern Partnership is in turmoil after its Summit in Vilnius on 29 November 2013. Only Georgia and Moldova of the four partner countries that had successfully negotiated Association agreements with the EU, including Deep and Comprehensive Free Trade Agreements (DCFTAs), initialed them at the Summit.1 In September, President Sargsyan, motivated by the threatened loss of Russia’s security guarantee vis-à-vis Azerbaijan, had informed the EU that Armenia would not initial its Association agreement but instead join Russia’s proposed Eurasian Customs Union.

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Topics:  Politics and economics

Tags:  Russia, EU, Ukraine, Eastern Partnership

Was Stalin necessary for Russia’s economic development?

Anton Cheremukhin, Mikhail Golosov, Sergei Guriev, Aleh Tsyvinski 10 October 2013

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In 1962, a prominent British economic historian, Alec Nove, asked whether Russia would have been able to industrialise in the late 1920s and 1930s in the absence of Stalin’s economic policies (Nove 1962). This question is still important for several reasons.

  • The transformation of Soviet Russia from an agrarian to an industrial economy is a key episode in economic and political history.

The industrialised Soviet Union played a key role in the victory over Nazi Germany during WWII and, as one of the two superpowers during the Cold War, reshaped the postwar world.

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Topics:  Development Economic history

Tags:  Russia, Stalin, Soviet Union, industrialisation, collectivisation

The BRICs party is over

Anders Åslund 04 September 2013

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After a decade of infatuation, investors have suddenly turned their backs on emerging markets. In the BRIC countries – Brazil, Russia, India and China – growth rates have quickly fallen and current-account balances have deteriorated.1 The surprise is not that the romance is over but that it could have lasted for so long.

From 2000 to 2008 the world went through one of the greatest commodity and credit booms of all times. Goldman Sachs preached that the BRICs were unstoppable (e.g. Wilson and Purushothaman 2003).

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Topics:  Development International trade

Tags:  Russia, China, India, commodities, protectionism, BRICs, Brazil, BRIC

The past in the Polish present

Irena Grosfeld, Ekaterina Zhuravskaya 23 March 2013

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History is vividly present in today’s political debates in Poland. There is a near-consensus among politicians and political commentators that the spatial pattern in voting is determined, to a large extent, by the Partitions of Poland (1772-1918) and the change of boundaries in 1945 that triggered mass migration of the population.

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Topics:  Economic history Frontiers of economic research

Tags:  Russia, Poland, Prussia, Habsburg, Catholic

Diversifying Russia

Simon Commander, Alexander Plekhanov 29 January 2013

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Russia aims to diversify its economy, thereby moving away from its dependence on oil and gas. Despite much political rhetoric, our research (European Bank for Reconstruction and Development 2012) indicates that, to date, relatively little has been achieved. Oil and gas still account for nearly 70% of total merchandise exports and around a half of the federal budget. Figure 1 shows the increasing share of minerals in total exports when measured in constant prices.

Figure 1. Russia: Structure of exports in real terms (at constant prices)

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Topics:  Development

Tags:  Russia, education, skills, oil, gas, economic diversification

Rising protectionism and the subordination of trade policy

Simon J Evenett interviewed by Viv Davies,

Date Published

Fri, 07/20/2012

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See Also

See also:

Débâcle: The 11th GTA report on protectionism (Simon Evenett, 14 June 2012)

Mounting tensions pose a test for world trade (Vox Talk with Simon Evenett, 25 November 2011)

Transcript

View Transcript

Viv Davies: Hello and welcome to Vox Talks, a series of audio interviews with leading economists from around the world. I’m Viv Davies from the Centre for Economic Policy Research, it’s 17 July 2012 and I’m speaking with Professor Simon Evenett of the University of St Gallen about the recent rise of protectionist measures in the world trading system. We also discuss the implications of the rise in regional trade agreements, the potential effect of Russia joining the WTO, and the impact of slow growth and recession in Europe on the region’s trade with the rest of the world.

I began by asking Simon what the recent rise in protectionism means for world trade. 

Simon Evenett: It means that the world economy is facing a greater risk of more closed markets and a stalled recovery because of protectionism. The recent uptick in protectionism has been mentioned not just by the WTO but by the European Commission, the International Chamber of Commerce and the so-called B20 group of business leaders. The findings of the Global Trade Alert report were discussed by some of the participants at Los Cabos, the G20 summit, and I think the profile of this issue has been raised appropriately by a large range of individuals and organisations.

Viv: What sort of protectionist measures are we seeing most commonly used now?

Simon: Measures being used at the moment are a combination of traditional antidumping, the so-called trade defence measures, some resort to subsidies by countries, especially those who have engaged in industrial policymaking initiatives, and also a number of export restrictions which are limiting the supply of commodities and other items to the world economy.

Viv: And what does this mean for the efficacy of WTO rules? Are they not working?

Simon: WTO rules have been negotiated over time and are still fairly incomplete. Where they are tough they’re very valuable and have probably done a good job in deterring some protectionism, but I would put a greater emphasis on the rules being incomplete and this inducing a switch in the form of protectionism. Overall I think the WTO rules have altered the composition of protectionism more than its level.

Viv: So who’s the biggest offender in terms of implementing protectionist measures? And who’s suffering the most as a consequence of protectionism?

Simon: Global Trade Alert cuts the data up in a number of different ways, and depending on different metrics you come out with different lead offenders. But amongst the top offending countries are Japan, the European Union countries taken together, Brazil, India, and China. Those are perhaps the worst five. Argentina also recurs heavily in the list of offenders.

In terms of the countries which have been hit the most these are the biggest exporters in the world, so obviously China, the United States, the major European nations, have been hit many, many times. We've seen over 500 hits for some of those countries since November 2008.

Viv: We’re also seeing quite a rise in the number of regional trade agreements being made. In 2010, for example, the China-ASEAN Free Trade Area was established; the European Union, too, is making deals with Colombia and Peru, with possible deals in the pipeline with India, Japan and the US. Is the rise of regional trade agreements a good thing for world trade?

Simon: The rise of regional trade agreements is probably mixed for the world trading system. There’s a long-standing concern amongst economists that regional trading agreements divert trade away from more competitive firms towards those which have tariff breaks.

But the other offsetting feature is that regional trading agreements have been fairly effective in introducing rules on behind-the-border policies, regulatory policies which affect domestic and foreign businesses as well. So any balance sheet of the costs and benefits is going to have to weigh up these two factors.

As tariffs come down over time, the trade diversion costs are probably getting smaller and smaller. They’ll probably be concentrated more in agriculture than in manufacturing, whereas the behind-the-border issues just seem to get more and more important over time. So on net I’m cautiously positive about regional trading agreements being a good force in the world economy, but I don’t believe you can argue that they’ve delivered a lot of economic benefits in most cases.

Viv: Okay. So Russia is, at last, just about to join the WTO. What do you think are the likely implications and consequences of that?

Simon: There are few people rejoicing that Russia is joining the WTO. This is partly because the Russian position on negotiations is not likely to be one which is open to further liberalisation. If anything the recent policy moves in Russia have been towards more protectionism and the substitution of imports. Overall, people are concerned about what the impact of Russia’s accession will be on negotiations and on the balance of those negotiations.

Furthermore, Russia will soon be subject to WTO dispute settlement and could well be the target of a number of enforcement actions by other countries, and this could make for some fractious times in Geneva as well. On net this is not the happiest development but, still, it’s better to have Russia inside the World Trade Organisation’s tent and hopefully over time its policy priorities will evolve.

Viv: What impact is the slow growth and recessionary environment having on Europe’s trade with the rest of the world? And what are the likely implications?

Simon: There’s a big knock-on effect of western European slow growth on trade with both eastern Europe and with China, and this is where we’ve seen the most immediate impact. This in turn I think is inducing, in the case of China, further government measures, including indirect subsidisation through their banking system as well as other measures to stimulate domestic demand.

The transatlantic effect of that has been rather limited but that’s because, again, the American and Canadian trade exposure is, while numerically rather large, proportionately not so big as a share of their exports. Not every region is particularly affected.
When it comes to the impact within Europe, again you would expect to see something of a downtick in imports in the periphery countries, which I think we are seeing, whereas Germany and some of the northern countries appear to be exporting plenty to the rest of the world. They seem to have substituted away some of their export dependency on the periphery for other, faster-growing, parts of the world. That realignment I think you’ll see continue.

Viv: Finally, Simon, what sort of future do you see for world trade? Are you optimistic?

Simon: I think world trade has been not a key priority of governments, or at least promoting world trade hasn’t been. I think trade policy has been subordinated below other policy objectives throughout this crisis. For as long as that is the case, one has to be a bit wary and cautious about where the world trading system is heading. I don’t think the current situation is anything to feel happy about. It’s certainly not excessively gloomy or anything like the 1930s, but I do think we need to be cautious and defenders of the world trading system need to be making a case for trade policy and openness as a government priority, instead of being outmanoeuvred by the other key players in the macroeconomic policy debates and debates about financial stabilisation.

 

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Topics

International trade
Tags
Russia, WTO, protectionism, Global Trade Alert, free trade agreements

Related Article(s)

Antidumping as cooperation The shifting geography of global value chains: Implications for developing countries and trade policy The UK economy in a global world
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