Protectionism in Russia

The new law “Special Protective, Antidumping and Import Compensatory Measures” differs from the old one by the fact that it fully complies with the WTO (World Trade Organization) standards. It is for the first time in the Russian practice that a law describes in detail what is necessary to do in order to protect the Russian market and how to do it. As its authors promised, the Law has turned out to be extremely concrete: it is conceived so that the officials as well as the participants of trade agreements will be able to find straight answers to their questions, and they should not search for any special “explanations” and “commentaries”.

The law provides a listing of basic concepts. Not everyone in Russia, even among lawyers, will be able to tell straight off what “dumping leverage” is, and what “dumping import” is. For the majority of people it becomes a revelation, that “dumping” is not the sale of foreign goods in Russia at lower prices than similar local products cost (that’s what for some reason most people think) but the sale of a product cheaper, than local production costs. A number of base concepts comprise such, as “the material loss of an industry” (what to understand in general under the term “damage”) and “serious damage ” (how to calculate it), and in general a lot of other things, which are clear “in general”, but very artful when officials start to build a state policy, based on the intuitive understanding of such terms.

For example, the Law provides the description of the investigation concept, which should precede the introduction of all protective measures against “bad” foreign goods.

The Law states, that the body responsible for investigation, is appointed by the decision of the Government of the Russian Federation, and defines concrete timeframe, both for the investigation, and for implementation of its results (the measures, taken according to investigation results should be approved by the Government not later than 14 days after they are exposed). In case of a highly critical situation such measures need to be introduced extremely rapidly, as the Government can practically instantly introduce a special tax (protective import tax) on the goods that cause damage to the economy. Should it be found out later, that this tax is excessively heavy; the foreign trade participants will have the right to be reimbursed for the actual incurred losses. Such import tax cannot be effective for more than 200 days.

The Law describes in detail how to establish the degree of damage to the Russian economy from “bad” import. Special protective measures have to be implemented in order to protect the economy, the Law clearly defines, what those are and in what case they should be used, for how long and what is the order of their review. The main idea behind this is that such protective measures should be lifted, as soon as they fulfill their purpose. It is important not to go too far with those measures, otherwise the market protection may cause more harm than good, creating with the domestic manufacturer a sensation of absence of competition, that the buyers will be the first ones to feel.

A separate chapter of the Law is dedicated to antidumping measures. Discovering the fact of goods dumping in Russia, calculating the damage and introducing protective measures – each step is exposed in every detail, because this is a new practice for this country. Here, as well as in the case of application of special protective measures may be, the lawgiver requires that the facts should be carefully investigated, as it is possible that blind measures can do more harm than good. If dumping influence does not exceed a certain allowable threshold, strict measures should not be used. Moreover, if the supplier of the goods states in writing that he followed a dishonest price policy, and signs an obligation to stop it, the investigation is then suspended, should the “inspectors” make the decision, that the supplier can be trusted. However, tight control is carried out to verify how he complies with the promise.

The Law introduces the concept of “compensatory measure” which is necessary in case when the goods, produced with the subsidies of the foreign governments are imported into Russia. In the reality however, as it has been already noticed by the experts, it is firstly the foodstuffs: the crisis of overproduction of agrarian and industrial complex, the aspiration to support quiet lifestyle of local farmers cause the foreign governments to buy from manufacturers of agrarian and industrial complex the goods at unfairly high prices, and then resell them for export at lower prices, compensating the difference from the budget. The demands of domestic manufacturers of agrarian and industrial complex “to forbid” such imports was faced with fears, that the sharp interdiction of imports will not cause the growth of own production and will result only in shortages and price increases. The Law has defined the “golden balance”: the investigation concerning the subsidized import is conducted extremely objectively, abstracting from lobbyism of domestic manufacturers.

The document is extremely transparent, as it could not be any different. The attempts to declare a “trade war” to Russia when its goods are exported to some countries, on one hand, as well as obvious practice of “bad import” to our country from which we were not protected, on another hand, have forced Russia to use protective measures (on import of fowl, beef, pork) before the adoption of this law. It caused an ambiguous and sometimes extremely strong reaction in the outside world. The reaction of Russia’s supporters during the WTO negotiations was especially painful. There was not a single country at this stage of joining the WTO who dared strengthening its protective measures. Russia has invested a great deal of efforts to prove, that it had the right to protect the market, and has spent a lot of time to explain to foreign experts, how its market was going to be protected.

Copyright 2005 OpenRussia.ruRussian business directory

Leave a Reply

Your email address will not be published. Required fields are marked *