Russia Opens Market to Poorest Countries

from All Africa

Inter Press Service (Johannesburg)

By Kester Kenn Klomegah
Moscow

Africans looking to do business in Russia's burgeoning market can now export goods under new preferential trade agreements.

According to a document from the ministry of foreign affairs, seen by IPS, goods from African countries are eligible for preferential tariff treatment.

Products from least developed countries (LDCs), including those in Africa, will be exempted from import duties. This encompasses the bulk of Russia's imports from African states.

The Union of African Diplomats in the Russian Federation called the Russian initiative to exempt African imports from duties commendable and regard it as a step that will strengthen Russian-African trade relations.

"The initiative, which is part of Group of Eight (G-8) compliance measures and corresponds with the World Trade Organisation's Doha development agenda, will create new opportunities in Russian-African trade which is still very low, compared to other regions," head of the Union of African Diplomats in the Russian Federation, Dr Churchill Ewumbue-Monono, told IPS.

Mesag Mulunga, chief trade policy analyst in regional and bilateral trade relations at Namibia's ministry of trade and industry, suggested that African governments "encourage their exporters to take advantage of such market opportunities, first by making them aware of the existence of such preferences, as well as by supporting them to promote their products in such markets."

As Namibia is not classified as an LDC, its exports to Russia do not qualify for the new benefits, he noted.

Still, preferential trade arrangements accorded by developed countries to developing countries or small economies, including Namibia, create an opportunity for these countries to develop their industries and improve their agricultural production.

"This will inevitably contribute to these countries' abilities to create employment and effectively fight the scourge of poverty, hunger and disease. The challenge for the beneficiaries essentially lies in ensuring that their production base becomes competitive and sustainable, even beyond the expiry or erosion of such preferences," he told IPS.

Some are more sceptical about the benefits. On the question whether or not tariff preferences will help African countries to engage in trade with Russia, the answer is "it depends", said Phil Alves, a researcher who tracks "Development through Trade" at the South African Institute of International Affairs at the University of the Witwatersrand in Johannesburg, South Africa.

Among others, said Alves, it depends on whether the preferences are for goods in which African countries have an advantage.

Overall, the track record of trade preferences granted to Africa is poor, as shown by the poor uptake of trade preferences provided by the European Union and the U.S.. "I see no reason to expect a Russian or Chinese version to be any more effective," Alves cautioned.

Ewumbue-Monono is more optimistic, regarding other trade initiatives like the U.S.'s Africa Growth and Opportunity Act (AGOA), the EU's Everything But Arms (EBA) initiative, as well as preferential trade promotion measures by Canada, China and Japan as competition to Russia's initiative.

He pointed out that AGOA, for instance, has increased U.S. trade with sub-Saharan Africa by 242 percent between 2000 and 2006.

However, "it is important to know that market access measures like the Russian initiative are not enough to increase Russian-African trade. Even more important are trade facilitation incentives, ranging from transportation to simplification of import and export procedures," Ewumbue-Monono added.

Moreover, Russian-African trade could be enhanced through investments in capacity-building, market development and industrial cooperation that would enable the local transformation of products in Africa before exportation with added value, he noted.

These issues have been the object of international trade cooperation declarations by the various conferences of African trade ministers in, among others, Kigali (2004), Cairo (2005) and Nairobi (2006), and could provide a better platform for Russian-African trade promotion.

Franklin Cudjoe, a research fellow at Imani University in Accra, Ghana, told IPS that developed countries present bilateral agreements as ensuring tariff-free and quota-free access for African products to rich markets but frequently contain the caveat that African states should open their markets in return.

Economically, African governments and businesspeople should compare deals and use offers to leverage better deals. "If this happens, it would help African economies if products could be exported at lower duties, which would free up money for better education infrastructure, better roads and good healthcare delivery," Cudjoe said.

Preferential agreements can be beneficial as long as they are on a quid pro quo basis, Cudjoe told IPS.

Dr Andrew Reed, a professor of international economics at Moscow's University of Touro, told IPS: "One of the most interesting aspects of the transitional economy in Russia is that until the state defines the relationship it ultimately wants to have with the private sector, it is hard to judge whether individual initiatives such as this one are really consistent with the overall strategy, or just another ad hoc expedient".

A key question is whether practical steps will be taken to reform the bureaucracy in order to transform it from a "woefully inefficient control structure" to a more modest facilitator of private sector activity, he commented.

Reed said it is hard to imagine many good reasons for foreign companies to operate in Russia, other than the underdeveloped state of the market for consumer goods concentrated in Moscow and St. Petersburg, and the future potential that may exist but is yet to be unlocked.