Russia finally joins WTO

Once the WTO and Russian agricultural export officials addressed the subsidies and protective tariffs, there are still some tariffs allowed that will make U.S. products more expensive. Russia will restrict tariffs on

• agricultural equipment, including combine harvesters and threshers, to an average bound tariff of no higher than 5.6 percent;
• dairy products to 14.9 percent from 19.8 percent;
• cereals to 10.0 percent from 15.1 percent;
• oilseeds, fats, and oils to 7.1 percent from 9.0 percent

Russia will allow U.S. pork up to 400,000 tons, poultry up to 350,000 tons, and beef up to 530,000 tons.  Those limits, known as the tariff rate quota (TRQ) will allow higher tariffs beyond those limits.

• beef at 15 percent within the TRQ and 55 percent outside the TRQ;
• pork at 0 percent within the TRQ and 65 percent outside the TRQ (and would replace the TRQ with a flat 25 percent tariff on January 1, 2020);
• selected poultry products at 25 percent within the TRQ and 80 percent outside the TRQ;

While these tariffs will allow more U.S. exports to enter Russian markets than previously, there will still be some added expense to the products once in the food system.  Whether the Russian consumer will pay extra depends on the Russian economy at the time and whether they want to purchase a higher quality product from the U.S. in some cases.

Additionally, Russia wanted permission for $9 billion in agricultural export subsidies, to keep its products competitive with foreign products.  The WTO allowed $9 billion for the next 6 years, then $4.4 billion after that.

Since the Cold War trade between Russia and the U.S. has increased annually.  Cooper says, “Between 2000 and 2008, U.S. exports rose 343 percent, from $2.1 billion to $9.3 billion, but declined in 2009 in the wake of the global recession. U.S. exports span a range of products, including meat, machinery parts, and aircraft parts.

U.S. imports increased more than 244 percent, from $7.8 billion to $26.8 billion from 2000 to 2008, but declined in 2009.”  And he says, “U.S.-Russia bilateral trade increased in 2010 and 2011 as both countries showed signs of recovery.”  At this point Russia is well behind other U.S. trading partners in terms of volume. 

Russia accounted for 1.6 percent of U.S. imports and 0.6 percent of U.S. exports in 2010, and the United States accounted for 3.3 percent of Russian exports and 5.3 percent of Russian imports. Russia was the 31st -largest export market and 14th-largest source of imports for the United States in 2011, while the United States was the 10th-largest export market for Russia and its 5th-largest source of imports.

With Russia’s accession to the WTO, the U.S. will be treating it as it does the other members, so the Russians no long can poke their finger at you and complain the lack of MFN and PNTR is hurting their agricultural economy.  But that transition was the longest of any WTO member.

Summary:

Russia has been admitted to the World Trade Organization, which limits its import restrictions and export subsidies to a level that U.S. farm products will be welcomed by the Russian consumer at prices that will not be restrictive.  Corn Belt commodities, including grains, meats, dairy, and farm equipment will benefit from the agreement, and provide added opportunities for higher prices from increased demand.

Source: FarmGate blog