On international trade, Vladimir Putin seems to be channeling the autocratic spirit of Catherine the Great. He wants Russia to modernize by joining the World Trade Organization -- but not too much.
With the Russian Federation seemingly on the verge at last of getting into the WTO, after nearly twenty years of trying, the Russian prime minister recently appalled trade diplomats worldwide with an outburst that perpetuates widespread doubts about the willingness of his regime to comply with the rule of law that is essential to the success of the rule-based world trading system.
Putin reportedly interrupted one of his underlings to rebuke him for being so bold as to suggest that Russia should begin complying with WTO rules in advance of attaining WTO membership. Instead, the prime minister ordered Russian officials not to comply with WTO rules in countering rising imports from China. “This is a direct order,” Putin said. “As soon as we start fulfilling WTO obligations without being a member, they, our partners, will lose any wish to admit us. Why the hell should they admit us if we already observe everything?”
The truth is exactly the opposite. It is precisely this attitude of reluctance when it comes to the prospect of having to comply with WTO rules that has kept the Russians waiting in line for WTO membership since 1993. Russia is by far the largest economy in the world that is not yet a member of the WTO primarily because the 153 countries that are already members continue to doubt the willingness of Russia to be bound by any WTO rules it may wish to ignore.
Putin’s Russia is something considerably less than an open society. There is evidence aplenty of his decided disdain for the rule of law. A commitment to uphold the rule of law is implicit in signing the WTO treaty. Although not mandated in so many words by the treaty, conscientious allegiance to the rule of law is inherent to a national commitment to comply consistently with WTO rules.
Putin has likened the prolonged WTO accession process to an “ambush” of Russian economic interests. Evidently, he wants Russia to be able to enjoy the benefits without bearing the burdens of being in the WTO. He seeks the tariff concessions and the safeguards against trade discrimination that come with WTO membership, but he does not seem to want WTO commitments to impede unduly on his continued ability to impose the whims of what often seems an arbitrary rule.
The Russian prime minister may be striking a strident national pose to help lay the groundwork for yet another presidential campaign in 2012. Whatever his motivation, his recalcitrance relating to WTO rules sends the worst possible signal at the worst possible time to Russia’s wary trading partners. This is especially so for a country ranked 156th out of 174 in the Transparency International Corruption Index.
All of this is all too reminiscent of the attitude of Putin’s 18th-century predecessor, Catherine the Great. Like Putin today, the tsarina of the Age of Enlightenment wanted to modernize Russia -- but only to the extent that doing so would help consolidate and extend her own arbitrary rule. Catherine sponsored legal reforms, abolished most state monopolies, promoted capitalism, established internal free trade, and presided over a spectacular growth in Russia’s exports. She was, however, devoted to Enlightenment principles only as a means of centralizing and concentrating power in her own person on the Russian throne. As historian Leo Gershoy concluded, “She was an absolutist to the core” who modernized Russia just enough to make it “safe for aristocracy for at least another century.”
WTO trade negotiators are not the first to think they can tame the traditional Russian tendency toward autocracy. Catherine was patron to the French philosophe Denis Diderot, who journeyed to her court in hopes of influencing the tsarina toward a more progressive rule. The idealistic Diderot clutched Catherine’s royal hand, and beseeched her to embrace his new ideas for modernizing Russia. He wrote her long and eloquent memos on Russia’s need for tolerance, for universities, for a constitution, and for an end to despotic rule.
Wearying of his nagging, the tsarina eventually sent the naïve philosopher a dismissive reply. She told him that all his “grand principles” would “make fine books,” but “would make sad work in actual practice” given the sad shortcomings of human nature. His ideas would “work only upon paper.” Disillusioned, Diderot returned to Paris.
Russia is a closed economy as well as a closed society. Regulatory barriers and tariffs in Russia are several times those of other industrialized countries. Since the global financial crisis, Russia has introduced dozens of additional protectionist measures affecting numerous sectors of trade. The Russians, for example, maintain export duties on nearly 450 types of products.
Russian import duties will supposedly be reduced, over time, from an average of 19% to an average of 8% after Russia becomes a Member of the WTO. The vast majority of Russia’s myriad of obstacles to foreign trade and investment will, however, remain. For a variety of diplomatic reasons unrelated to trade, the United States in particular seems to have decided to wait and try to resolve many intellectual property, agriculture, and other trade grievances with the Russians in WTO dispute settlement instead of compelling concessions in the required terms of Russia’s accession agreement with the WTO.
As we have seen elsewhere, WTO rules can indeed, over time, help pry open closed economies and closed societies. But this U.S. strategy will work only if, as a WTO Member, Russia chooses to honor its treaty commitments on trade by respecting the international rule of law. The risk is that, like Diderot, the United States and Russia’s other trading partners will be disillusioned. The danger is that, in echo of Catherine the Great, Vladimir Putin will decide that WTO rules will “work only upon paper.”
James Bacchus is a former Member of Congress, and a former chief judge for the World Trade Organization. He chairs the global practice of the Greenberg Traurig law firm.