June 16, 2000
The Republic of Georgia officially became the 137th member of the World Trade Organization (WTO) on June 14, joining Estonia, Kyrgyzstan and Latvia as the only former Soviet states within the global trading body. Russia, too, is trying to garner membership; but before Russia can gain entry, it must first obtain approval from all current members – including its former Soviet republics. This will allow several of Russia's neighbors to wring considerable economic concessions out of Moscow – and spark a membership race for the rest.
Georgia joined the World Trade Organization (WTO) as its 137th member on June 14, a mere four years after submitting its candidacy. Such membership grants Georgia preferential access to the markets of all other WTO members – most of the world's largest and richest – as well as direly needed investment and export opportunities.
Georgia – along with the other former Soviet states of Estonia, Kyrgyzstan and Latvia – now has a voice in formulating WTO policy. More importantly, they can block new applicants from becoming members – notably, Russia.
Much in the way that the European Union (EU) managed to wring economic concessions out of China before approving Chinese membership in the WTO, Estonia, Georgia, Kyrgyzstan and Latvia will be able to influence Russian economic policies with respect to themselves.
In the past Russia has spurned free trade agreements with the Commonwealth of Independent States (CIS) because they threaten Russia's mid-term economic and political power. A free trade zone would sacrifice Russia's current position of preeminence, allowing other CIS producers to undercut Russian producers in the Russian market.
However, now Estonia, Georgia, Kyrgyzstan and Latvia will be able to demand full access to the Russian market. Georgia may even try to link WTO membership to the removal of Russian troops from bases in Georgia.
If Russia refuses, it will be barred from the WTO and therefore continually denied preferential access to most of the global economy and the large-scale investment that it so desperately needs.
Once Russia obtains membership, its room to maneuver against its former colonies will shrink further. All of the former Soviet states depend upon Russia – to varying degrees – for oil, natural gas and transportation routes. In the past, when one of the smaller states engaged in a policy Moscow perceived as against its interest, Russia has been quick to use its economic levers as political punishment.
Once Russia joins the WTO, this behavior will be prohibited. The WTO structure actually allows states that have been so wronged to sue the perpetrator. The WTO has even ruled against such major economic powers as the United States, the European Union and Japan.
However, this adjudication regime is not fool proof – by far. The process of suing can take up to two years, and in the past large powers have defied the WTO ruling, as did the European Union with regard to banana imports.
Russian-Latvian negotiations on sticky issues such as banking, customs and transport have already begun with the Latvians gleefully informing Russia of Latvia's "requirements."
Soon Russia will have to face similar humiliating negotiations with the other three colonies-turned-WTO members. The smaller states will largely seek what the rest of the WTO members want: predictable market access and an expansion of rule of law. Moscow will no doubt find these negotiations galling. But if it doesn't complete them now, it will present the opportunity for other former Soviet states – perennially in a position of weakness vis-í -vis Russia – to join the WTO first.
Russia may find the idea of economic concessions to Estonia and Georgia annoying, but concessions to the more significant states of Ukraine and Uzbekistan could cause real damage to Russia's short-term economic plans. Azerbaijan, Armenia, Belarus, Kazakstan, Lithuania, Moldova, Uzbekistan and Ukraine have already submitted applications. Of these, Lithuania is the only shoo-in for membership.
The WTO will reduce Russia's ability to unilaterally bully those states of the former Soviet Union that have pursued liberal economic policies. But that ability cannot be eliminated. Russia still controls the only feasible export route for Kyrgyz goods, the only efficient oil supplies for Lithuanian refineries, a main source of power for Ukraine and a wide array of other economic necessities.
But negotiations to join the WTO – and WTO regulations themselves – will provide Moscow's former territories with considerable leverage. And leverage is something that, until now, they have utterly lacked.
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