Russia Faces Higher Non

8/2/2019 Russia Faces Higher Non

1/14

Non-Tariff Barriers on Exports

Russia and the EU are now preparing for significant changes in their economic

relations that will be discussed at the EURussia Summit on 31st May 2003 in St.

Petersburg. Russia seeks WTO accession and to further its integration into the global

economy, while the EU is in the completing phase of its eastern enlargement. Against this

background, the question is what economic relationship will the EU and Russia develop in

the future? In the Partnership and Cooperation Agreement (PCA) of 1994, the answer was

given to be a free trade area. But so far there is no evidence that this has been implemented.

More recently, the answer has been a European Economic Space consisting of EU and

Russia. But the content of this proposal is very unclear. Carl B. Hamilton studies the recent

history of economic relations between Russia and the EU and gives the following

conclusions:

A European Economic Space between Russia and the EU is a near impossibility for

both legal and domestic political reasons. Instead of holding an agreement such as a

European Economic Space as the objective of economic relations, priority should be given to

setting definite measures that define a time path and end date for a process leading to free

trade in industrial products between the EU and Russia, as was put forward almost ten years

ago in the 1994 PCA agreement between the two parties.

There is an urgent need for action to abolish the current restrictive trade barriers on

Russian exports of steel, chemicals, agricultural products and potentially textiles.It is

estimated that in the enlarged EU, Russia will face new non-tariff barriers on its exports in

the form of anti-dumping measures and steel quotas. Calculations in this Paper indicate thatthe new anti-dumping measures will be equivalent to tariffs of 16-21% in Hungary, 5-7% in

Poland, 9-17% in The Czech Republic, 23% in Slovenia and 2-9% in Estonia.

There is also potential for future conflict between Russia and the enlarged EU over

free trade. After accession to the WTO, Russia can be expected to be active for freer trade

both in manufactures, and to an even greater extent, agricultural products. As full-members of

the EU, the new member countries may act to keep lucrative West European markets for

themselves and seek protection against extra-EU imports.

The EU and Russia are currently bogged down in a flight to the future and theremoval of potential and future barriers to trade in products and services for which there is

little export demand. There is too much emphasis in summit declarations on Russia to

harmonise to, and adopt the rules and standards of the EUs internal market.

More than half of Russias exports are energy products. The enlarged EU will take

around 50% of Russias total exports. At present, Russia is a small and discriminated against

trading partner with the EU. Though Russia has officially stated that it wishes a more

balanced economy, it subsidises domestic energy consumption significantly.

Russias geopolitical situation is different from its economic situation. A failure to

separate the two will lead to confusion. It is likely that it is in Russias long -term interest to


2/14

minimise the influence of geopolitics on trade relations. Russias accession to the WTO is

crucial in this respect.

DOING BUSINESS

Business opportunities

Russia is one of worlds most important emerging markets, defined by both its size

and its growth potential. Despite the difficulties of the global financial crisis, the Russian

economy has performed remarkably well over the last decade.

Many Australian companies have been exporting to Russia for years and have

successfully established themselves in the market. Australian small and medium-sized

companies are now represented in the market alongside large, well-established multinational

companies.

Business etiquette

Business tips

As with any international market, Russia has its own way of doing business and

unique social norms. For Australian exporters, it is important to take time to understand how

business is done in Russia and how to maximise opportunities for success in your business

dealings.

In Russia, strong personal relationships are critical to business success. Hence face-

to-face business meetings are vital. Here are a few pointers that can help you achieve a

successful outcome:

Plan what you need to say. Many business visitors fail to present the most relevant

benefits of their product. Most business people do not have time to listen to long-winded

presentations.

Make sure that all of the necessary information is readily available and your website

is in working order.Brochures, promotional materials and samples should be of high quality,

matching industry standards. Use metric measurements. If possible, translate the most

important marketing materials into Russian: Austrade can help with translation services.

Speak slowly and clearly. While some Russian business people will speak English,

they will be more accustomed to American or British accents. Minimise use of slang and

provide clear, concrete explanations. Austrade can assist by organising an interpreter to

accompany you during visits to the market.

When negotiating, remember that your first price is seen as a starting point for

negotiations. Potential business partners will expect several offers and counter-offers before a


3/14

mutually acceptable price is reached.

Russians are generally courteous and positive in listening to your presentation. This

can leave a false impression of interest or commitment on their part. You should be careful to

clarify what you understand to have taken place. This can be done conveniently in a follow-up

email.

The meeting should conclude with the understanding that you will follow-up. Do

not rely on the Russian business person to make the next move. It is vital to follow up on the

phone, on email and even in person to build relationships with potential business partners and

customers.

Fast and comprehensive follow-up is essential in successfully doing business in

Russia and the CIS. The Russian business cycle can move considerably faster than in

Australiasometimes clients may even want to sign contracts on the same day. Often the

relationship can go cold unless there is immediate follow-up.

Promised delivery dates and production quantities must be honoured. Failure to

deliver agreed quantities at the promised time will lead to lost business and a tarnished

reputation for your company and for Australia in general.

Russian business people tend to dress quite formally. A business suit is expected

business attire for men. For women similar guidelines apply. Pant suits are fully acceptable in

Russia. It is preferable to dress well and conservatively to create the right first impression.

Tariffs and non-tariff barriers

Tariff

Russia makes regular adjustments to its national import regime, including tariffs and

licensing. Frequent changes and imperfect communications can lead to inconsistent

interpretations of Russian customs regulation. It is essential to have a competent intermediary or

partner in the market. It is recommended that Australian exporters contact Austrade in Moscow

or Vladivostok with specific enquiries. Russia is not yet a member of the World Trade

Organization.

Tariffs are constantly revised and are subject to change without notice. Duties are

usually ad valorem, assessed on the CIF value (Incoterms 2000) at the point of crossing the

Russian border. Many types of goods are subject to minimum values on a per kilogram basis as

prescribed by Russian customs. Deemed values are an effort by the authorities to crack down

avoidance through dual invoicing practices.

On 1 January 2010, Russia, Belarus and Kazakhstan entered into a Customs Union. A

common customs code took effect on 6 July 2010. Border customs controls between the three

countries are scheduled to be removed in mid-2011 and there are plans for the gradual

elimination of other customs controls between the three markets. Clients are advised to seek


4/14

advice from Austrade on the impact of the Customs Union.

Non-tariff barriers

Customs requirements in Russia are often complex and time-consuming. Generally the

Russian company is responsible for customs procedures. Austrade Moscow and Vladivostok arepleased to provide advice on customs matters and refer you to specialist Russian customs agents

and brokers if necessary to clarify specific issues.

Import duties apply to most goods. In addition to general customs requirements, import

licences and product-specific approvals are required for a wide range of items, including food

and beverage products, pharmaceuticals, industrial equipment and more. Pre-shipment technical

inspection (at the exporters expense) may sometimes be required.

Product certification, labelling and packaging

Labelling and marking

All products sold in Russia must include relevant information about the product in

the Russian language. It is also recommended that bulk shipments also contain basic

information written in Russian.

Goods should be securely packed, having due regard to the nature of the goods,

means of transport and likely climatic conditions. It is important to take into account the

specifics of the Russian market, including its often extreme climatic conditions and rough

handling on roads, railways and ports.

Outer containers should bear the consignee's mark and port mark and should be

numbered (to accord with packing list), unless the contents can be otherwise readily

identified. The contract number must be shown on the outside of containers.

Accurate document is vital in Russia. Failure to comply with the documentation

specified by your importer/customer can lead to lengthy delays and additional expense.

Special certificates

A very wide range of goods require a certificate of conformity to allow customs

clearance. Some of these requirements are mandatory while some are voluntary. The

certificate must refer to Russian safety standards and may be obtained prior to export from

local (SGS) offices in Australia. Alternatively, certification can be handled on arrival in

Russia through Gosstandard, although this may entail lengthy delays in customs clearance.

Austrade Moscow can provide detailed information on certification processes and

introductions to service providers who can assist. Details should be clearly confirmed with

your importer or customer.


5/14

The list of products requiring certification includes the following:

agricultural and foods products childrens clothing footwear prams toys electrical and telecommunications equipment transportation equipment and tools pharmaceuticals and healthcare products

To receive a certificate of conformity for food products and additives, a hygiene

certificate is necessary. These are usually issued by the Australian Quarantine Inspection

Service (AQIS) on the basis of health certificates (commonly issued by AQIS), together with

testing of a product sample by an independent laboratory accredited by the Russian healthauthorities.

All goods of animal origin require the appropriate veterinary certificate indicating that

they are free from disease. Australia has in place dual-language veterinary certificates for a

series of products, although this list is not exhaustive. Australian veterinary certificates for

other products (those not covered by agreed certificates) are normally acceptable, provided

they meet the requirements of the equivalent Russian certificates. For specific advice,

exporters should contact their Russian partners, Austrade Moscow, AQIS, the Department of

Agriculture, Forestry and Fisheries or state-based agriculture authorities.

All plants, plant parts and plant products (other than dried vegetables) require

phytosanitary certificates issued by the competent authority in the country of origin. In

Australia this is usually the AQIS, the Department of Agriculture, Forestry and Fisheries or

the state/territory Department of Agriculture.

All medicines and pharmaceutical goods should be registered or certified by the

Russian Ministry of Public Health. Special labelling and packaging requirements may apply.

Methods of quoting and payment

Quotes in US dollars and cost, insurance and freight (CIF) (Incoterms 2000) are

preferred, either CIF to a major port or CIF Moscow.All hard currency settlements with

Russian companies and organisations should be made through authorised Russian commercial

banks (to the exporters bank). Some exporters prefer the customer to make payment from hard

currency accounts held offshore in countries such as the UK, USA, Switzerland, Cyprus,

Luxembourg, etc.

An increasing number of Russian buyers are demanding flexible payment options,

mainly revolving credit lines (Russians do not normally use letters of credit due to high local

interest rates). Normal precautions should be exercised but trade finance arrangements in the
http://www.daff.gov.au/aqishttp://www.daff.gov.au/aqishttp://www.daff.gov.au/http://www.daff.gov.au/http://www.daff.gov.au/http://www.daff.gov.au/http://www.daff.gov.au/aqishttp://www.daff.gov.au/aqis


6/14

Russian market increasingly reflect international norms.

Foreign payment records of Russian companies (if any foreign payments have been

made) may be obtained via information services such as Dun & Bradstreet and CoFace. Some

companies obtain this data in lieu of credit reports, which are not always available in this

market. Corporate credit bureaux such as CoFace have recently started appearing in the market

in Russia, but the level of information available is generally less than in more developed

markets.

Documentary requirements

Advice provided here should always be confirmed in advance with your importer or

customer, as requirements vary.

Commercial invoice

There is no prescribed form of commercial invoice. Usually a minimum of seven copies

must be supplied (the number is normally stipulated in the contract). Details must be provided

in accordance with the payment conditions of the contract. The invoice must show:

country of origin details of packing materials marks and numbers of packages weights (net, gross and tare) quantity and description of goods unit prices and total shipment value selling price to purchaser place of final dispatch from country of export Bill of lading/airway bill No special requirements. A minimum of three copies must be provided. Packing list Six copies are required, providing a summary of the total shipment.

Certificate of origin

The terms of the contract determine whether the seller or buyer obtains insurance for

the shipment in question. When the seller (under the covering contract) has the right to

purchase insurance, instructions from the importer and insurance company should be followed

closely to prevent problems.

Public health requirements

The Russian Federation maintains strict standards and controls over quarantine, safety,

health, food and drugs. Some certificates are obtained by the importer in Russia after clearance

of goods through customs but before sale. Some need to be obtained by the exporter prior to


7/14

clearance through customs (preferably prior to departure from Australia). See 'Special

certificates' below, particularly for hygiene certificates.

Weights and measures

The metric system is used throughout the Russian Federation.

Setting up in Russia

Finding the right partner

Sustained business in Russia and the CIS requires commitment to a long-term market

strategy.A first step in this process is to determine the type of in-market representation best

suited to your objectives. You should consider your needs at the time you enter the market

while ensuring you have sufficient flexibility to adapt as the market develops over time.

Prior to formalising representation, it is prudent to ensure that the structure proposed is

appropriate under local law and that you understand fully the implications of any agreements in

the local context. You should ensure the agreement protects your interests to the fullest extent

possible. Ultimately, as in any market, the durability and success of your representation

arrangements will depend not so much on your formal contractual undertakings, as upon the

strength of understanding, trust and communication that you develop with your in-market

representative.

Austrade Moscow and Vladivostok can offer specific assistance to help you identify arange of companies, be they direct importers, distributors, agents, or joint venture partners,

from whom to make your selection of the company best suited to your forward plans.

An increasing number of Australian companies are looking to invest in the Russian

market through the establishment of local operations in the form of a representative office,

branch office or legal entity (subsidiary). A number of useful guides are available to help you

make an initial assessment of the different options:

Austrade can recommend legal and accounting advisors to help structure your

arrangements in keeping with local requirements. Austrade can also suggest other ways ofchecking the suitability of prospective partners. A useful guide is an assessment of the

companies your prospective partner already represents. If appropriate or possible, you may

consider speaking to some of these companies to gain a sense of how the local company is

performing for them.

A golden rule is always to take your time in this selection process as it is generally the

most important decision in ensuring that your business not only gets off to a good start, but

continues to grow in the market.


8/14

In-market representation

Russia is the worlds largest country in geographic terms. Before assigning the entire

market to one particular company, assure yourself that the company is capable of servicing

such a geographic spread. You may wish to consider, for example, separate representation for

the Russian Far East and western Russia. Moscow and Vladivostok are more than 9,000km

apart.Austrade Moscow and Vladivostok are well placed to advise you how to ensure your

representation has the right geographic footprint.

Taxation

Value Added Tax (VAT) of 18 per cent (10 per cent on many food items and

childrens goods) is excised at the border. Additional excise duties apply for tobacco, alcoholic

beverages, cars and some other luxury items.Russia has a flat 13 per cent personal income tax

as well as a 26.2 per cent social guarantee tax levied on employers. Company tax is 20 per centon profits.Australia and Russia signed a tax treaty in 2000. Details of this can be found at

theAustralian Taxation Office website.

Intellectual property protection

Russia is a signatory to most major international agreements and conventions on

intellectual property and Russian civil law regulates legal IP protection and its provisions tend to

be similar to those of other developed countries.

However, it should be noted that the practice of intellectual property enforcement in

Russia lags behind international norms. While the situation is improving, it is important to

discuss strategies for protecting your intellectual property with lawyers and other specialists.

Austrade Russia/CIS can provide introductions to appropriate service providers.

Intellectual property licenses or assignment agreements for patents and trademarks

must be registered with the Federal Service for Intellectual Property, Patents and Trademarks of

the Russian Federation. The registration requirement does not apply to copyrights.

Licence agreements are not required if a third party wants to sell goods bought from the

trademark owner, or has the trademark owners consent to do so. Russia also has specific rules

about accounting for intellectual property.

Banking and finance

Since Russias realignment towards a market-based economy in the 1990s, banking

infrastructure has developed rapidly. The countrys increasing prosperity and rising personal

incomes have contributed significantly to this growth and to the proliferation of banks.

There are today approximately 1,000 banks in Russia, a number that has halved in recent
http://www.ato.gov.au/large/content.asp?doc=/content/55844.htmhttp://www.ato.gov.au/large/content.asp?doc=/content/55844.htm


9/14

years owing to stronger regulatory oversight. The state-owned savings bank, Sberbank is by far

the dominant operator in the market. It holds over 50 per cent of all deposits in Russian banks

and manages 35 per cent of retail lending and 32 per cent of commercial lending. The top 20

banks in Russia control some 65 per cent of all Russias banking assets. A number of foreign

banks are represented in Russia. Some have established a presence by buying into existingRussian banks or creating new Russian banking entities.

Dispute resolution

Bodies such as the Russian Chamber of Commerce and Moscow Chamber of

Commerce offer a voluntary framework for resolution of commercial disputes. This may be a

suitable means for resolving small-scale matters.

The Russian court system remains weak but is improving.Many companies doing business in

Russia draw up contracts under the legal framework of a third country such as the UK orSwitzerland. This ensures access to a reliable court system.

Customs union Russia,Belarus, Kazakhstan: Non-tariff barriers,factional interest groups &

efficiency. Belarus rates 6 points below the world average in terms of trade freedom

according to the 2009 Index of Economic Freedom. At 67.2, Belarus lost 15 points on its

trade freedom score due to non-tariff barriers. Kazakhstan rates 13 points above the world

average in terms of trade freedom. At 86.2, Kazakhstan lost 10 points on its trade freedom

score due to non-tariff barriers. Russia rates 12.4 points below the world average in terms of

trade freedom. At 60.8, Russia lost 20 points due to non-tariff barriers.

Russia has had a history of imposing non-tariff barriers on Belarus, including a recent

milk war after Russian banned 500 types of milk and dairy products from Belarus in June and

a ban on meat products from two Belarusian meat plants. The milk war cost Belarus $1

billion and Russia says it banned the import because Belarus had violated packaging rules.

Russia paid Belarus about $1 billion last year for 93% of its meat and dairy product exports.

Russia is a traditional buyer of Kazakh grain (approximately 98% of the total

volume of Russias import of milling value grain). Trade turnover between the two countries

in 2007 amounted to $17 billion. Trade between the two countries increased in 2008 to $19.7

billion.

It is debatable whether establishing a common market might have improved

economic consequences. In spite of this, in a climate of recent trade wars, a customs union is

being formed. A customs union is a trade agreement that allows the duty-free movement of

goods between member states and the application of a common external tariff (CET) on

imports from non-member states. Normally, it removes any internal barriers to trade and

requires a harmonization of foreign trade policies.

Prime Minister Vladimir Putin met with the Economic Development Minister ElviraNabiullina in June about Russias decision to establish a customs union with Belarus and
http://www.heritage.org/index/Default.aspxhttp://blog.heritage.org/2009/06/09/roadblocks-on-russia-path-to-wto/http://blog.heritage.org/2009/06/09/roadblocks-on-russia-path-to-wto/http://www.time.com/time/world/article/0,8599,1904749,00.htmlhttp://www.russiatoday.ru/Top_News/2008-09-22/Hi-tech_trade_bonds_Russia_and_Kazakhstan.htmlhttp://www.russiatoday.ru/Top_News/2008-09-22/Hi-tech_trade_bonds_Russia_and_Kazakhstan.htmlhttp://www.time.com/time/world/article/0,8599,1904749,00.htmlhttp://blog.heritage.org/2009/06/09/roadblocks-on-russia-path-to-wto/http://blog.heritage.org/2009/06/09/roadblocks-on-russia-path-to-wto/http://www.heritage.org/index/Default.aspx


10/14

Kazakhstan. According to Putin it is a Russian key priority. One of the topics discussed was

the need to avoid another milk war by establishing unified regulations and a coordinated

agricultural trade policy.

A few cautionary tales are worth mentioning. In 2005, Constantine Michalopoulos,

World Bank, and David G. Tarr, New Economics School, presented their outlook and

revealed the negative implications of a customs union in the CIS. They cite the example of

the Central American common market and the inefficiencies that were produced in favor of

preserving a customs union. Custom unions do not move in the direction of free and open

trade regimes that members of the WTO aim to achieve. The Central American common

market shaped new inefficient industries that sold high priced products to each other that they

could not sell anywhere else. This led to its collapse. The lesson learned there is that unless

there is alignment with a large bloc with a lot of internal competition, the use of this type of

preferential trade agreement encourages partners to sell products from inefficient industries

and develop inefficient industries.

Michalopoulos and Tarr also point out that access to diverse and modern

technologies, which is crucial to a small transition economy, would be impaired by Customs

Unions. This would occur because trade in many intermediate products would be diverted

toward CU members and away from Western suppliers.

While Belarus and Kazakhstan have both tried to assert their independence and

sovereignty and form their own national identity, there are concerns within these countries

and internationally that the formation of the customs union occurs at the expense of the

sovereignty of the member states.

Despite these concerns, Belarus, Kazakhstan, and Russia are taking steps to

formalize the customs union. All three countries also want to make sure that they can become

members of the WTO. According to Ms. Nabiullina, the idea is to enter the WTO together

and make sure the WTO treats the three countries as one partner and act as a union.

The Belarussian parliament is preparing a set of agreements on the Customs Union

for Belarus, Russia and Kazakhstan. Seven agreements are to be considered for ratification.

These include an agreement that regulates customs procedures and rules, an agreement for

declaration of the customs value of goods, and an agreement for customs clearance andcontrol.

A Secretariat of the Customs Union Commission will be created as a supranational

body. The Secretariat will be headquartered in the Russian Federation.According to Igor

Karpenko, deputy chairman of the permanent commission for international affairs and links

with the CIS, the Customs Code should be worked out in 2010.

Non-tariff barriers slow down trade, have a high economic cost to the exporter and

hamper regional integration. Customs unions are good for increased competition and for the

benefits from economies of scale. Economies of scale is achieved when more units of a good
http://www.belta.by/en/news/politics?id=397959http://www.belta.by/en/news/politics?id=397959


11/14

or service can be produced on a larger scale with less input costs. With increased competition

and tariff liberalization, there tends to be a reduction in consumer prices and production costs.

Customs unions also have an interesting effect on factional interest groups that have

traditionally been protection-seekers for their industry at the national level. These same

domestic firms who seek industry protections are often forced to obtain some kind of

protection at the regional level through the development of transnational organizations or

associations. It is the only way these factional interest groups can lobby to influence regional

trade policies. Another interesting scenario may be that one industry in one country can be

extremely influential and organized, while powerless and unorganized in another. Often this

creates lobbying from the industry from within and across the different countries.

While the Soviet Union was mostly isolated from the global shocks of the Great

Depression, Russia has come out of eight years of economic boom into a slow period. Today,

Russia wants to affirm its status as a regional hegemon. With Kazakhstan and Belarus as their

biggest trading partners and willing to form this customs union, its a way for Russia to dust

more than their own broom during economic hard times and integrate.

The Eurasian Economic Community will discuss the customs union this

October.Russia needs to diversify its economy since its reliance on oil showed that natural

resources are the staple ingredient of the economy. It needs new technologies. Are Belarus

and Kazakh markets equipped to meet these needs? For years, Belarus and Kazakhstan have

been sharing their experience in the field of application of energy saving technologies and

other manufacturing industry technologies. Belarus has shown mixed signals when it comes

to being very market-oriented. Russia needs to bring into play innovative business practicesnot stagnate. All the while, all three countries have said they want their sovereignty preserved

and to be closer to Europe.

Like with other customs unions, gains from integration might not only come from the

tariff reductions alone, but might have to come from the removal of other barriers to

competition and those that impede or slow trade flows to become more market-oriented -

even with industrial policy goals that promote certain sector growth

Russias economic freedom score is 50.5, making its economy the 144th freest in the

2012 Index. Its score is unchanged from last year, with a significant increase in businessfreedom counterbalanced by a significant deterioration in control of government spending.

Russia is ranked 41st out of 43 countries in the Europe region, and its overall score is below

the world and regional averages.

The Russian government has demonstrated little if any commitment to economic

reform in recent years, and the countrys economic freedom score remains stuck at the lower

end of the mostly unfree category. While strong returns from hydrocarbons have buoyed

the economy, prospects for sustained long-term growth and diversification remain dim.

Pervasive corruption and limited respect for property rights undermine the rule of law,

increasing uncertainty and investment risk.


12/14

Extensive state interference in the economy mutes private-sector dynamism. Layers of

complex non-tariff barriers significantly increase the cost of trade. Deterrents to foreign

direct investment include bureaucratic inconsistency and regulatory obscurity. The lack of

market competition has inflated price levels. Public spending has been expanding, with little

transparency or public accountability for expenditures. The budget has become increasinglydependent on oil prices.

BACKGROUND

Russias highly centralized government has tightened controls on civil society.

Dmitry Medvedev was elected president in March 2008, but former President Vladimir Putin

remains prime minister and leader of the ruling United Russia party and the newly created

Popular Front. The state has reasserted its dominant role in the extractive industries and

depends heavily on exports of natural resources, especially hydrocarbons, for revenue. The

global financial crisis, overregulation, pervasive corruption, and the war with Georgia

sparked capital flight in 2008, and GDP contracted in 2009. The economy began to grow

again in 2010, and high oil prices buoyed growth in 2011. Russias accession to the World

Trade Organization, long delayed by issues of intellectual property rights, the rule of law, and

resistance by Georgia, was moving forward at the end of 2011.

RULE OF LAW

Russias legal framework is not up to the needs of a modern market economy. The

rule of law is not strongly maintained across the country, and the judiciary is neither

independent of political pressure nor consistent in applying the law. Protection of private

property rights is weak, and contracts are not always secure. Infringements of intellectual

property rights continue. Corruption remains a serious concern.

LIMITED GOVERNMENT

The income tax rate is a flat 13 percent, and the top corporate tax rate is 20 percent.

Other taxes include a value-added tax (VAT) and an environmental tax, with the overall tax

burden amounting to 34.4 percent of total domestic income. Government spending has

increased to a level equivalent to 41 percent of GDP, turning the budget balance to deficit.

Public debt has hovered at around 11 percent of total domestic output.

REGULATORY EFFICIENCY

The business environment has improved only marginally, and regulations remain

burdensome. Bureaucratic obstacles and inconsistent enforcement of regulations inject

considerable uncertainty into entrepreneurial decision-making. The outmoded labor code

continues to limit employment and productivity growth. The state influences prices through

extensive subsidies and numerous state-owned enterprises.


13/14

OPEN MARKETS

The trade weighted average tariff rate is 5.9 percent, and layers of bureaucratic non-

tariff barriers further distort the flow of goods and services. Except in the oil and gas sector,

growth in foreign direct investment has been elusive due to the deficient investment

framework. In mid-2011, regulators and the state-controlled VTB Group bailed out the Bank

of Moscow with an injection of $14.2 billion.The Russian government may use non-tariff

measures to protect the domestic car-making industry after joining the World Trade

Organization, Prime Minister Vladimir Putin said late on Wednesday.

Currently, Russia levies import duties on foreign cars but will have to scrap this

measure after joining the world trade club."If we see that the car industry operates in

inequitable competitive conditions, we will find non-tariff instruments to protect it, for

example, technical regulations," Putin said.

He claimed there were problems with competition in the truck sector, as the U.S.,China and Europe had a higher level of tariff protection. "However, it is possible to find

protection instruments and there is such an intention," he said.Asked whether Russia could be

expected to join the WTO next year, Putin said that "there are questions, but we could expect

it."

Putin said the creation of the Customs Union between Russia, Belarus and

Kazakhstan had not postponed Russia's entry into the WTO and, on the contrary, had

accelerated it.The Customs Union and the common economic space between the three ex-

Soviet republics complied with WTO rules, he said.

Russia, the only major economy outside the global trade club, has been negotiating

entry to the WTO for 17 years. Russian and foreign officials have recently said that Moscow

can become a member next year.


14/14

Sri Ramakrishna Engineering College

(Autonomous Institution Affiliated to Anna University ofTechnology Coimbatore)

Vattamalaipalayam , NGGO Colony Post

Coimbatore - 641022

Department of Management Studies

INTERNATIONAL BUSINESS MANAGEMENT

Term Paper

on

TARIFF AND NON TARIFF BARRIERS OF RUSSIA

Submitted by

ARUN.T

1191004

Date of submission :

Marks

Signature of the Student Faculty Sign

10

Documents

Russia Faces Higher Non