Russia, Welcome to The Club

July 1, 2002

Meeting amid the mountains of Kananaskis, Alberta, last week, the leaders of the world's seven most powerful industrial nations agreed to make Russia a full member in their exclusive fraternity.

Russia will be something of an oddball in this plush, top-hat club. Russia is poor; the other members are rich. Nonetheless, in 2006 the Group of Seven will formally become the Group of Eight. Russian leaders, who have been attending economic summits for some years, will join financial discussions as well as political ones.

Given Russia's size, its influence across many regions, and its economic potential, this step makes sense. And in Vladimir Putin, the West is fortunate to have a Russian leader who is keen to bring his huge nation into the modern world.

An important next step will be admission to the World Trade Organization, the body which regulates international trade. It is to be hoped that Russia's admission to WTO will not take years, as China's did. But there will be many hours of negotiations as each WTO nation attempts to protect its own commercial interests in the process.

One big problem is that Russia remains a long way from being a true market economy, and the WTO rules hang on prices of traded goods being largely set by markets. Removing the effects of 70 years of communist central planning doesn't happen in a day, a year, or even a decade.

But Russia continues to move in the right direction. With the partial revival of the Russian economy over the past three years, following a devaluation of the ruble and an increase in oil prices, domestic private commerce has been spreading. In another significant move, Russian legislators recently took a big step toward allowing the free sale of agricultural land, something banned since the 1917 Revolution.

Earlier this month, the Bush administration recognized the progress by formally designating Russia a "market economy." That means Russian exports to the US will not be subject to higher duties or other barriers than those imposed on the exports of WTO members. Once a member of WTO, Russia will win what is now called "normal trade relations" with all member nations.

So far, foreign investment in Russia has been relatively small. Many pioneer American and European investors feel they were badly treated by both private and government entities in recent years. But there is fresh hope that, under Putin, the rule of law and respect for property rights will improve commercial relationships.

In general, American business welcomes Russian membership in the WTO. Unlike China, Russia hasn't the capacity to flood the American market with inexpensive goods. Its chief exports are raw materials. But US business leaders want negotiations to be based on commercial questions and not just Putin's support for President Bush's war on terrorism.

For reasons of both political and economic stability across a large swath of the globe, Russia should be welcomed into the trading community of nations as soon as possible.