Russia Pacific Rim Countries: Prospects of Trade Liberalization

DOI: 10.20542/0131-2227-2017-61-5-67-78

D. Izotov (;,
Economic Research Institute, Far Eastern Branch of RAS, 153, Tikhookeanskaya Str., Khabarovsk, 680042, Russian Federation 

Abstract. Trade and economic cooperation between Russia and Pacific Rim countries have expanded and deepened in recent years. Russia is guided by long-term interests in determining its place in the Pacific Rim, while continuing to carry out further trade liberalization with the region’s countries in an environment marked by fundamental competition between the US (TPP) and China (RCEP). Despite the negative price dynamics for traditional Russian exports at the global markets, the overall positive dynamics of bilateral economic relations with the Pacific Rim countries provides a framework for continuing cooperation and solving the existing problems in the future. At the same time, the commodity structure of Russian exports in the Pacific Rim countries has been traditionally unbalanced, due to the predominance of primary goods, while the commodity structure of imports has a tendency to convergence thanks to competition among the particular Pacific Rim countries at the Russian market. The author’s analysis confirmed the assumption of the positive bilateral effects of trade liberalization. The trade creation effect is likely to exceed the trade diversion effect and the total trade effect will be higher than the tariff revenues’ losses. These findings indicate the future benefits for the Russian economy under all potential scenarios of trade liberalization in the region. The tariff revenues’ losses for the Russian budget can be partially offset by increasing the export duty fees. The assessment showed that the trade liberalization with the Pacific Rim countries could lead to changes in the geographical structure of Russian trade. Significant changes of Russian exports could occur in the case of cooperation with either the potential participants of TPP (in the enlarged format) or China. Imports from the Pacific Rim can grow across a wide range of product groups, both consumer and investment. Probably, there will be a substantial increase in the supply of vehicles as well as agricultural products from the TPP countries when the restrictive trade barriers are removed. A noticeable change in the commodity structure of imports is likely to happen as a result of the reduction in non-tariff barriers. The benefits for Russia from the comparative convergence with the RCEP or TPP (in the enlarged format) are comparable. As the current trade liberalization process shows, in the near future Russia can create the conditions for signing a FTA with the RCEP if it comes into being. Regarding pure trade effects (trade creation effect and welfare effect), the Russian economy may receive the greatest gains by cooperating with the TPP countries. At the same time, as for a comparable increase in exports and imports, China would be the most preferable trade partner. Russia faces competing choices between the different Pacific Rim trade integration formats. But these choices are contingent due to closely intertwined interests of global, regional and national business entities in the region. The author argues that an increase of Russian exports to the Pacific Rim countries requires a more detailed consideration of costs and benefits, including the lowering of institutional barriers and cooperation between companies. 

Keywords: trade, trade agreement, trade barriers, trade creation effect, trade diversion effect, welfare effect, Russia, Pacific Rim, China, Regional Comprehensive Economic Partnership, Trans-Pacific Partnership 


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For citation:
Izotov D. Russia Pacific Rim Countries: Prospects of Trade Liberalization. World Eonomy and International Relations, 2017, vol. 61, no. 5, pp. 67-78.

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