GENEVA — The aggressive actions by Russia in Georgia and the strong condemnation by the West could derail the country’s bid to enter the World Trade Organization and put commercial relations to a test.
This story first appeared in the September 3, 2008 issue of WWD. Subscribe Today.
Russia is the world’s fifth-largest export market for apparel, after the U.S., the European Union, Japan and Hong Kong, and in 2006 was the destination for shipments valued at $8.1 billion, according to WTO data.
Francesco Marchi, director of economic affairs at the European apparel and textiles organization Euratex, is concerned there could be repercussions that may have “a serious impact” on European apparel exports to the lucrative Russian market if the crisis widens.
In recent years, Marchi said, Russia has been “a booming” export market for European suppliers “mostly in luxury, high quality and high price” lines.
“There’s a lot of interest to sell there,” he said.
But an Asian diplomat from a major apparel-exporting nation, speaking on the condition of anonymity, said he didn’t think the rise in trade tensions would impact luxury apparel, cosmetics and accessories.
“The world is so globalized and Russian women want to look beautiful,” he said.
The geopolitical crisis and Russia’s decision to drag in commercial issues in a bid to silence international critics also threatens to derail the country’s longstanding bid to join the WTO.
Following critical comments by Russian Prime Minister Vladimir Putin on Aug. 25 downplaying the importance of WTO membership for Russia, Western trade diplomats say entry talks are likely to be put on the back burner.
Ahead of a new round of talks slated for Sept. 18, a senior Russian official, who did not want to be identified, said: “If our partners like to stop [entry talks], we would not have any objections. This session will show whether the talks will slow down, continue, or be put on hold.”
A spokesman for U.S. Trade Representative Susan Schwab said, “If Russia decides to step back from those accession commitments that it has already made, it will further delay its aspirations for joining the WTO. Russia has sought to integrate into the diplomatic, political, economic and security structures of the 21st century. The United States has supported those efforts.” By its recent actions, “Russia is putting its aspirations at risk.”
Tensions between Moscow and Washington have continued to escalate, aggravated by the decision by Russian President Dmitry Medvedev last week to recognize the independence of the Georgian breakaway regions of Abkhazia and South Ossetia, and assertions by Putin to CNN that Washington had a hand in fanning the latest Georgia crisis, which the White House said were “patently false.”
However, some business executives and trade diplomats estimate that, irrespective of the Georgia crisis, a Russia flush with huge export revenues from record high oil and gas prices is now in no hurry to join the WTO, which could force the country to lower trade barriers from which it is benefitting.
“They have not been dying to join,” said a senior European Union official, predicting Russia’s accession could be put in the slow lane.
“I don’t think Russia cares too much at the moment about securing market access for their products via the WTO,” added an Asian envoy.