Russia and WTO membership: challenges and opportunities for Russia and the EU

By Massimiliano Gobbato

The decision of Russia to engage in negotiations for the World Trade Organisation membership highlighted the fact that the country was undertaking several important steps towards its modernisation and line up with the development pace of the rest of the world. Even though not in the media's spotlight, Russia has eventually reached the stage which should allow Moscow to join the WTO after being an outsider for eighteen years. Despite remaining technical and political issues to sort out, nonetheless Russia was declared a full member at the WTO ministerial meeting which was scheduled from the15th to the 18th of December. The final juridical step was constituted by the Russian Parliament ratification of the agreements in order to formalise the membership. The ratification process would lead to put into force the norms embodied in the accession treaties presumably at the beginning of next year.

An act of detention?

This set of events has been prepared by several acts of detention which have changed the focus of Russia's foreign policy over the past years. Moscow's involvement both in the energy crisis with Ukraine and the war against Georgia, along with the tensions with the US on the missile shield project in Europe as well as several diplomatic crises with Poland have undergone an important qualitative shift which is culminating into the WTO membership. The more smoothed nature of Russian foreign policy with regards to its neighbors could be attributed to the achievements of a new internal and external strategy which have been sustained by EU and US efforts in order to involve Moscow on renewed political and economic streamlines. In addition, the losses that the country has suffered as a consequences of the financial crisis and the fact that a pro-Russian has become President of Ukraine in February 2010 have surely contributed to this evolution.

Apart from the international context, it is of utmost importance to evidence the debate on the foreseen consequences of the WTO membership which would offer Russia the opportunity to rebalance its economy as notably the country's shape relies excessively upon natural resources exports and prices. In fact, the membership promises increased market access for Russian exports under Moscow's agreement on a greater opening of Russia to foreign investors. The global public debate on Russia's advantages and disadvantages of joining the WTO seems to be oriented towards the opinion that Russia will benefit in the medium and long term from this new trade and economic pattern.

Persistent concerns

Some concerns have been raised both upon both the capacity of the Russian economy to offset the disadvantages of firms which would struggle to survive market pressures and, more generally, to what extent a win-win game could be forecasted from the new trade model. Worries have been also pointed out on Russia's capacity to develop rule of law improvements to create a better investing climate and to implement market-oriented reforms, especially on public procurement and property rights. Over the past 5 years, the Russian government has adopted several laws with the rationale of facilitating companies in obtaining registrations, licenses and certificates, as well as to reduce the number bureaucratic ties. According to different authoritative sources, although these reforms have achieved some results in improving business-oriented practices, hurdles have remained heavy and, coupled with persisting corruption, they are actually preventing enterprises establishment and growth both for foreign and Russians investors .

The challenges of WTO membership are nonetheless not limited to economic policy. They also put into question the political model which has shaped Russia in the last ten years. Under the present rule, Russia's 'social contract' has been based on the deal that Russian could have accepted de facto limited-right citizenship over the assurance of political stability, security and an elite-driven wealthiness redistribution. On the contrary, within the WTO deal, Moscow would have a more circumstantiated influence on economic dynamics and progressively fewer controls on the top-down convoy of the country's richness distribution. This model has notably been internally and externally controversial for its consequences on the quality of the democracy. Transitional economics theories and the example of the Central Eastern European transitions have showed the direct link between economic growth and the rule of law, as well as the quality of the institutions. As a result, the challenges ahead for Russia have a solid base within the concerns which this case embodies.

Furthermore, the opponents to the WTO membership and the political elites which are not inclined towards economic liberalism are convinced that, during the recent economic crisis, the coercion of foreign investors in favour of national champions, together with protectionist practices, have demonstrated their effectiveness. In addition, WTO accession talks have been considered a premature political move rather than technical means to improve Russia's welfare. Tariff reductions are in fact perceived as concessions to trade partners instead of tools to increase the quality of trade and enhance competitiveness, while the opening of the economy is considered dangerous to Russian producers, especially in the domains unprepared to open competition, such as agriculture. The debates in Russia seems thus to be clung to the classical dichotomy between liberalism and protectionism and its natural ties with the democratic rule.

Will trade and democracy enforcement go along?

The incontrovertible fact is that a great amount of trade should allow Russia to gain an immediate advantage in terms of capital inflows, especially from the EU. The WTO membership is expected to swiftly boost about 4 billion euros of trade-creation per year coming from the European economy. In addition, the new establishment is forecasted to be immediately mutually beneficial as, on the one hand, the WTO accession should also assure higher accessibility for one of the Russia's main trading partner, namely the European Union, and, on the other, it should facilitate the setting up of a functioning market economy while granting imports' cost reductions. Non contested figures have shown that last year the EU as a whole imported nearly 60 billion euros of goods from Russia, including oil and gas, and it has exported roughly 86 billion worth of manufactured products.

On the Russian side, it results quite clearly that, apart from trade creation inflows, the tariffs lowering could benefit Russian citizens and firms by assuring lower costs to the already present amount of trade. Furthermore, Russia should be able be secure its and import its oil and gas commodities more efficiently and benefiting from tariffs exclusion in all the sectors which have suffered the non-WTO members restrictions. Finally, as reported by the Commission website, ''Russia is the only major international economy which is not yet a member of WTO. Once Russia becomes a member, it will benefit from the rights and obligations set by the multilateral trading system of the WTO, including the possibility of recourse to the intergovernmental trade dispute settlement''.

Both Moscow and Brussels have thus a lot at stake also in consideration both that, in absolute terms, Russia is the third largest export market after the US and China and that the country's internal economic structure and foreign policy have undeniably tangible repercussions not only in the European economy, but also in Europe's neighbourhood stability and democracy enforcement. Russia after Putin re-election seems at a turning point whose outcomes are still unknow. At first glance, the opening of its economic instituions and the emerging of a visible political opposition seems parallel fenomena, nonetheless Russia still gives the impression of remaining monolitical.

Effective Tactics for Managing Consultant-Client Relationships

In order for consultants to be the most effective, a strong relationship must be formed between the consultant and the client. However, throughout the consultation process, political and ethical issues arise that can either hinder or help the relationship, and therefore, hinder or help the overall strategy. The way in which the consultant handles these political and ethical issues can strengthen or weaken the consultant-client relationship and lead to a successful or unsuccessful program. 

Smeltzer, Watson, and Barker developed the Model of the Communication Consultant/Client Relationship, which consists of 24 steps that explore various aspects of the relationships between consultants and their clients. The model is based on the premise that consultants often must work in environments where political and ethical issues are raised simultaneously (Smeltzer, Watson, & Barker, 1984, p. 126). While ethical consultants “do not simply try to determine what actions are in their own best interest, but rather what actions are right or best for all parties concerned,” political issues “are concerned with the kind of actions that are most often beneficial or harmful to a person as an individual, and which advance one’s own interests (p. 126). 

After the first two basic steps of the model of marketing oneself as a consultant and having the initial meeting with the client, the third step of the model is to have the client state the problem (Smeltzer, et. al., 1984, p. 127). This is the first stage that possible political and ethical considerations usually arise. “Politically, the consultant may want to see only the part of the problem which is in the domain of his or her professional expertise. Ethically, the consultant must decide if the important problem areas are outside his or her area of expertise” (p. 127). During this stage of the process, consultants must also decide whether to limit his or her investigation to the problem identified by the client, or to investigate other areas within the organization that could also indirectly affect the issue at hand. Of course, this could increase the length of time spent on the project, and the consultant may discover that other problems must be solved before the requested problem is solved (p. 128), however, this is both a political and ethical decision the consultant will have to make prior to beginning the project.

In the fourth, fifth and sixth steps of the model, the consultant must analyze and obtain data to determine problem-solving strategies. Ethically, the consultant must determine how much information is needed to develop an effective strategy for the client (Smeltzer, et. al., 1984, p. 127), and politically, the consultant must determine how much time and effort should be spend to attempt to gather the necessary data to make a sound decision (p. 128). For instance, the consultant may appear to be more professional if he or she does not require extra time to assemble more data, but ethically, if the consultant knows that a more sound decision could be made with access to more data, extra time should be taken to gather the necessary data. In the seventh step of the model, determining the possible strategies that can be used to deal with the problem, “there may be a difference between the strategy which would be the most profitable for the consultant and that which would be most effective (p. 128). In this case, the consultant would have to choose whether to select an effective strategy that may not show results right away, and a less effective strategy that may show immediate results. Being open with the client at the early stage of the process, and explaining why the consultant has opted to use the most effective strategy that is slow to show results in the short-run, can actually help strengthen the client-consultant relationship in the long-run. 

The eighth step in the model addresses the various degrees of the consultant-client relationship, and “the extent to which the consultant should take over the tasks and responsibilities of the client” (Smeltzer, et. al., 1984, p. 128). In this stage of the process, the consultant and client must determine what the ultimate goal of the consultant is—whether to teach tasks, or complete them, and on what level in regards to dependency, involvement, and ownership (p.129 – 130). Dependency is the extent to which the consultant wants the client to be dependent on them. The consultant must also evaluate the client and be open and honest with the client in regards to the client’s competency level and ability to be independent (p. 129). Some clients may desire a high level of involvement in the decision-making process when determining which strategy is right for the company (p. 129). While this could be helpful, it could also cause conflict if they client requests a particular strategy that the consultant believes will be ineffective. Politically, selecting the client’s choice may have better results initially, but if the program fails, the consultant could still be held responsible, even though it was the client’s idea. Ethically, if the consultant feels as if the strategy is not in the best interest of the client, he or she should explain why, although this may result in an undesirable situation, such as high tension or the termination of the relationship. Lastly, the client and consultant must determine the level of ownership of the program and implemented strategies (p. 130). For instance, who would take credit for the success or failure of the program, and at what point? In steps 9 through 16, time and resources are evaluated for the project and the proposal is presented to the client.

Evaluating the Effectiveness of the Consultant Program

Steps 17 and 18 of the model begin the evaluation process of the consultant program. During this phase, the consultant must decide how extensive an evaluation to conduct, determine “what aspects of the evaluation should be used by the consultant for personal self-development and what should be used for organizational improvement,” and must separate objective data from subjective data (Smeltzer, et. al., 1984, p. 131). After the evaluation has been completed, the consultant must provide the client with feedback—Step 19 (p. 132). While presenting feedback may seem like a pretty straight-forward process, again, both political and ethical issues must be taken into consideration during this stage of the process. The consultant must be committed to sharing all feedback—both positive and negative results—because that is the only way the client will grow in the long run. “…special problems develop when one is aware of certain information and contemplates the possibility of withholding it. In some situations, it may be both morally and politically judicious to withhold information (i.e. confidential information from employees), but in other situations the decision is not easy) (p. 132).

Step 20 and 21 of the model describe the process of terminating the agreed upon strategy and discussing future actions. There will come a time when the strategy that a consultant has implemented has been exhausted. While many consultants see “certain actions need to be implemented, there may be a tendency to make it part of the present strategy rather than making a new proposal,” this is not always the best option (Smeltzer, et. al., 1984, p. 132). When the agreed-upon program is completed, the consultant should evaluate the effectiveness of the program with the client. At that time, if either party feels as if there is more work to be done, the client and consultant must make the decision whether to continue the relationship, at which point a new proposal should be written by the consultant (Steps 22, 23, and 24) (p. 133). If the client and consultant agree to continue the relationship, the consultant should be aware that he or she will likely face many of the same problems, but on a different level. “In fact, some of the questions become even more complicated as the relationship between a client and consultant grows and develops” (p. 133). If the relationship is terminated, materials should be returned to either the client or consultant based on prior determinations. Decisions pertaining to the use of materials and ideas after the client-consultant relationship has ended should be determined prior to the implementation of the program. 

Conclusion

In the consultant-client relationship, there will always be instances where ethical and political issues must be taken into consideration. These considerations can lead to a strong relationship between the consultant and the client, as well as the successful implementation of the strategy, supported by objective results. However, making the wrong decision, or a decision that is not ethically or politically sound, can lead to a weak consultant-client relationship and a failed strategy. That said, even when ethically and politically sound decisions are made, there are times when the consultant-client relationship must be terminated due to a difference in ideas about where the organization should go; disagreements about the level of dependency, involvement or ownership of the organization or the strategy; or at times, simply because the contract has come to an end. Regardless of the end result, it is imperative that the consultant make a valiant effort to continuously make ethically and politically sound decisions throughout the entire relationship with the client to ensure optimal results.

Reference

Smeltzer, L., Watson, K., & Barker, L. (1984). The communication consultant/client relationship: An analysis of ethical and political issues. Communication, 13(1), 125.