Impact+of+global+economy+and+trade+on+Russian+economy.

//You have to be very rich or very poor to //// live without a trade. //

//"Economy is the basis of society. When the economy is stable, // // society develops.The ideal economy combines the spiritual and // // the material, and the best commodities to trade in are sincerity and love." //

After the collapse of the USSR in 1991, the Russian Federation adopted, through what it was called the “shock therapy”, the market economy and the capitalism system. Russia has a wealth of natural resources. It is the leading producer of natural gas and the second producer of oil in the world, as well as being one of the main producers and exporters of diamonds, nickel and platinum.The most well developed sectors are chemicals, metallurgy, mechanical construction and defense sectors. The service sector employs more than 60% of the population and generates slightly under 60% of the GDP.

The country is fairly open to foreign trade (which represents around 50% of the GDP) despite the nationalistic attitude of its leaders and strict legislation and fare policies. Russia is amongst the 10 primary exporters and the 20 primary importers in the world. Its main trade partners are China, Germany, The Netherlands and the United States. The country shows a high trade surplus and this should continue regardless of the drop in raw material prices and the deterioration of the global economic situation. Rich in natural resources, Russia has the largest natural gas reserves in the world, the second largest coal reserves and the eighth largest oil reserves. All these resources constitute a major portion of Russia’s exports. In fact, 80% of Russia’s exports constitute oil, natural gas, metals, timber, and defense equipment. Russia uses these reserves to secure both its economic and political interests. Primary imports: machinery, transport equipment, plastics, medicines, iron and steel, consumer goods, meat. Russian imports of machinery and metal products reveals an underlying trade weakness. Specifically, Russia's old and worn manufacturing base must be modernized or replaced to compete in the global economy. Primary exports partners: EU (44.8%), United States (6.0%), China (5.8%), Turkey (4.9%), Ukraine (3.7%) Top importers into Russia include Germany (15.3%), Ukraine (8.8%), China (6.9%), Japan (5.7%), Kazakhstan (5%), United States (4.6%), Italy (4.6%) and France (4.4%). WTO and Russia Russian Prime Minister Vladimir Putin has claimed that WTO member countries, including the United States, are blocking Russian accession. However, analysis suggests that the demands placed on Russia are not unusual, with the exception of gas pricing restrictions. In fact, Russia was allowed to avoid opening its territory to foreign banking, a commitment that the United States has demanded from all other acceding countries not classified as “least developing.” Russia has a great deal to gain from WTO accession, including faster growth and much-needed institutional reform. While not all sectors will improve, estimates suggest that Russia would see a gain of 3.3 percent of GDP in the medium term, and a gain of 11 percent of GDP in the long term. These gains would come largely from liberalization of policies in Russia, not from greater market access provided by the WTO, since Russia’s commodity exports already enjoy unfettered access.

It is important to note, however, that different sectors of the Russian economy would be unequally affected. Raw material producers would benefit, while producers of food and light industry goods would likely suffer. This would significantly complicate Russia’s goal of economic diversification and shows that not all groups in Russia are convinced of the benefits of accession.

Finally, Russian accession could provide the impetus for institutional reform that is less likely otherwise. Russia has a poor business climate and ranks poorly in corruption and ease of doing business indices, including those that measure trade logistics. WTO accession—which requires stronger and more accountable governance—could provide important support for reforms. <span style="display: block; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 130%; text-align: justify;">Some Russian businessmen, supported by politicians, believe that the WTO accession would irresistibly increase unemployment. The worst negative projections announce that more than one third of Russian citizens will lose their jobs. Of course, it is true that many regional economies, as well as local government budgets along Russia, largely depend on one industry or, even in some cases, only one company. According to these not so optimistically predictions, only 10 percent of the actual Russian firms would be able to survive in case of market liberalization.

<span style="display: block; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 130%; text-align: justify;">In fact, many other studies show that no substantial unemployment rise will result from a WTO accession. It will even have, in long term, positive effects on the employment rate. However, the arrival of foreign products and companies on Russian markets will affect the less competitive sectors of the economy such as the old soviet industries. Those which will survive will learn to restructure more quickly and efficiently and will make better use of technology and management strategies. As an example, imported goods will increase the competition on the national market and will force local producers to improve the quality of their products.

<span style="display: block; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 130%; text-align: justify;">Joining the WTO is a unique opportunity for Russia to improve its economy level. First, with more than 50% of it exportations destined to the European Union, the country needs to adapt its standards to the European ones. As a consequence, the adhesion will push the authorities to accomplish many reforms that would normally not be achieved so quickly. These reforms represent a huge occasion to reduce the dependency of Russia on its oil and gas exportation sector, as well as it is a good opportunity to revitalize its industry. **<span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 17px; line-height: 25px;">Russia's accession: benefits and stumbling blocks ** media type="youtube" key="n9Rr0-U1KnA" height="315" width="420"

<span style="color: #3e3ee5; display: block; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 180%; text-align: center;">The Customs Union

<span style="display: block; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 130%; text-align: justify;">The Customs Union between Belarus, Kazakhstan, and Russia came into existence on January 1, 2010. Belarus, Kazakhstan, and Russia are to go on with economic integration and were set to remove all customs borders between each other after July 2011. From January 1, 2012, the three states are expected to introduce the single economic space. <span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 120%;">First Russian Deputy Prime Minister Igor Shuvalov said on Monday that differences between Russia and Belarus over export duties remain. The disputed issues between Russia and Belarus include export duties on Russian oil and petroleum products to Belarus and the import of foreign cars and aircraft into the Union's customs territory. The issues delayed ratification of the Customs Code by Belarus. <span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 120%;">The more porous borders are set to expand markets for businesses within the zone and make trading more competitive. Foreign companies already operating in one of the three markets could also benefit from easier access to other states within the union. There are some fears that cheaper or fake goods could enter the Russian market via Kazakhstan however. Unified import and export duties are in place, although many exceptions still remain, covering sectors such as pharmaceuticals, plastics and transport equipment.

<span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 120%;">In September 2010 customs duties were unified, going into a communal account to be divided. Russia accounts for over 85 percent of these duties, Kazakhstan just over 7 percent and Belarus just under 5 percent. <span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 120%;">The agreement, for now, eases trade among the three large former Soviet economies without fully abolishing all duties and tariffs. The agreement, celebrated with much fanfare in the Kazakh capital of Astana, eliminates obstacles to trade and investment that went up after the collapse of the Soviet Union. That alone, analysts said, could give a boost to the region’s economies by introducing them to greater competition. <span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 120%;">The signing was also a victory for Russia’s leaders, who have made the customs union a pet project for a variety of reasons, notably because Moscow stands to benefit as a natural hub for regional finance and trade. <span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 120%;">“A lot of work remains before the formation of a common economic space,” Mr. Medvedev said, according to comments published on the Kremlin’s Web site. “But, considering that it really is a beneficial and interesting endeavor, I’m sure we can agree on everything.” <span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 120%;">For Russia, the push for a free trade pact that began during the financial crisis is a change of tack in its economic policies in the former Soviet space. Russia, which found itself in the favorable position of holding hard currency reserves even as Western lenders were pulling out of the region during the crisis, moved away from loans and direct subsidies of fuel, and toward an emphasis on more sweeping economic integration. <span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 120%;">In the short term, Russian farmers could suffer from competition from Belarus, and Russian steel workers from competition from Kazakhstan. But in the longer term, the exposure to competition will help Russia diversify away from its dependence on natural resources while elevating the role of Moscow as a regional financial and business center. <span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 120%;">media type="youtube" key="HVEqIzXDjyA" height="315" width="560"

<span style="color: #472be3; display: block; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 180%; text-align: center;">The franchising in Russia

<span style="display: block; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 120%; text-align: justify;">Russia is becoming increasingly attractive for foreign companies. It is not only due to the vast natural resources. Today Russia is a source of business opportunities. This country attracts large international banks and trading networks, mining companies and equipment suppliers engineering centers and R&D organizations. They are all driven by the unlimited choice of areas where to develop business in Russia, make use of the country’s experience and potential. <span style="display: block; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 120%; text-align: justify;">The government has been creating a favorable environment and an adequate legal framework for fair business dealing over past years, establishing a base for welcoming the business of international market leaders. Just recently a number of international brands entered the Russian market (Le Pain Quotidien, Nobu, Burger King), following the example of Hard Rock Cafe, T.G.I. Friday’s, KFC, McDonald's, Baskin Robins Southern Fried Chicken, Subway, Sbarro, Starbuck’s and Costa Coffee, who have already secured their franchise development in Russia.



<span style="background-color: #ffffff; display: block; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif; font-size: 120%; text-align: left;">Franchising in Russia is mainly dominated by companies working in sectors of the food and restaurant business, and by retail outlets involved in the sale of clothing, accessories and jewelry.