This spring Russia formally joins the World Trade Organization. The news was announced in December 2011 and was the result of lengthy and complex negotiations between Russia, its trading partners, and WTO members, which lasted 18 years.
Now that the country has joined the WTO, it must live up to certain obligations to fairly treat businesses looking to trade with it and not be discriminatory. It means it can’t impose import or export controls unfairly, which should create a better environment for businesses operating there. It means there should be an increase in trade in that part of the world by companies — including Canadian organizations — that have been staying away.
Many, like Bernie O’Rourke, senior vice president and general counsel of I.M.P. Group International Inc., featured in our cover story this month (see page 18), believe it’s a shame more Canadian companies aren’t doing more business in Russia — and that’s coming from someone who learned the hard way how to navigate what can be treacherous territory. He sees a great, untapped market for Canadians to expand into.
Although some Canadian businesses have shied away from Russia, bilateral trade actually reached $2.8 billion in 2010, up 12.3 per cent from a year earlier.
Russia is a major market for Canadian machinery, seafood, and aerospace products, and is an exporter of fertilizers and chemical and steel products to Canada.
The traditional path a Canadian business has used to get involved in a new market like Russia is to retain an agent or consultant to help navigate and interpret the red tape and cultural differences. That has been critical in the past largely due to the level of corruption in the country. “Russia does have a high degree of corruption privately and publicly and the Corruption of Foreign [Public] Officials Act does only apply to foreign public officials,” points out John Boscariol, head of the international trade and investment group at McCarthy Tétrault LLP.
Boscariol cautions that WTO membership aside, it doesn’t necessarily mean Russia is entirely open for business or that companies should rush in. He wonders if a tiger like Russia can truly change its stripes. “What will be interesting is when the disputes come up and Russia hasn’t changed their laws, or it tries to favour their domestic products and services and a government then decides to bring a case before the WTO,” he says, pointing to a similar situation when China joined the WTO in 2001. “A lot of cases were brought against China and it looks like China is trying to comply now.”
It may be, though, that a combination of sagging economies in other European nations and the urgent need to attain critical growth abroad will push Canadian companies to look at Russia in a new light now and push forward with a strategy to make inroads there. With the right legal counsel along for the ride, of course.