RESTRICTED
WORLD TRADE WT/ACC/RUS/2/Add.2
2June1995
ORGANIZATION(95-1462)
Original: English
ACCESSION OFTHE RUSSIAN FEDERATION
Introductory Note toQuestions andReplies
totheMemorandum ontheForeign Trade Régime
Addendum
Thepurpose ofthisintroductory noteistoprovide ashort overview ofdevelopments related
toreform process oftheRussian economy andforeign tradesince thesubmission oftheMemorandum
ontheForeign Trade Régime (L/7410 of1March 1994).
Russia hasentered itsfourth yearofradical economic reforms against thebackground of
continuing decline ofmajor economic indicators. Production hasbeenfalling forfiveyears inarow.
By1994, Russia 'sGDP haddeclined by40percentfrom its1991 level, while industrial production
was44percentbelow its1991 level. In1992, gross agricultural production declined by9percent
from the1991 level, while in1993 thedecline overthepreceding yearwas4percent. In1994 it
felldown further byanother 9percent.
Processing industries experienced thesharpest declines with respect tothe1991 levels:
47percentinthelightindustry, 39percentinmachine building, 29percentinthechemical and
petrochemical industries, and31percentinforestry, woodworking andthepulpandpaper industries.
Atthesame time, January-May 1995 appear tohaveregistered thefirstsigns ofeconomic
stabilisation withthefallofindustrial production slowing down substantially.
Theinflation rateremains high, although aftertheoutbreak oftheinflationary process caused
bytheliberalisation ofprices atthestartof1992 ithasbeendeclining from yeartoyear. In1992,
theGDP deflator index was1720, while in1993 itdecreased to1023 andto460in1994. Itshould
alsobenoted thatthistrend haspersisted since thebeginning of1995. InFebruary 1995themonthly
rateofinflation was11percent,inMarch -9.5percent,andinApril -8.5percent. Bearing inmind
therigid monetary andcredit policies thathavebeenpursued bytheGovernment since early 1995,
therateofinflation isexpected todecrease to4-5percentamonth bymid-1995.
In1994, capital investment was26percentlower thanin1993, withindustrial investment
dropping atanevenhigher rate.
In1994, thebudget deficit amounted to10.4percentofGDPor44.8percentoftotalbudgetary
expenses. In1995, thebudget deficit isexpected togetdown tothelevelof5.5percentofGDP.
This, inturn, would openopportunities forfinding non-inflationary sources foritsfinancing.
Theproblemofunemploymentisbecomingincreasinglyacute:1.6millionpeopleor2.1percent
oftheeconomically active population areofficially registered asunemployed. Considering those who
arepartially unemployed (4.8million people or6.4percent), aswellasthose whoarelooking forWT/ACC/RUS/2/Add.2
Page2
jobsontheirownwithout using theservices ofgovernment agencies, thetotalnumber ofunemployed
isestimated atthelevelofmore than10million people or13.5percentoftheeconomically active
population.
Thestructure ofGDPhaschanged significantly. In1994services accounted foraconsiderably
larger share ofGDP thaninthetwopreceding years (50percentin1994 compared to42.2percent
in1993and32.6percentin1992). Suchanincrease reflects therapid development ofthecommercial,
banking andfinancial sectors andmounting prices forservices rendered, particularly intransportation,
aswellassignificant dropinindustrial production.
In1994, thenon-state economic sector accounted for62percentofGDP, withtotally private
enterprises accounting for25percentofGDP. Atotalof112,700 stateandmunicipal enterprises
or47percentofallRussia 'senterprises havechanged theirownership status since thebeginning of
theprivatisation process. Asof1July1994, theprivatisation programme hasentered itssecond stage.
Itisenvisaged tostartselling stateproperty atmarket prices rather thandistributing itforfree
(privatisation vouchers) aswasthecaseinthefirststage ofprivatisation.
Retail, catering, repairs andother service enterprises stillmake upthelargest share ofRussia 's
privatisedentities(46percent).Industrialenterprises,construction,andtransportationandcommunication
account for27percent, 11percent, and6percent, respectively.
Radical steps havebeenundertaken intheareaofprice liberalisation. Under Decree ofthe
President oftheRussian Federation No.221of28February 1995, pricecontrols shallbeapplied mainly
toproducts produced bynatural monopolies. Asaresult, theapplication ofpricecontrols willlargely
belimited tothefollowing sectors: transportation ofcrude oilandpetroleum products through major
pipelines, gaspipeline transportation, generation ofelectrical andthermal power andtheprovision
ofservices related totheirsupply, railway transport, shipments toremote geographical locations within
thecountry, services oftransportation terminals, riverandseaports andairports, andelectronic and
postal communication services. Stateregulation ofprices willalsoapply tomilitary products, precious
metalsandalloys,rawdiamondsandpreciousstones.GovernmentRegulationNo.239of7March1995
provides adetailed listofproducts andservices whose prices remain under control either atthefederal
orregional level.
Important decisions havebeenmade inorder toensure financial stability bywayofadopting
anumber ofmeasures aimed atcutting economically unjustified subsidies. These measures provided
forinthe1995Federal Budget include theelimination ofsubsidies toeconomic sectors atinterest rates
lower thanthereference banking interest rateinexcess ofamounts stipulated inthebudget, ending
thepractice ofcentralised distribution ofloans, aswellassignificant restrictions ongranting deferrals
ofinterest payments onloans previously extended andwriting-off debts. Asof1January 1995, the
Government isnolonger allowed tousedirect Central Bankloans forthepurpose offunding theFederal
Budget deficit.
In1994 and1995 substantive changes were introduced innon-tariff regulation offoreign
economic activities.
Asofthesecond halfof1994, allquantitative export restrictions (export quotas andlicenses)
wereeliminated. Russian participants inforeign tradearenowfreetoexport anyquantity ofproducts.
Theremaining restrictions onexports ofparticular products (where export licenses arestillrequired)
aredictated bythefollowing considerations:
- national security (armaments andmilitary equipment, dualpurpose goods, precious stones and
metals);WT/ACC/RUS/2/Add.2
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- preservation ofirreplaceable natural resources (rarespecies ofanimals andplants) andthehealth
ofthecountry 'spopulation (medicine, poisons, narcotics, hazardous waste); and
- quantitative restrictions imposed onimports ofRussian goods byanumber ofcountries.
Anexhaustive listofthose goods isgiven inthetextofthereplies.
Also, theproportion ofgoods whose exports remain under statecontrol doesnotexceed
5percentofthetotalvalue ofnational exports.
Another important change inthisareaisthecomplete elimination ofthesystem ofso-called
"special exporters", i.e.theregistration ofenterprises forthepurpose ofreceiving therights toexport
somevitalcommodities. Thispractice hasbeendiscontinued asof25March 1995. Now, allenterprises
andphysical persons registered aslegalentities ontheterritory oftheRussian Federation (including
enterprises with100percentforeign ownership) haveequal rights withrespect toanyexport transaction
involving goods orservices.
Inaddition, asofspring 1995, allindividual privileges withrespect toforeign tradehavebeen
cancelled bylaw,andallRussian andforeign enterprises aretreated onanequal footing.
Russia remains oneofveryfewcountries which havenotimposed quantitative restrictions or
other measures ofnon-tariff control overimports ofgoods. Import controls remain onlyforsecurity,
health, public morale andenvironment sensitive products. Anexhaustive listofsuchproducts isgiven
inthetextofreplies.
Import tariff isactually theonlymeans toregulate imports intotheRussian Federation. On
6May1995, newimport customs rateswereadopted withtheweighted average estimated at14percent.
More detailed information isprovided inthetextofreplies. Thefullschedule inEnglish willbe
circulated totheWorking Party shortly.
Export tariff wasintroduced on1January 1992. Since thattimeboththeratesandthelist
ofgoods subject toexport duties have been drastically reduced. Inaccordance withtherelevant
legislation adopted in1993, theexport duties aretobephased outon1January 1996.