How to Ensure Sustainable Development of Agribusiness in the Conditions of Trade Integration: Russian Approach

How to Ensure Sustainable Development of Agribusiness in the Conditions of Trade Integration: Russian Approach

Vasily Erokhin (Stavropol State Agrarian University, Russia) and Anna Ivolga (Stavropol State Agrarian University, Russia)
Copyright: © 2012 |Pages: 12
DOI: 10.4018/ijsem.2012040102
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Abstract

The World Trade Organization (WTO) is currently the leading international organization regulating the issues of liberalization of international trade. In October 2011 the long process of Russia-WTO negotiations was completed. The problem is that the Russian accession into WTO is more related to the general unification of Russian trade policy, not to the effective development of agricultural production. Russian agricultural producers are against integration into the global trade system in the frameworks of WTO. National agricultural production would not be able to compete effectively with foreign producers in the conditions of free market. The complex of supportive measures for Russian agribusiness is needed from the national government, but the situation is worsened by the global financial crisis and lack of budget resources. The paper discusses an overview of the WTO principles in agriculture and possible support measures for the Russian agriculture in the conditions of trade integration.
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Discussion

Even today, the majority of Russian agricultural industries cannot equally compete with foreign producers. The dependence on import deliveries is critically high. Local agricultural and food products cannot find their customer neither on foreign nor even on local Russian markets.

However, the “secret” of success of foreign farmers on the Russian market is not only in the unique high quality of their production. Agriculture in global economics is one of the most protected and “closed” branches. The main method of protection is to give a huge volume of subsidies to the agricultural producers. Annual expenses of WTO member countries for agriculture reach dozens of millions US dollars. Half of “agricultural” expenses of WTO member countries are the measures distorting trade and production which has a negative influence on the global agricultural market, leading to the excess production and fall of prices for agricultural and food products.

Currently almost all-global volume of agricultural support is distributed between EU producers (39%), USA (36%) and Japan (15%). These countries provide more than 90% of total volume of subsidies worldwide. The share of state support in GDP of agriculture is 36% in EU, 37% in Japan and 39% in USA (Table 1). Herewith USA and a range of other developed countries remain the net exporters of food products and save the high level of food sovereignty. USA and France are fully independent and provide themselves with agricultural and food products on 100%, Germany – on 93%, Italy – on 78%, Japan (which almost has no land resources) – on 40%.

Table 1.
Cumulative support of agriculture by WTO member countries in 2011
WTO member countriesAmber Box (AMS)de minimisBlue BoxGreen BoxCumulative support
$ million%$ million%$ million%$ million%$ million%
EU3975858.26786.62023992.11989519.18057039.4
USA1680324.6734171.400.05005748.17420036.3
Japan64619.500.08453.82336722.53067315.0
Other WTO member countries52727.7226322.08954.11069410.3191249.3
TOTAL68294100.010282100.021979100.0104013100.0204567100.0

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