As a WTO Member, Georgia Gains the Upper Hand
Summary
The Republic of Georgia officially became the 137th member of the
World Trade Organization (WTO) on June 14, joining Estonia,
Kyrgyzstan and Latvia as the only former Soviet states within the
global trading body. Russia, too, is trying to garner membership;
but before Russia can gain entry, it must first obtain approval
from all current members - including its former Soviet republics.
This will allow several of Russia's neighbors to wring considerable
economic concessions out of Moscow - and spark a membership race
for the rest.
Analysis
Georgia joined the World Trade Organization (WTO) as its 137th
member on June 14, a mere four years after submitting its
candidacy. Such membership grants Georgia preferential access to
the markets of all other WTO members - most of the world's largest
and richest - as well as direly needed investment and export
opportunities.
Georgia - along with the other former Soviet states of Estonia,
Kyrgyzstan and Latvia - now has a voice in formulating WTO policy.
More importantly, they can block new applicants from becoming
members - notably, Russia.
Much in the way that the European Union (EU) managed to wring
economic concessions out of China before approving Chinese
membership in the WTO, Estonia, Georgia, Kyrgyzstan and Latvia will
be able to influence Russian economic policies with respect to
themselves.
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In the past Russia has spurned free trade agreements with the
Commonwealth of Independent States (CIS) because they threaten
Russia's mid-term economic and political power. A free trade zone
would sacrifice Russia's current position of preeminence, allowing
other CIS producers to undercut Russian producers in the Russian
market.
However, now Estonia, Georgia, Kyrgyzstan and Latvia will be able
to demand full access to the Russian market. Georgia may even try
to link WTO membership to the removal of Russian troops from bases
in Georgia.
If Russia refuses, it will be barred from the WTO and therefore
continually denied preferential access to most of the global
economy and the large-scale investment that it so desperately
needs.
Once Russia obtains membership, its room to maneuver against its
former colonies will shrink further. All of the former Soviet
states depend upon Russia - to varying degrees - for oil, natural
gas and transportation routes. In the past, when one of the smaller
states engaged in a policy Moscow perceived as against its
interest, Russia has been quick to use its economic levers as
political punishment.
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Once Russia joins the WTO, this behavior will be prohibited. The
WTO structure actually allows states that have been so wronged to
sue the perpetrator. The WTO has even ruled against such major
economic powers as the United States, the European Union and Japan.
However, this adjudication regime is not fool proof - by far. The
process of suing can take up to two years, and in the past large
powers have defied the WTO ruling, as did the European Union with
regard to banana imports.
Russian-Latvian negotiations on sticky issues such as banking,
customs and transport have already begun with the Latvians
gleefully informing Russia of Latvia's "requirements."
Soon Russia will have to face similar humiliating negotiations with
the other three colonies-turned-WTO members. The smaller states
will largely seek what the rest of the WTO members want:
predictable market access and an expansion of rule of law.
Moscow will no doubt find these negotiations galling. But if it
doesn't complete them now, it will present the opportunity for
other former Soviet states - perennially in a position of weakness
vis-a-vis Russia - to join the WTO first.
Russia may find the idea of economic concessions to Estonia and
Georgia annoying, but concessions to the more significant states of
Ukraine and Uzbekistan could cause real damage to Russia's short-
term economic plans. Azerbaijan, Armenia, Belarus, Kazakstan,
Lithuania, Moldova, Uzbekistan and Ukraine have already submitted
applications. Of these, Lithuania is the only shoo-in for
membership.
The WTO will reduce Russia's ability to unilaterally bully those
states of the former Soviet Union that have pursued liberal
economic policies. But that ability cannot be eliminated. Russia
still controls the only feasible export route for Kyrgyz goods, the
only efficient oil supplies for Lithuanian refineries, a main
source of power for Ukraine and a wide array of other economic
necessities.
But negotiations to join the WTO - and WTO regulations themselves -
will provide Moscow's former territories with considerable
leverage. And leverage is something that, until now, they have
utterly lacked.
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