Russia and the international economy, Детальна інформація

The law "On State Regulation of Foreign Trade" adopted in July came into force in October. The law stipulated what authority in this area shall be with the President, the Government and the Ministry of Foreign Economic

Relations. The exclusiveness of the MFER's position was emphasized by the fact that only it was vested with the right to license import and export transactions subject to quantitative restrictions or to approval procedures.

As pursuant to the law, the Russian Government shall submit a program of foreign trade development together with a draft of the Federal budget for the Parliament's approval. Alongside with other provisions this program shall embrace customs tariff rates planned for the year in question as well as the band of their possible fluctuation, thus making the foreign trade more predictable. The Government has the right to introduce export and import quantitative restrictions on national security grounds, to comply with international agreements or to protect the domestic market, however, these measures shall be announced not less than 3 months prior to their actual introduction. The law envisages a possibility to introduce state monopoly for trade in certain products. In this case a special procedure of licensing import and export operations exclusively to state-owned enterprises shall be applied.

As the above mentioned law was effectuated, the Commission of the RF

Government on Safeguard Measures in Foreign Trade became fully legitimate and in December it received "Procedures of Investigation Prior to

Application of Safeguard Measures" approved by the MFER (Russ.abbr. MVES).

A possibility to apply safeguard measures against competitive imported products complies with usual practices applicable in the world trade. In this area Russia is late in working out and application of such measures, especially taking into account that Russian exports are often and in most cases unjustifiably subject to discrimination on foreign markets. So, the

RF import regime loses its exceptional liberalism which has been characteristic of it until recently.

Tariff regulation. From September through December export duties levels were gradually lowered until their complete abolition since January

1, 1996, with an exception of a small group of goods including oil, natural gas and some other raw commodities.

In June and in October, 1996 import duty rates were changed. On the whole, changes were made in direction of an increase in tariffs. Earlier goods taxable at 1 percent have constituted a rather significant part of the list, at present this rate is only applicable to certain goods within

Group 10 of the External Economic Activity commodity nomenclature (grain) and 1701 (cane sugar, beet firm sugar and sucrose). A 10 percent tariff is now applied to medicines which earlier have been exempt from duties while fish and fish products are subject to a double rise of duties (from 5 to 10 percent) and duties on vegetables were tripled (from 5 to 15 percent). For foodstuffs earlier exempted from duties new tariffs made 5 percent on bananas and citrus fruits, 10 percent on tee and coffee, 15 percent on fresh cucumbers, however, rates of import duties in Russia still remain considerably lower than in the EU countries (16 percent against 21 percent). There were effectuated provisions stipulating a 30 percent duty on goods such as luxuries, tobacco products, alcoholic beverages and weapons.

Tax regulation. As before, close attention was paid to products subject to excise taxation. In July and in December, 1996 a price difference between excise stamps and special stamps designated for imported tobacco and alcohol products were adjusted. There were created equal conditions for importers of these products both from countries within and outside of the former Soviet Union (ECU 0.1 per unit of an alcohol beverage and ECU 0.01 per unit of a tobacco product). In December the rate of excise tax on tobacco products was increased from ECU 1.2 to ECU 2 per 1000 pieces.

In June the list of products subject to a preferential 10 percent value added tax was shortened; it was again examined in detail in November and some new products were added to it. In December works and services, both produced domestically and purchased, being exported to countries outside the CIS alongside with services concerning the transit of foreign cargo through Russian territory were exempted from the value added tax.

Preferences in External Economic Activities. In October, 1996 the

Government abolished previously applicable preferential taxation of alcoholic beverages imported from abroad by certain legal entities which were exempt from customs duties (for instance, the National Fund of Sports and the All-Russian Society of Invalids). Since December, pursuant to the

Presidential Decree "On Customs Preferences" of November 30, 1995, it is inadmissible for Federal agencies to adopt decisions which would provide prolongation of preferences in terms of customs duty exempts and receipts of additional compensations.

In August, 1996 the control mechanism over incoming export proceeds denominated in foreign exchange was adjusted. All proceeds in foreign currencies shall be entered into accounts with authorized banks--that became a requirement of the customs regime. Customs service now enjoys the right to control all capital flows and apply relevant sanctions if necessary.

In September, 1996 the control over exports and imports of military- purposed products, works and services, subject to licensing, was tightened.

In December the set of instruments of the state control mechanism over imports was supplemented. The system of foreign exchange control over imports introduced on January 1, 1996, is basing on the same principles as the export control existing since 1994 and envisages the same chain of relations: an importer--an authorized bank--customs. The key document fundamental for the whole control system is a registration certificate for import transactions.

3. Foreign Trade Pattern

In 1995 Russian foreign trade was influenced by differently directed factors. A favorable state of the world market and the governmental policy of stimulating exports via regular lowering of export duties provided for a further increase in volumes of trade with countries outside the former

Soviet Union and a stable active balance of the foreign trade.

Estimating Russian foreign trade the following adverse factors shall be taken into account: a decline in production, small amounts of investment, rather high inflation rates, insufficient level of state assistance for development of the country's export potential, poor competitiveness of many Russian-made manufactured products, especially of machines and equipment, lack of positive shifts in development of Russia's external relations with countries of the former CMEA, huge external debt, discriminatory barriers banning a number of Russian-made products from external markets. In connection with accession of Finland, Sweden and

Austria to the EU Russia automatically became subject to anti-dumping and quantitative restrictions concerning trade with these countries in steel, textiles, mineral fertilizers, uranium.

Introduction of the "ruble corridor (fluctuation band)" alongside with a relatively high internal price dynamics caused deterioration of export transactions' effectiveness. However, due to liberalization of energy resources exports, the export sector reacted to the introduction of the

"corridor" slower and not so sharply as critics of a fixed exchange rate had believed. At the same time, stabilization of ruble exchange rate created a sufficiently favorable transaction climate for importers allowing them to compensate a part of the loss inflicted by an increase in import tariffs.

Goskomstat reports that the Russian foreign trade turnover, unorganized trade including, made $ 135.7 billion in 1995, or by 16 percent more in comparison with 1994 figures. Exports were at $ 77.8 billion (a 18 percent increase) and imports at $ 57.9 billion (by 15 percent more).

The results of external economic activities in 1992 through 1995 are indicative of the fact that Russia re-oriented its trade towards industrialized countries and that the share of countries outside the former

Soviet Union in the total foreign trade turnover has grown. In 1995 countries outside the former USSR accounted for 78 percent of it. In 1992 through 1995 exports to these countries increased at a record rate in the last 20 years with exports showing a 25 percent growth ($ 64.3 billion) and imports (together with unorganized trade) increasing by 12 percent ($ 41.6 billion).