and institutional changes. These changes can move the economy toward an open trade and investment model of economic development and away from an import-substitution economic model.

My colleagues and I have undertaken several detailed numerical studies to assess the consequences of WTO accession in Russia. (See Jensen, Rutherford and Tarr, 2006, 2007; Rutherford, Tarr and Shepotylo, 2005; and Rutherford and Tarr, 2006, forthcoming.)<sup>3</sup> We have assessed the likely impacts on overall income, wages, returns to capital, poverty, output, exports, imports and employment by sector, and how impacts will differ across the regions of Russia. The basic macroeconomic impacts are presented in table 1.What I would like to emphasize is that these studies indicate that Russia will reap substantial gains from WTO accession, the benefits are widespread and will reduce poverty, those regions that establish a better investment climate will reap greater gains from WTO accession, and, crucially, most of the gains are due to Russia’s own reforms. The reforms in the services sectors, are the most important of Russia’s own reforms.

Although governments typically try to sell WTO accession to the general public as a process that will yield increased market access for their own exporters, our estimates are that less than 10 percent of the gains come from improved market access for Russian exporters. After all, Russia has negotiated most favored nation status or better with all its significant trading partners. While Russian exporters will be accorded additional legal benefits in antidumping cases once Russia is a WTO member, and this is the source of the gains we estimate, many economists are cynical regarding the fairness of antidumping proceedings. This suggests that we should not expect very significant differences in determinations against Russian exporters in antidumping cases, and consequently improved market access in export markets cannot be the source of significant gains to Russia from WTO accession.<sup>4</sup> Given that the benefits to Russia of WTO accession come from its own internal reforms, some infer from this fact that Russia will gain little from WTO accession—since Russia could unilaterally implement these reforms. There are several reasons why I take the opposite view—that the process of WTO accession is a unique historical opportunity to achieve reform.

> 3 Versions of all these studies are available at <u>www.worldbank.org/trade/russia-wto. This work follows my</u> earlier studies examining Russian trade policy. See Tarr (1993, 1994, 1999, 2002) and Michalopoulos and Tarr (1994, 1996, 1997).

> 4 In addition, members of the WTO obtain rights in international trade. Members are granted permanent most-favored nation status to the markets of other member states. So Russia will not have to be concerned about  annual renewals of Most Favored Nation status. Members are also able to use the WTO’s dispute settlement procedures to protect their trade interests, such as in antidumping cases.  Trade disputes among WTO members are resolved based on WTO legal agreements under which smaller countries have the potential to win disputes against large countries. All WTO agreements require unanimous consent of all the members, and this helps provide a voice for the smaller member countries. On the other hand, nonmembers will be influenced by the new rules of this dominant organization in international trade, without a voice in their formation.

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