accession protocol to the WTO, representing the period during which the WTO commitments were phased in. These results reflect the impact of the tariffs as fully phased in by 2020, as if they were imposed on Russia’s trade patterns in 2012. For the ECU, a baseline of 2008-12 is used, since the changes to tariffs in Kazakhstan and Belarus are phased in over 2010-2012. 2008 is chosen as the initial year instead of 2010 both because of availability of annual tariff data in Kazakhstan and Belarus and because 2008 represents a more normal set of conditions than 2010, which is immediately following the Great Recession of late 2008-09.<sup>7</sup>

## **2.2 Main Results**

# **_a)_ Assessment of the change in Russian imports from CIS and GSP countries and WTO members after Russia implements its WTO commitments and the effect on the ECU CET.**

As a result of tariff cuts related to Russia’s WTO Accession Protocol commitments, to be reached by 2020, the total value of Russia’s imports compared to 2012 is projected to go up from $314.8 billion to $318.3 billion (a 1.1 percent increase), across all products and trading partners. This is a relatively small impact. Nevertheless, imports of nearly 60 percent of Russia's product lines are expected to rise. Welfare gains arise from a projected increase in consumer surplus of $371.39 million (0.02 percent of Russia’s GDP in 2012).<sup>8</sup> This estimate of welfare gains appears relatively small. It is important to bear in mind that the estimate reflects only the static efficiency gains from removing the tariffs. They do not count dynamic gains, e.g. from technological spillovers associated with imported intermediate goods, nor do they take into account the effects of trade facilitation or other provisions of the ECU. Nor do they include interindustry effects. For example, cheaper imports of intermediate goods may make exports of final goods more competitive on the world market.

Estimates of the gains of tariff liberalization on a static efficiency basis tend to be small in the literature, so the result presented here is not surprising. Nonetheless, the results of the model pertaining to relative effects on different sectors are likely to be robust to an approach that considered other sources of potential gains, and produced thereby larger estimates of aggregate welfare effects.

### **Analysis By Imported Product:**

Trade-weighted average tariffs for all imported products are projected to drop by 2.2 percentage points (from 7.8 percent of the average duty to 5.6 percent) once Russia fully adopts its WTO tariff bindings. For products whose tariffs will go down, trade-weighted average tariffs are projected to decrease from an average of 11.4 percent to 6.9 percent.<sup>9</sup> The 10 HS 2-digit chapters (products) predicted to see the largest increase in import values after the expected tariff cuts explain 63.3 percent of the total change in import value. The predicted change in imports corresponding to these products alone is an increase of $2.2 billion (Table 1).

> 7 Readers wishing an estimate of the joint effect on Russian sectors of the WTO tariff cuts and the changes in the ECU tariff jointly may consider the estimates in percentage terms, when added, to constitute a very rough estimate of changes in Russian output, which leaves out general equilibrium (inter-industry) effects.

> 8 This static increase excludes any welfare gains for producers having access to cheaper intermediate inputs.

> 9 It is predicted that 2,447 products at the HS6-digit level of aggregation will face a tariff cut.

RUSSIA’S TRADE POLICY CHALLANGES – THE WORLD BANK GROUP 6