` As Russia Joins WTO, Better Prospects for European Olive Oil - Olive Oil Times

As Russia Joins WTO, Better Prospects for European Olive Oil

Sep. 16, 2012
Costas Vasilopoulos

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Recently, the Russian Federation became the 156th mem­ber of the World Trade Organization (WTO). The WTO’s Agriculture Agreement’ spec­i­fies that the mem­bers of the orga­ni­za­tion agree to improve mar­ket access and reduce trade-dis­tort­ing sub­si­dies,” which trans­lates into lift­ing tar­iffs for imported goods and sim­pli­fy­ing pro­ce­dures; the import tar­iff for olive oil will drop to 7.8 per­cent from its cur­rent 10 per­cent. Theoretically, olive oil and other agri­cul­tural prod­ucts will have bet­ter chances to enter the vast Russian mar­ket.

European Union’s (EU) trade com­mis­sioner wasted no time cel­e­brat­ing the event and said, As a con­se­quence of the WTO acces­sion, Russia will amongst oth­ers lower its import duties, limit its export duties, grant greater mar­ket access for EU ser­vices providers and facil­i­tate rules and pro­ce­dures in many areas affect­ing bilat­eral eco­nomic relations”.

In gen­eral, a WTO acces­sion means that the econ­omy will become open, glob­al­ized and mod­ern­ized, and fur­ther­more that local enter­prises will face seri­ous com­pe­ti­tion from abroad on a wide range of prod­ucts. In the case of olive oil, exporters based in the EU do not have to com­pete with any locals since olive oil is only imported and they can have a seri­ous advan­tage over oppo­nents from else­where: The EU is the biggest trad­ing part­ner of Russia, hence there are already open chan­nels of com­mu­ni­ca­tion and collaboration.

In 2008, Russian olive oil imports amounted to just 18,000 tons; palm oil was top among veg­etable oils with 692,000 tons, fol­lowed by coconut oil with 192,000 tons. For one thing, Russia can­not be seen as a vir­gin mar­ket regard­ing olive oil since more than 100 brands of olive oil are already avail­able in super­mar­kets and deli shops. But with a pop­u­la­tion of about 140 mil­lion, and given the huge quan­ti­ties of veg­etable oils con­sumed, there is space for more olive oil if it the aim is to replace the other veg­etable oils and become the con­sumers’ choice. And while the per capita income declined seri­ously in 2009 to $8,616 due to the global finan­cial cri­sis, it has since then started to rapidly increase again to $13,089 in 2011, accord­ing to the World Bank. Simply put, there is more pur­chas­ing power avail­able to Russian con­sumers to go after more expen­sive and health­ier veg­etable oils, like olive oil.

The sim­pli­fi­ca­tion of processes and pro­ce­dures can be the oppor­tu­nity for stronger pro­mo­tion of olive oil from the EU. What this sim­pli­fi­ca­tion means is that the coun­try must make huge leaps for­ward to dereg­u­late its busi­ness envi­ron­ment and hope­fully improve the 120th posi­tion it cur­rently holds in the Doing Business” index, which does not sound very promis­ing to firms from abroad.

So, hav­ing in mind that Russia and the EU already have tight trad­ing bonds and that the tar­iffs will be reduced and the pro­ce­dures will be sim­pli­fied and ratio­nal­ized to expel the country’s rigid bureau­cracy, it seems that European olive oil exporters should turn their heads east. This, of course, if they are not put off by the high degree of exis­tent corruption.

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