Kiel Working Papers, Kiel Institute for World Economics
No 1385:
Sectoral Distortions and Service Protection in Russia. A Comparison with Benchmark Emerging Markets and EU Accession Candidates
Rolf J. Langhammer
Abstract: Recent empirical research on efficiency gains for Russia
from WTO membership concludes that service trade liberalization especially
through allowing foreign suppliers to invest in Russian service industries
promises the largest gains. This points to sizable efficiency deficits in
the Russian service sector. This paper departs from the question whether
both the Russian sectoral protection structure and the effective rates of
protection (ERPs) differ from structures and rates in benchmark countries
if tax equivalents for intermediate services are taken into account. The
result is that almost all Russian service industries get effectively taxed
and not protected once not only tax equivalents of intermediate goods but
also those of intermediate services are included in ERP calculation.
Variance among industries and peak taxes in service industries are
significantly higher than in a median emerging country taken as benchmark.
These findings support the key role of intermediate services liberalization
for the expansion of a viable Russian service sector. Results from
comparing Russian effective rates of protection with those of the EU
accession countries Bulgaria and Romania are not inclusive. Tax levels of
the two accession countries are also high and variant and thus cannot serve
as a proxy for the “economic distance of Russia to Brussels”. Lessons for
European Neighborhood Policy point to the requirement for the EU to
liberalize bilateral service trade (through mode 3 supply: commercial
presence ) on a quid pro quo base: without opening EU markets for Russian
companies in specific services (i.e., energy distribution), Russia will
probably not open its service sector for EU suppliers more than is required
in order to comply with minimum WTO accession prerequisites.
Keywords: Service Trade, Liberalization, Russia, European Neighborhood; (follow links to similar papers)
JEL-Codes: F13,; F15; (follow links to similar papers)
15 pages, October 2007
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