The long-neglected tillers of Russia's soil are finally getting some
state attention, as government officials preparing for entry into the
World Trade Organization (WTO) realize their agricultural industry is
woefully unprepared for competition.
But state officials are now facing up to what farmers have pointed
out all along: that imports encouraged since the food shortages of the
early ‘90s have now gained the upper hand in the country's grocery
stores.
"If we do not manage to wholesale pearl
carry out a reasonable agricultural policy aimed at limiting food
imports, we will not just lose years on restoring livestock breeding,
but we will be addicted to the West," Alexei Gordeyev, Russia's
Minister of Agriculture, told the Rossiiskaya Finansovaya Gazeta.
Russia's poorly subsidized farmers simply can't compete with their
heavily assisted counterparts in Europe and the United States, said
Sergei Guriev, a senior researcher at the Center for Economic and
Financial Research, a Moscow-based think tank. Government officials and
negotiators are now trying to figure out how to handle those subsidies.
"This is a very serious question that is now being discussed in
[the] WTO," Guriev said. "The developing countries are demanding that
the West open the market. Some partial concessions will take place, but
what exactly will happen, no one knows."
About 27 percent of Russia's population lives in rural areas, and
most of those are dependent upon agriculture. World Bank figures show
the industry was worth $32.28 billion in 2000.
But, of Russia's agricultural producers, the World Bank found that 48 percent of them lost money that same year.
"The market is spontaneous; we survive on our own," said Yury
Kostyuk, head of the agriculture department at GK Rusagro, a company
that grows, processes and sells a variety of products including grain
and livestock.
Kostyuk named the "catastrophic disparity in prices" as one of the main barriers to local agricultural development: Compared to tin cup pearl necklace
1990, prices for heavy machinery, oil and fuel have increased 20- to
30-fold. But supermarket prices have only increased five times, Kostyuk
said.
Now, in its continuing quest to fully privatize Russia's economy and
gain entry to the WTO, the government is stepping into this struggling
industry to try to modernize agricultural policies.
"Today in front of us are discriminatory conditions [for entering
the WTO] in the agricultural sector," said Arkady Zlochevsky, head of
the food-market control department of the Agriculture Ministry. The
government's task, he said, is to change those conditions, in part
supporting local producers and encouraging exports.
Zlochevsky named state intervention into the grain market – allowing
state purchases of grain to stabilize prices – as one of the
government's main protective measures last year. Other steps aimed at
supporting local producers included interest rate subsidies on loans to
producers, and unified tariffs for grain transportation. Russian grain
for export can now be loaded at ports under internal tariffs that are
two-and-a-half times lower than export ones.
Zlochevsky also said last year's creation of a state supervisor to
regulate leases of heavy machinery will assist small farmers in
expansion. Previously, private operators set the rates and conditions
of payments.
Part of the challenge for both government officials and producers is
dealing with poor planning from the past. Zlochevsky blames the
discrepancy between producers' costs and their share of the end
supermarket price, which Kostyuk criticized so heavily, on outdated
state policies on imports which caused a "colossal" surplus of grain.
In 1992, when people started panicking over food shortages, Russia
imported 26 million tons of grain. Official statistics show that year
Russia harvested 103 million tons of grain, to feed a demand of 130
million tons. But Zlochevsky says the Russian harvest was actually much
higher, leaving an enormous surplus that fed Russia until 1995.
Official statistics were skewed by farmers underreporting their harvest
to minimize taxes, as well as government officials who may have been
trying to justify imports.
"The state policy was built on crooked data," Zlochevsky said. The
price discrepancy also grew sharply after a bumper crop in 1997 that
dropped food prices, and was not assisted by a crop failure the
following year. Last year, despite a plentiful crop of 85 million tons
of grain, the state managed to pearl strand wholesale keep prices at the same level and increase the area under cultivation, he added.
While government officials debate subsidies for agriculture
producers and eagerly anticipate WTO entry, the prospect does little to
boost farmers' spirits. Kostyuk said that he does not expect "anything
good" for his company if Russia enters the WTO at the end of 2003 as
scheduled. Nor are grain producers the only ones concerned: those
producing vegetables and livestock are also worried.
"I am asking for equal conditions. I am not asking for privileged
conditions," said Kostyuk. "Our business will just die because it will
not be able to stand the competition [on basic products like meat, milk
and butter]."
Sergei Filippov, general manager and co-owner of Fruchttrink, a
Russian company that grows, processes and sells with the help of some
foreign investment, said the supermarket price of vegetables grown in
Bunyakino, a village outside Moscow, is just slightly lower than that
of imported ones. He said local producers' costs are 30-40 percent
higher than those in the West, in part because of high taxes and
transportation expenses for imported seeds and machinery, which are
preferred over lower quality domestic products.
Kostyuk complained of a similar situation in raising livestock. He
said the cost to produce one kilogram of Russian meat is 50 rubles
($1.70), while one kilogram of imported meat sells for 44 rubles.
Kostyuk, like other agricultural producers, is seeking a six- to
eight-year transition period with subsidies for Russian industries of
$6.2 billion to cope with an influx of inexpensive imports, and also
wants to see protective measures such as taxes and quotas on imports –
neither of which are likely to be embraced by WTO authorities.
Guriev, at the Center for Economic and Financial Research, said
Russian subsidies today amount to about $1.5 billion, far less than
those used in the West. He said making local producers competitive
after entering the WTO requires one of two policy changes: removing
state subsidies from Western products, or increasing state subsidies
from Russia's government. He believes Russia will choose to akoya pearl necklace increase subsidies.
But Zlochevsky said removing subsidies on imported meat – one of his
government's goals – would increase the price of imported meat to 72
rubles per kilogram and leave Russian producers quite competitive. He
argues that simply increasing taxes on imported meat, as many producers
demand, is not the answer since the burden falls on the consumer. World
Bank figures show imported meat now makes up 20 percent of sales in
Russia, an amount not easily compensated for domestically.
"We still consume an insufficient quantity of meat [for good
health]," he said, adding that a price hike would lower consumption
further. "If we reduce imports, this will [influence] the sale of our
own products... People will not buy meat."
Zlochevsky said the way out may be through a tariff quota, which the
state now uses only when regulating economic policy with developing
countries. He added that, in February 2001, lawmakers tried to expand
the tariff quota for all countries but the amendment was rejected by
the Duma twice. Meanwhile, the imported share of the market has grown
drastically over the last three years: 260,000 tons in 1999, 680,000
tons in 2000 and 1.3 million tons in 2001, Zlochevsky said.
Another coping mechanism may be to swing machines
encourage exports to other countries, which would also require
government assistance. Guriev said oilseed crops grown in Russia, such
as flax and canola, are quite competitive and could be exported.
"Our hands and feet are bound by WTO entrance, international
obligations and our own laws," Zlochevsky said. "[But] the ice has
shifted. There is an understanding among the government that its
[support] is necessary."