WTO report: anti-Russian sanctions hit Western countries

Professor Portansky explained why both sides suffer from restrictions

Russian experts, predicting that the economic sanctions imposed against our country would boomerang back to Western countries, turned out to be not so far from the truth. The World Trade Organization (WTO) came to essentially the same conclusion in its 2023 World Trade Report.

While some may consider the position of Russian politicians and economists, which they expressed at the dawn of the “sanctions wars,” to be biased, it is difficult to suspect the WTO of sympathizing with Moscow. However, the organization’s experts come to the disappointing conclusion that the imposed anti-Russian sanctions will have a negative impact on most of the world’s economies. “Even bilateral trade tensions can reduce economic growth,” they write.

The report provides an example of trade relations between the United States and China, when Washington and Beijing began to “tug of war” over themselves. The tension led to a loss of welfare for the population of the Middle Kingdom in the region of 0.3% of GDP, and in the States – by 0.1% of GDP.

“Similarly, the economic sanctions imposed against Russia in response to the special operation (the term is replaced by the requirements of Russian legislation – “MK”) in Ukraine are projected to have a negative impact on most economies. At the same time, the Russian Federation will face the largest drop in real GDP,” the document says.

It is emphasized that geopolitical tensions usually affect only a few countries, while others may remain neutral or join some parties to the conflict. According to the WTO, the “showdown” between China and the United States has led to an increase in the supply of manufacturing products from other developing countries. Between 2017 and 2020, there was a 40 percent increase in Vietnamese goods exports to the States.

In its report, the World Trade Organization considers two scenarios – full and partial competition. In the first option, the least developed countries will be hit the hardest. By 2050, they will suffer losses of 6.5% of GDP, and developed economies during this period (from 2020 to 2050) about 3% of GDP.

The second option (partial rivalry) assumes that some developing countries remain neutral and do not impose higher trade costs on either side of the conflict. Although in this case, weak economies will lose part of their GDP.

In general, sanctions do not choose who to hit; they affect the economic development of almost all countries.

True, the organization itself emphasizes that the scenarios it describes are not predictions of the future. They are “beliefs about what is likely to happen under a certain set of assumptions.”

What is the future of Russia in the context of the imposed “nuclear sanctions”? And can the authoritative World Trade Organization somehow influence the situation? We ask Alexey Portansky, a professor at the Higher School of Economics and a leading researcher at the IMEMO RAS, about this.

“No, this is a mass delusion,” he answers. – The World Trade Organization is a club without a boss. There, countries agree among themselves, can complain about each other or come up with some kind of collective initiative. Unlike, say, the International Monetary Fund, there is no head or board of governors. The organization does not have such powers to take and end sanctions.

– Is the current WTO report capable of changing the situation for the better in terms of global trade?

– It is necessary to take into account that the document presented to the WTO is not a forecast, but an assumption. It is important. It analyzes several scenarios, mostly negative, that can happen in literally all countries, including Russia.

In recent years, we have observed a number of factors affecting trade between countries, not in the best, so to speak, way. All of them are associated with a departure from the rules of international trade. These are geopolitical considerations and geoeconomic ones. In particular, last year’s law to reduce inflation in the United States, which was sharply condemned in the European Union. And the American initiative to do business with states that are similar in political spirit and values. And, of course, the introduction of economic sanctions. They can be classified as new factors that violate the rules of international trade.

All this may further lead to fragmentation of trade. This is why all countries will suffer to varying degrees.