Food imports rise after Russia’s WTO accession

Business daily Vedomosti.ru quotes yesterday’s comments by the Russian Minister of Agriculture Nikolai Fedorov on the effects of Russia’s WTO accession. According to Fedorov, veal, pork, milk and cream imports increased between 10-33.5 percent in the period between September and November on a year-on-year basis. The Institute for Agricultural Market Studies (http://www.ikar.ru/eng/) provides a more detailed analysis, stating that the imports of milk powder increased by 216 percent (to 7,800 tons), imports of whey increased by 89 percent (to 6,766 tons), cheese imports increased by 116 percent (to 89,104 tons) and butter imports rose by 136 percent (to 27,155 tons) in the same period.

Experts sounded the alarm immediately after the final WTO accession requirements became public a year ago. Russia reduced tariffs for pork imported within a determined quota from 15 to 0 percent (tariffs for pork imported above the quota were reduced from 75 to 65 percent), while the tariffs for live pig imports were cut from 40 to five percent. Import tariffs for dairy products were lowered from 25 to 15 percent. One of the experts was quoted saying that Russian system of state subsidies is insufficient to enable the local producers to compete with dairy product exporters such as Belorussia, Finland and the Baltic countries. Furthermore, it is expected that the Russian Government will reduce state subsidies to the dairy industry.

The National Meat Association reports that the pork prices in Central Russia, accounting for half of the country’s output of pork meat, dropped from 94 rubles (USD 3.1) per kilo in August to 65 rubles (USD 2.1) per kilo, which is below the cost of production. However, the Government still has certain instruments for the protection of domestic producers at its disposal. For instance, it already extended the application of the zero income tax rate for agricultural producers and VAT tax breaks applicable to imports of livestock for breeding purposes until 2020. The Government is expected to amend the Law on Agriculture Development and remove limitations on additional state support to the domestic agriculture.

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