Russian trade specialization on the global market

For the definition of the modern place of Russia on the global market and historical features of its trade specialization it is necessary to consider:

— the potential opportunities;

— their real use.

Russia has the significant advantages in comparison with the majority of other countries, traditionally considered as high developed. The significant size of the territory, the number of historical and national features have predetermined the character of its foreign economic relations. These relations were developed under the greater influence of the internal, than external factors. These circumstances are necessary for the estimation of the foreign trade relations of the country on the basis of the preliminary analysis of these factors, and actual level of Russian economic development.

Russia occupies the first place in the world on the coal reserves and iron ore and the second place — on the oil reserves, precious metals and diamonds. Russia has the significant area of woods (22 % of the global forests) and agricultural land. There are the world largest reserves of natural gas.

The Russian prosperity with natural resources has predetermined the raw structure of its export not only in the Soviet period, but also much earlier, in the period of the development of capitalism in Russia. Nowadays, despite of the general tendencies of growth of trade by the processed goods, various services, scientific and high-technology goods, Russia keeps this feature of the export specialization.

The emphasis on the creation of the open economy in the combination with the system of macroeconomic regulation has caused the long and hard character of the crisis stage in 1990s and creation the conditions for stabilization. The foreign trade

has played an ambiguous role at this stage of Russian economic reforms:

1) the foreign trade became the tool of realization of the not optimal model of Russian transition to the market economy, one of the channels of «flight» of the domestic capitals abroad;

2) in frameworks of the really chosen way of the reforms the foreign trade was one of the basic sources for maintaining of the national economy. It also became the major tool to start the integration into the system of global market;

3) import helped to solve one of the most significant problems of the early period of economic reforms in 1990s — the saturation of the Russian consumer market.

In 1986-1991 Russia was still in the structure of USSR. During these 5 years the foreign trade turnover reduced twice.

Only since 1993 the annual foreign trade volumes began to increase. We can compare the GDP dynamics with the dynamics of the foreign trade turnover in 1992—1995.

GDP decreased:

1992 - 14,5 %; 1993 - 8,7 %; 1994 - 12,6 %; 1995 - 4,0 %.

FTT decreased too during this period, but in lower rates, and in 1993 Russian export started to grow, and 1994 was the first year of FTT increase. This increase was achieved because of the significant activization of the Russian foreign trade relations with the CIS countries.

So, the so-called «centralized» import sharply decreased because of the economic crisis and the lack of the financial resources. At the same time export started to increase in the middle of the 1990s because of the raw materials (oil and gas) and good prices for them on the global market. The trade balance was positive.

The main Russian trade partners in 1990s were Germany, USA, Italy and Great Britain. Among CIS countries: Ukraine, Belarus, Kazakhstan. The expansion of the trade relations with the CIS countries was one of the priorities of Russian foreign trade policy.

Russian export in 1990s:

— oil (45-47%);

— ferrous and precious metals (15—17 %);

— machinery, equipment and vehicles (8,5—10 %);

— the chemical products (7—9 %);

— wood (4-5 %);

— agricultural products (2,5—3 %).

The share of other commodity groups in the Russian export remained on the average level 13—17 %.

The basic reasons of the low equipment share in total export:

— decrease of machines and equipment manufacture at the end of the 1980s;

— low competitiveness of Russian equipment;

— lack of credit recourses for manufacture and transportation;

— the industrial backwardness of Russia;

— long terms needed for development and implementation of modern equipment;

— non-payment problems;

— absence of the insurance system and the system of bank guarantees.
Russian producers were not well protected from the competing import,

while the level of discrimination of Russian products on the global market has increased. The country was not only limited in real opportunities to deliver the competitive goods on the new global markets, but it also considerably reduced its presence on many important commodity markets.

Russian import in 1990s:

1) machinery (30 %);

2) food and raw material for its production (30 %);

3) chemical products (9—12 %);

4) textile, clothes, shoes (9-11 %);

5) ferrous and precious metals (3—4 %).

The share of food and agriculture products continued to grow. In 1995 the share of the import agriculture products on Russian market has reached the critical point (40 %).

Devaluation of Russian currency and crisis of the Russian bank system during 1990-1998 have resulted in significant reduction of import volumes. Only in August, 1998, during the hardest Russian financial crisis and default, the import decreased on 32 %, and in the next month September, 1998 — 50 %. Total reduction of import during the three last months in 1998 was 70 % in comparison with the similar periods of 1997.

So, it is necessary to note, that in last 25-30 years Russia had no precise foreign trade policy. Our country participated in the international foreign trade relations with the backward structure of its foreign trade with the raw materials in export and agriculture and high-tech products in import.

Of course, such trade specialization predetermined the character of Russian foreign trade development in the modern period..1998

The essential recession of foreign trade activity because of the extremely adverse internal and external economic conditions.

FTT - $116,6 bin. It has decreased on 16,8 %.

Export — $72,5 bin. Decrease on 16 %.

Import — $44,1 bin. Decrease on 18 %.

The FTT decrease is a result of the aggravation of financial crisis in August-December, 1998.

The decrease of the Russian foreign trade volumes can also be explained with the low global prices for the main Russian export products (oil, metals and chemical products). The losses of the country only on three commodity positions (petroleum, diesel fuel and black oil) were $4,3 bin.

FTT - $102,2 bin. Decrease on 11,2 %.

Export — $71,8 bin. Decrease on 0,7 %.

Import — $30,2 bin. Decrease on 30,7 %.

The growth of the global oil prices promoted the increase of the Russian export.

FTT — $136,6 bin. Increase on 32,4 %.

Export — $102,8 bin. Increase on 41,0 %.

Import — $33,8 bin. Increase on 11,5 %.

The volume of the Russian export in 2000 has exceeded $100 bin., because of the growth of global prices on oil and other fuel and energy goods, ferrous and precious metals.

FTT - $149,1 bin. Increase on 3,6 %.

Export - $100,7 bin. Decrease on 2,3 %.

Import — $41,2 bin. Increase on 21,7 %.

In 2001 the Russian FTT has reached the highest level for the period of 1992 — 2001. This was promoted by the significant growth of import volume, the increase of the internal demand, the growth of the investments and level of the real incomes of the population.

FTT - $151,8 bin. Increase on 7,0 %.

Export — $105,8 bin. Increase on 5,8 %.

Import — $46,0 bin. Increase on 9,8 %.

The situation on the international markets was still favorable for the Russian exporters. The export volume increasing has resulted in strengthening of the national currency and growth of the internal demand, that has caused the appropriate growth of the import volumes.

Russian export during 1998 — 2002 developed under the primary orientation on the development of the foreign trade relations with the EU countries and USA.

The growth of export volumes to the Western Countries was caused by a number of reasons:

1) the consequences of the financial crisis of 1998. This crisis has caused the devaluation of the national currency and the relative increase of competitiveness of the external markets in comparison with internal market;

2) the decrease of production costs that increased the competitiveness of the Russian products on the global market. But in 2000-2002 the devaluation effect was exhausted;

3) oil prices growth.

Russia doesn't use the great potential of the trade relations with CIS countries. It was the region of the traditional political and economic influence of the USSR, but today we can see that Russia is loosing its traditional power in this region.

In structure of Russian import during 1998-2002 we can also see the tendency of prevalence of the Western Countries in comparison with the CIS countries.

The devaluation effect after financial crisis in 1998 had the return influence on the character of Russian import in comparison with export:

1) significant reduction of import volumes has created the favourable conditions for the development of national manufacture to substitute the lack of the expensive foreign products on the domestic market;

2) the crisis has also caused the reorientation of import on cheaper goods from the CIS countries;

3) The overcoming of the negative consequences for the importers in the next years has caused the significant growth of import volumes, basically because of the hi-tech products and new advanced equipment;

4) import from the CIS countries decreased up to the level of 1998;

5) it shows the essential dependence of Russian economy from the import from Western Countries, especially on equipment, high technologies, machinery.

So, it is necessary to note, that the tendencies of raw orientation of Russian export and the high dependences of Russian economy on import can not be favorable for the further development of the Russian foreign trade.

It is necessary to diversify the Russian export, to develop the national import substitute production. In Russia we should create the world-standard legislative basis for international trade. We should work on the optimization of the geographical structure of Russian foreign trade relations, including the orientation on the perspective markets of the CIS countries. And of course we should expand the Russian participation in the integrated organizations and unions in the sphere of international trade.