Trade Liberalization between Russia and East Asian Countries

Based on the international statistics data the author estimates effects of trade liberalization between Russia and East Asian countries. The prospective niche markets in mutual trade and the impact of trade liberalization on the national economies were identified. Using a partial equilibrium model the author indicates the following positive trade effects for Russia and East Asia: trade creation effect prevails over trade diversion effect; general welfare and mutual trade of the countries tend to increase. The Russian economy has positive trade effects with all the East Asian countries, with the highest scale in the case of Sino-Russian trade. At the same time trade liberalization has following some costs for the Russian economy: a) the growing role of imports, mostly from China, compared to Russian exports; b) reduction of tariff revenues, which are four times higher for Russia, compared to East Asian countries; c) continued negative trade balance with the East Asian countries. The evaluation shows that the increase of Russian exports to East Asian countries is feasible only for certain commodity groups which determine marketable niches of specific East Asian countries; at the same time, Russia can import from East Asia a huge range of commodity groups. The study reveals that reduction in tariff measures and non- tariff restrictions will not lead to a massive increase in Russian exports and changing in its trade and geographical structure. On the basis of prolongation of short-term trends the author identifies long-term challenges and opportunities for the Russian economy from trade liberalization with East Asian countries. According to the estimation results, the author suggests that in the current environment of global trade liberalization the tariff measures become less significant as a tool for redistribution of commodity flows.