H. R.

College of Commerce and Economics

Churchgate, Mumbai , Maharashtra ( 400020 )

Trade Restriction of a country

Program of the study : M.COM ADVANCE ACCOUNTANCY
Name : AMAN AMAR PRASAD
Roll No. : HFPMCAA0047
Title of the Project : Trade Restrictions of RUSSIA

SR. NO TITLE
1. INTRODUCTION
2. THREE TYPES OF BARRIERS
3. TRADE POLICY IN RUSSIA
4. TRADE RESTRICTIONS IN RUSSIA
5. TARIFF AND NON TARRIF BARRIERS
6. TARIFF QUOTAS
7. PRODUCT CRETIFICATION, LABELLING AND PACKEGING
8. RUSSIA FOREIGN TRADE IN FIGURES
9. CONCLUSION

10. REFERENCES

INDEX
 INTRODUCTION

A trade restriction is an artificial restriction on the trade of goods and/or

services between two or more countries. However, the term is controversial because what

one part may see as a trade restriction another may see as a way to protect consumers from

inferior, harmful or dangerous products.

A trade barrier is defined as “any hurdle, impediment or road block that hampers

the smooth flow of goods, services and payments from one destination to another.”

They arise from the rules and regulations governing trade either from home country

or host country or intermediary

Trade barriers are manmade obstacles to the free movement of goods between

different countries and impose artificial restrictions on trading activities between countries.

Trade barriers are often criticized for the effect they have on the developing world. Because

rich-country players call most of the shots and set trade policies, goods such as crops that

developing countries are best at producing still face high barriers. Trade barriers such as taxes

on food imports or subsidies for farmers in developed economies lead to overproduction and

dumping on world markets, thus lowering prices and hurting poor-country farmers. Tariffs

also tend to be anti-poor, with low rates for raw commodities and high rates for labour

intensive processed goods. The Commitment to Development Index measures the effect that

rich country trade policies actually have on the developing world.

Trade barriers are mostly a combination of conformity and per-shipment

requirements requested abroad, and weak inspection or certification procedures at home. The
impact of trade barriers on companies and countries is highly uneven. One particular study

showed that small firms are most affected (over 50%)

THE THREE TYPES OF TRADE BARRIERS

Trade barriers are restrictions on international trade imposed by the

government. They are designed to impose additional costs or limits on imports and/or exports

in order to protect local industries. These additional costs or increased scarcity result in a

higher price of imported products and thereby make local goods and services more

competitive (see also comparative advantage and trade) There are three types of trade

barriers: Tariffs, non-tariffs, and quotas. We will look at all of them in more detail below.

Tariffs

Tariffs are taxes that are imposed by the government on imported goods or

services. They are sometimes also referred to as duties. Tariffs can be implemented to raise

the cost of products to consumers in order to make them as expensive or more expensive than

local goods or services. In many cases, tariffs are used to protect local industries that could

otherwise not compete with foreign producers. Of course, the countries affected by those

tariffs usually don’t like being economically disadvantaged, which often leads them to

impose their own tariffs to punish the other country.

Non-Tariffs

Non-tariffs are barriers that restrict trade through measures other than the direct

imposition of tariffs. This may include measures such as quality and content requirements for

imported goods or subsidies to local producers. By establishing quality and content

requirements the government can restrict imports because only products can be imported that

meet certain criteria. More often than not, these criteria are set to benefit local producers. In

addition to that, the government can grant subsidies, i.e. direct financial assistance to local

producers in order to keep the price of their goods and services competitive.

Quotas

Quotas are restrictions that limit the quantity or monetary value of specific

goods or services that can be imported over a certain period of time. The idea behind this is to

reduce the quantity of competitive products in local markets which increases the demand for

local goods and services. This is usually done by handing out government-issued licenses that

allow companies or consumers to import a certain quantity of a good or service. Although

technically speaking, quotas are non-tariff measures, they take quite a different approach than

the other measures discussed above. Instead of just making it more difficult or costly to

import goods, quotas actually limit the number of products that can be traded. There is no

way for foreign producers to circumvent such a quota. The most restrictive type of quota is

an embargo, i.e. an entire ban of trade and/or commercial activity concerning a specified

good or service.

Why Are Tariffs and Trade Barriers Used?

Tariffs are often created to protect infant industries and developing economies but are also

used by more advanced economics with developed industries. Here are five of the top

reasons tariffs are used:

Protecting Domestic Employment

The levying of tariffs is often highly politicized. The possibility of increased competition

from imported goods can threaten domestic industries. These domestic companies may fire

workers or shift production abroad to cut costs, which means higher unemployment and a

less happy electorate.

The unemployment argument often shifts to domestic industries complaining about cheap

foreign labour, and how poor working conditions and lack of regulation allow foreign

companies to produce goods more cheaply. In economics, however, countries will continue

to produce goods until they no longer have a comparative advantage (not to be confused

with an absolute advantage).

Protecting Consumers

A government may levy a tariff on products that it feels could endanger its population. For

example, South Korea may place a tariff on imported beef from the United States if it thinks

that the goods could be tainted with a disease.

Infant Industries

The use of tariffs to protect infant industries can be seen by the import substitution

industrialization (ISI) strategy employed by many developing nations. The government of a

developing economy will levy tariffs on imported goods in industries in which it wants to

foster growth. This increases the prices of imported goods and creates a domestic market for

domestically produced goods while protecting those industries from being forced out by

more competitive pricing. It decreases unemployment and allows developing countries to

shift from agricultural products to finished goods.

Criticisms of this sort of protectionist strategy revolve around the cost of subsidizing the

development of infant industries. If an industry develops without competition, it could wind

up producing lower quality goods, and the subsidies required to keep the state-backed

industry afloat could sap economic growth.

National Security

Barriers are also employed by developed countries to protect certain industries that are

deemed strategically important, such as those supporting national security. Defense

industries are often viewed as vital to state interests, and often enjoy significant levels of

protection. For example, while both Western Europe and the United States are

industrialized, both are very protective of defense -oriented companies. 

Retaliation

Countries may also set tariffs as a retaliation technique if they think that a trading partner

has not played by the rules. For example, if France believes that the United States has

allowed its wine producers to call its domestically produced sparkling wines "Champagne"

(a name specific to the Champagne region of France) for too long, it may levy a tariff on

imported meat from the United States. If the U.S. agrees to crack down on the improper

labelling, France is likely to stop its retaliation. Retaliation can also be employed if a trading

partner goes against the government's foreign policy objectives.

Common Types of Tariffs

There are several types of tariffs and barriers that a government can employ:

 Specific tariffs

 Ad valorem tariffs
  Licenses

 Import quotas

 Voluntary export restraints

 Local content requirements

Trade Policy in RUSSIA.

On August 22, 2012, Russia formally joined the WTO, and on December
20, 2012, the United States established permanent normal trade relations
(PNTR) with Russia, enabling the United States to apply WTO agreements
with Russia.

As part of WTO accession, Russia signed the General Agreement on Trade

in Services (GATS) that provides a legal framework for addressing barriers
affecting trade in professional services. In the services sector, Russia
committed to substantial transparency in a broad range of sub-sectors,
including the elimination of many existing limitations, such as financial
services, telecommunications, distribution, energy, express delivery,
professional services, and audio-visual services.

On October 18, 2011, eight countries (Russia, Belarus, Ukraine, Moldova,

Tajikistan, Armenia, Kazakhstan, and Kyrgyzstan) from the Commonwealth
of Independent States (CIS) signed and then in the following years ratified
a Free Trade Agreement (FTA), which provides the free movement of
goods within the territory of the member states. In 2013, Uzbekistan joined
by signing a separate agreement with the above eight countries. On
December 30, 2015, President Putin signed Federal Law 410 Suspending
the FTA between Russia and Ukraine.  In response, on January 2, 2016,
Ukraine’s Cabinet of Ministers enacted resolution No.1146 of December
30, 2015, which abolished trade preferences for goods from Russia. Both
Russia and Ukraine have since continued to extend the mutual abolition of
trade preferences, such that currently, there are no trade preferences
between Russia and Ukraine, and instead, there is an increasing number of
restrictions in Russian-Ukrainian trade in both directions.
On January 1, 2015, the Eurasian Economic Union (EAEU) was launched,
which incorporated the regulations previously outlined in the Russia-
Kazakhstan-Belarus Customs Union (CU) formed in 2010, expanded the
tariff provisions to cover services, and established unified standards and
labelling requirements. The accession of Armenia and Kyrgyzstan came
into force on January 2, 2015. and August 12, 2015, respectively.  

Trade Restrictions in RUSSIA

U.S. companies face a number of tariff and non-tariff trade barriers when

exporting to Russia. For example, for importers of alcoholic products there

is a long-standing requirement that all Customs duties, excise taxes, and

value-added taxes on alcohol be paid in advance using a bank guarantee and

deposit, for which the reimbursement process is very slow.  U.S. industry is

concerned that the assessment and licensing procedures administered by

different Russian government agencies and the EEC (Eurasian Economic

Commission, the executive body of the Eurasian Economic Union, a.k.a.

EAEU) add an unnecessary level of complexity leading to increased costs

and delays.

Nearly all U.S. food and agricultural exports were banned by the Russian
government in August 2014, in reaction to the imposition of sanctions

against Russia.

U.S. companies also cite technical regulations and related product testing

and certification requirements as major obstacles for a range of imported

goods. Russian authorities require product testing and certification as key

elements of the product approval process for a variety of products, and only

an entity registered and residing in Russia can apply for the necessary

documentation for those product approvals. Opportunities for testing and

certification performed by competent bodies outside Russia are limited.

Additionally, U.S. companies have observed that the procedures associated

with Russia’s requirement to have a “supplier’s declaration of conformity”

are unnecessarily burdensome. This document is meant to confirm the

safety of products for the environment and the health of people and

animals. Manufacturers of telecommunications equipment, oil and gas

equipment, and construction materials and equipment, in particular, have

reported serious difficulties in obtaining product approvals within Russia.

Other member countries of the EAEU are in the process of adopting a

similar system.

Laws governing the information technology (IT) sector have made it more

difficult for U.S. technology companies to provide/export goods and

services to the Russian market. For example, Russian Government

Resolution No. 1236, in effect since the start of 2016, requires Russian

government agencies to give priority to Russian software based on a

registry published and updated by the Russian Communications Ministry.

The law of the Ministry of Telecom and Mass Communications of the

Russian Federation envisioned a transition to the use of domestic office

software by federal executive agencies and state extra-budgetary funds

from 2016-2018.

Government agencies may only buy foreign software when a suitable

domestic substitute is not available. Moreover, on July 21, 2014, President

Putin signed the Personal Data Localization Law 242-FZ that requires

companies to store personal data of Russian citizens only on servers

physically located within Russia.  This law made it more difficult for

companies to select cloud-based IT solutions.  After this law entered into

force on September 1, 2015, the Russian Federal Service for Supervision in

the Sphere of Telecom, Information Technologies and Mass

Communications (ROSKOMNADZOR) was given authority to fine

companies that violate the law and restrict access to their websites.

he “Yarovaya” package of anti-terrorism amendments which President

Putin signed into law in 2016 include provisions requiring

telecommunication service providers to furnish encryption keys to

law enforcement agencies upon request.  Among its provisions, the

legislation mandated that as of July 2018, domestic telecoms and

Internet service providers (ISPs) store all customers’ telephonic and

electronic content for six months.  These amendments also require

ISPs to keep records of all transmitted communications for one year

(three years for telecom companies). 

New regulations in the auto and aviation sectors could make it more

difficult to sell U.S. products in Russia.  For example, Russia developed

a global navigation positioning technology called Global Navigation

Satellite System (GLONASS) as an alternative to the U.S. Global

Positioning System (GPS) system. Russia’s Ministry of Transport

issued a rule in March 2012 requiring that GLONASS compatible

satellite navigation equipment be installed on all Russian-

manufactured aircraft, with varying deadlines depending on the use,

age, and size of the aircraft, but in all circumstances no later than

January 2016. In addition, any foreign-manufactured aircraft listed on

a Russian airline’s Air Operator Certificate was required to have

GLONASS or GLONASS/GPS compatible satellite navigation

equipment installed by January 1, 2018 or earlier, depending on the

size of the aircraft, requiring modifications to non-GLONASS-

 configured aircraft to meet this new rule. The same issue applies to

cars imported into the Russian Federation: All vehicles, both new and

used, that are imported should be equipped with a GLONASS system.

Any vehicle without GLONASS-capable equipment cannot be

imported into Russia, as established in technical regulation TR TS

018-2011 of January 1, 2017.

Packaging

Use of straw packing materials is prohibited. Proposed packaging should be

cleared with importers as they have definite preferences. Goods should be marked according

to normal commercial practice.

Special certificates

Animals, plants and their products require health certificates issued by an

approved authority in the country of origin. Frozen vegetables and fruit must be accompanied

by a certificate of condition (Form E46) instead of a phytosanitary certificate.

Meat for human consumption requires an additional certificate, issued by an

approved authority in the country of origin, stating that the animals were free from designated

infectious diseases prior to slaughtering and that subsequent processing was under hygienic

conditions.
 Imports of food require a food import permit issued by the Ministry of Health

and Welfare. Alcoholic beverages may require a certificate as per the age.

Machine tools under a year old must be accompanied by a certificate of date of

manufacture.

RUSSIAN FOREIGN TRADE IN FIGURES

The country is fairly open to foreign trade, which accounts for 51,5% of GDP (World Bank, 2019), despite
strict laws and policies. Russia became a member of the WTO in 2012, is a member of the Commonwealth
of Independent States which have established a free trade area, and is a member of the Eurasian Customs
Union. Russia and Ukraine have abolished mutual trade preferences. The Eurasian Customs Union has
signed an agreement with Vietnam and is negotiating free trade agreements with, for example, Iran, India,
Egypt, Singapore and Serbia. Russia is the 14th exporter and 21st importer of goods in the world (WTO,
2019). It mainly exports hydrocarbons (more than 50% of total exports), solid fuels, wheat and meslin, iron
and steel, precious metals, precious stones and wood, and mainly imports machinery, pharmaceuticals,
electronics, electrical products, vehicles and plastics. In 2020, due to the COVID-19 pandemic, the volume
of exports of goods and services dropped by -8.8% compared to 2019, while the volume of imports
decreased by -12.6% (IMF). According to IMF forecast, exports should rebound in 2021 (1.5%) and 2022
(2.7%), but slower than imports, expected to increase by 4.3% in 2021 and 3.5% in 2022.
 
Russia's main customers are China (13.4% of exports), the Netherlands (10.5%), Germany (6.6%), Belarus
(5.1%) and Turkey (5%). It's main suppliers are China (21.9% of imports), Germany (10.2%), Belarus
(5.5%), the United States (5.4%) and Italy (4.4%). Since the conflict in Ukraine and the economic
sanctions imposed by Western countries, the Kremlin has imposed an embargo on European and American
agricultural products and has reconfigured its trade relations.
 
The country has recorded significant and regular trade surpluses since 1998, mainly due to the richness of
its natural resources, notably hydrocarbons (crude oil and natural gas in particular). The trade surplus
makes up easily for the deficit in services and income. After declining due to tensions with Europe and the
United States over the Ukrainian crisis and falling commodity prices, the trade surplus has increased due to
higher commodity prices. However, the surplus decreased in 2019, since exports decreased and imports
increased. According to the latest WTO data, Russia exported USD 419.8 billion worth of goods in 2019,
and imported USD 254.6 billion worth, posting a surplus of USD 164.3 billion. The country exported 61.7
billion USD of services and imported 97.5 billion USD. According to preliminary data from the Russian
central bank, the trade surplus shrinked to USD 81.4 billion during the period from January to November
2020 (a decrease compared to USD 150 billion during the same period in 2019), amid constrained
domestic oil output and depressed global crude prices. Despite the efforts made since the imposition of
sanctions, the substitution of domestic products for imports has hardly been successful, except in the food
industry.

 
 Foreign Trade
2015 2016 2017 2018 2019
Values

Imports of 194,087 191,406 238,384 248,856 254,598

Goods (million USD)

Exports of 340,349 281,825 353,104 443,914 419,850

Goods (million USD)

Imports of 86,868 74,379 87,400 93,248 97,483

Services (million
USD)

50,984 50,504 56,847 63,603 61,714

 
Foreign Trade Forecasts 2021 (e) 2022 (e) 2023 (e) 2024 (e) 2025 (e)

Volume of exports of goods and services (Annual % 3.2 5.6 2.0 1.7 1.6
change)

Volume of imports of goods and services (Annual % 17.3 6.8 1.6 1.5 1.6
change)

TRADING PARTNERS OF RUSSIA

Main Customers 2019

(% of Exports)

China 13.4%

Netherlands 10.5%

Germany 6.6%

Turkey 5.0%

South Korea 3.8%

OTHERS 60.7%
CONCLUSION

In conclusion trade barriers make trade so much easier between countries. It has its benefits

when it comes to producing more of a product and making more money from tariffs from

products being taxed. Each trade barrier has its own purpose when it comes to helping trade.

In the end trade barriers make all the complicated stuff that goes along with trading a little bit

easier on the producer. Trade Barriers are very important when it comes to international

trade, do it makes things easier.

 
REFERENCES

https://santandertrade.com/en/portal/analyse-markets/russia/foreign-trade-in-figures