See Granville (1995). However, pre-1994 data on Russia’s trade are highly imperfect for a variety of reasons, including very weak compilation capacity and distorted valuation.
See Owen and Robinson (2003) for an overview of macroeconomic and structural developments in Russia.
Dean and Eremenko (2003) used gravity model simulations for Ukraine, concluding that there would be no measurable improvement of its market access in the event of WTO accession. However, their model did not explicitly include a WTO-related variable.
The gravity model has already been used for Russia and the former Soviet Union in several studies, notably by Gros and Steinherr (1995) and van Selm (1997). That research pointed to the high predictive power of the model with respect to the intra-Soviet trade flows.
Including the estimates for these countries and territories (Bermuda, Cuba, Iraq, Democratic People’s Republic of Korea, and Serbia and Montenegro) does not alter the statistical significance of the results or their qualitative nature.
A “between-effects” panel estimation yielded an even larger absolute estimate of the WTO coefficient, in the range of minus 0.7 to minus 0.9, with the coefficient being robustly statistically significant. Otherwise, results were similar to those of the time effects regression.
A random-effects regression seems less appropriate, given that its underlying assumption—that unobserved individual heterogeneity is uncorrelated with the included variables—seems somewhat heroic in the case of our model (for example, heterogeneity with respect to the GDP variable). In any case, the results from the random-effects regression showed a negative coefficient on the WTO variable, albeit small and insignificant.
Oil, with the role of pipeline infrastructure in generating export inertia, may not be a perfect example, but a fair portion of Russia’s oil exports (by sea) can be redirected at the margin.
At the same time, there could be an alternative explanation based on our first hypothesis (WTO countries’ restrictions on Russia’s exports). Russia’s declining export performance in 1997–98 may have been caused by the concurrent global crisis, with some preset import restrictions becoming less binding because of the contraction in world trade.
Our baseline assumption is that, in the long run, the gravity model coefficient on the WTO would approximate zero, which is roughly consistent with the multilateral results of Rose (2004).
The recent debates on the WTO’s role in job outsourcing in industrialized countries and China’s export expansion are cases in point.
Still, the evidence for a positive WTO impact in fixed-effects regressions is fairly weak, partly because the coefficient captures a shorter-run “within” effect, as opposed to the longer-run “between” effect of the OLS regressions.
This conclusion would run counter to Rose’s (2004) point that developed WTO country members indiscriminately extend trading preferences to nonmembers; instead, it would support a study by UNCTAD (2004) arguing that the world’s poorest countries are receiving only limited benefits from preferential trade schemes designed to help them, because of gaps in coverage and restrictive rules of origin.
In 2002–03, according to the IMF Direction of Trade Statistics, China’s annual growth in exports and net foreign direct investment was 27 percent and 14 percent, respectively, compared with corresponding annual averages of 17 percent and 7 percent over the decade prior to its WTO entry.