The Appropriateness of Trade Liberalization in the Industrial Sector of the Russian Federation

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  • Appropriateness of Trade Liberalization in the Industrial Sector of the Russian Federation

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This article seeks to investigate the appropriateness of implementation of trade liberalization in Russia by analyzing the current performance of the Russian industrial sector and evaluating its nominal and effective protection levels. The estimation of the effective level of protection is performed through the calculation of effective rates of protection for each industrial sector. Effective rates of protection are estimated with the simple Corden Method to examine the difference in protective levels for industry as a whole, raw materials, semi-finished products and for finished products intended predominantly for consumer needs in each industrial sector. The results of the analysis find that the system of protection in the industrial sector of the Russian Federation has been built without taking into consideration the possibilities of development of comparative advantage. Protection is predominantly granted reasoning from revenue consideration and lobbing interests, but not the economic efficiency. This study concludes that there is urgent necessity for the Russian government to clearly identify the industrial sectors, which need protection, taking into account their perspective on comparative advantage; and accordingly, to reconsider its tariff policy. Designing Russia’s tariff policies in compliance with the potential comparative advantage can provide considerable welfare gains to the economy and help to establish a more efficient economic structure.

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