Accession fails to excite Russia
field than just the European Union. In Russia a number of issues
relating to accession are set to make an impact on both production
levels and quality, but the outlook for future trade between the
two remains bleak, according to industry expert Dr. Jury Borko.
"The accession of 10 new states to the EU will result in minor alterations of trade relations with Russia within the food and drink sector," said Dr. Borko, a professor at the Institute of Europe of the Russian Sciences Academy and a leading expert on economic trade.
"If the strong economic growth experienced in the Russian Federation over the past two or three years develop in the same direction, trade with Europe will develop moderately. Conversely, if Russia suffers internal economical crisis trade relations with the EU will undergo negative changes, reduction both the import and export of food and drink."
The accession states will automatically join the general agrarian policy accepted by the EU. As a result the cost of industrial output will rise, in particular for agricultural. The competition between manufacturers in the 10 states will strongly increase, raising quality of products and in turn the price will also rise.
"Accordingly, for Russia it will be unprofitable to buy products from these countries, which means imports will decrease," said Borko. "On the other hand, the reduction of imports will mean that production within the Russian agricultural sector will increase alongside demand. In turn this will mean that the quality of the Russian food sector - which is currently well regulated - will probably reach even higher standards, in accordance with increasingly strict domestic state requirements.
"It is extremely difficultly to make a forecast the volume of export for any commodity. Industry experts focusing on foreign trade believe the loss from in exports to the European countries could reach $150 million, as the new, and very high EU quality standards within the accession countries cannot be met by many Russian manufacturers. With specific reference to the food and drink sector the volume of exports to the European countries remains relatively low, so there is not expected to be a huge impact on the industry."
Changes on food safety demands are not expected to affect the agricultural sector seriously either Only Russian food and drink manufacturers adhering to the ISO safety standard will be able to maintain their trade with the EU, and more specifically the accession states. Food and drink products not reaching the required standards in the accession countries will not be traded there until they have received the ISO certification.
"Now practically all trade is conducted through private companies," Dr. Borko said. "Currently trade missions focus on large European countries, such as Germany, France, England, whereas representations in the Baltics and other medium-sized countries have been liquidated in recent years. The official line from the Russian government is that 'The Market itself solves the problems, the state prefers to not interfere, it only collects the information.'
"In general, there are no quotas for exports of agri or food products to the EU. But here it is necessary to separately allocate agricultural production. The EU conducts a policy of patronage, and on these goods high quotas have become the norm, with the likelihood of the even greater increases in the future.
"Trade in food and drink between Russia and the existing EU countries remains limited, and the export of specified goods will not change, as conditions of cooperation look set in stone. As for export to the 10 new EU states - Russia's potential to export there will remain limited as for the most part there is still a plentiful domestic supply of cheap food and drink products."
This interview was bought about through the cooperation of Moscow-based market analysis company Market Advice, which put www.Ceefoodindustry.com's questions to Dr. Borko.
