Andrei Kozenko
On December 24, the Japanese Government supported motorists in Russia's Far East and called on the Russian Government to abolish its resolution on raising car-import duties. The Japanese Foreign Ministry said this decision ran counter to free-trade principles and could complicate Russia's accession to the World Trade Organisation (WTO).
Analysts say Japan has elevated the issue of higher car-import duties to the foreign-political level in order to save its car market in Russia, which is now estimated at $20 billion, but which could shrink by 50% due to the introduction of the new duties.
On December 24, a spokesman for the Japanese Foreign Ministry said Tokyo was calling on Moscow to abolish higher car-import duties, due to start January 10. "We believe measures being implemented by Russia are not conducive to building a free-trade system. The Japanese Government thinks it would be best not to enforce the current measures. It is our opinion that a movement towards protectionism is not in tune with Russia's ambition to join the WTO," the Japanese Foreign Ministry said.
Moreover, the Japanese Foreign Ministry's spokesman reminded that in November 2008 Russian President Dmitry Medvedev had signed a declaration that Moscow would not create new barriers in international trade during the G-20 summit in Washington, and that the resolution on raising car-import duties, signed by Prime Minister Vladimir Putin, ran counter to this document. He said the Japanese Foreign Ministry had informed the Russian Government about its position.
In November 2008, the Russian Government raised new-car import duties from 25% to 30% and said used cars could operate for five, rather than seven, years. After that, restrictive car-import duties depending on engine size will go into effect.
This decision caused massive protests in Russia's Far East where motorists mostly use right-hand-drive foreign cars being imported, assembled and repaired by 200,000 local residents. Protesters waved Japanese flags and called for ceding the Far East to Japan. Police played it tough and dispersed the December 21 demonstration in Vladivostok.
"Predictably, skyrocketing foreign-car prices in Russia's Far East have become a political and even foreign-policy problem," Viktor Pokhmelkin, head of the Russian Motorists Movement, told the paper. He said the new car-import duties would negatively affect the Japanese economy, and that Tokyo would use every method, including political pressure, for defending its Far Eastern interests.
The Russian Foreign Ministry said the problem should not be politicised. "The Japanese Government's demarche aims to defend the interests of national producers," a high-ranking Foreign Ministry official told the paper. He stressed that Russia was still displaying its commitment to join the WTO on equitable terms. The Russian Foreign Ministry explained higher car-import duties running counter to the G20 summit's declaration by an unusual situation requiring unusual measures.
On December 24, the Russian Government's press service declined to comment on the Japanese Foreign Ministry's statement, while the Government press service declined to comment on the issue.
The Avtostat analytical agency said Russia had imported a million Japanese cars and components worth over $20 billion in 2008. In all, 630,000 new cars and over 300,000 used vehicles were purchased. Avtostat analysts said higher car-import duties could halve imports. The Russian car market accounts for 9% of Japanese vehicle exports and ranks second after the US market in this respect.
Analysts say new duties will drastically reduce Japanese car-import volumes. "Russia imports the bulk of used Japanese cars and reduces the Japanese Government's car-recycling expenses," Valery Kistanov, head of the Centre of Japanese Studies at the Russian Academy of Sciences' Institute of Far Eastern Studies, told the paper.
He said Japan had always insisted that Russia reduce import duties, a pre-condition for Moscow's accession to the WTO, but that it had achieved a diametrically opposite result.
"Japan is also worried because the cheaper Korean cars are becoming increasingly popular in Russia's Far East. The Russian automotive industry could become competitive at this time of crisis if the Government subsidises car deliveries to the region," Mikhail Delyagin, director of the Institute of Globalization Studies, said.
People in Russia's Far East continue to protest higher car-import duties. A telegram sent December 24 by the Far Eastern fishermen's trade union to Prime Minister Vladimir Putin said, even if the entire Russian riot-police force came to the Far East, it would not be able to force people to buy substandard Russian cars.
However, politicians are convinced that neither protests, nor foreign-government statements will force the Russian Government to reduce car-import duties. "It would be appropriate to reduce duties and to find a compromise solution. But this will not happen because the Russian automotive industry lobbyists have completely defeated their opponents, and because Prime Minister Putin reacts extremely negatively to his mistakes and never annuls obviously incorrect decisions," Pokhmelkin told the paper.