AckleyRusTrade

AckleyRusTrade - Heath Ackley Econ 508 Preface This article...

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Heath Ackley Econ 508 Preface This article is going to be written as an analytical fact sheet and not as a comprehensive academic work. Russia is a very large and complex market economy that has many active and moving parts making it impossible to completely explore its role in the world in a few pages. Instead this paper will focus on key macroeconomic indicators key to trade and competition. The focus will be put on Russia’s oil and agricultural trade. Russian trade history Russia formed from the USSR in 1991 and began its path to becoming a market economy and a large player in the world oil industry. During its transition Russia experienced high inflation coupled with high unemployment. It was very hard for Russia to industrialize at this time and become a market economy. Russia was only deemed a market economy in 2002 by the U.S. Commerce Department. Upon this news Russia was considered a world player for the first time in decades. They are now trying to work their way into the world trade organization (WTO). Russia has some various trade barriers in the form of taxation to raise operating revenue for the government. These value added taxes (VAT) do not carry the same weight with all goods. The items Russia needs: school supplies, medicine, health care products, agricultural goods, and books have little or no import taxes placed upon them. This trade liberalization seemed to take an immediate turn around in 1998. The Ruble’s value changed and caused an amazing economic recovery for the country. Nineteen-ninety-eight was the year that became the turnaround point for the Russian economy. Further in the paper you will see charts and figures that elaborate on this. GDP The Gross Domestic Product (GDP) of Russia suffered heavily through the first 8 years after reform. In mid 1998 the GDP began its turn around and has more than doubled in 4 years. Most of this realized income came from oil exports. The GDP breakdown is quite unique in Russia. The CIA handbook breaks out GDP by agriculture, industry, and services. Services makes up 59.8%, industry makes up 35.1%, and agriculture makes up 5.2%. 1 For comparison purposes the United States GDP is broken out in the following manner: industry makes up 26.2%, service makes up 72.5%, and agriculture makes up1.4%. **Interesting side note – it seems that more developed countries have a lower percentage of their GDP reliant upon agriculture. More developing or third world countries depend on agriculture to maintain any amount of GDP. Further analysis of this phenomenon will come later. Country Arable land Agricultural production % of GDP Rank of economic freedom Russia 8.0% 5.2% 124 Kyrgyzstan 7.0% 38.7% 97 Canada 5.0% 2.2% 16 United States 19.0% 1.4% 12 1 CIA Handbook. On-line. http://www.cia.gov/cia/publications/factbook/fields/2012.html
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Heath Ackley Econ 508 GDP (current US$) 0 100 200 300 400 500 600 Ye a r 1 9 0 2 3 4 5 6 7 8 In Millions (USD)
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AckleyRusTrade - Heath Ackley Econ 508 Preface This article...

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