External and Internal Trade Barriers of the Russian Far East

Abstract

Recently, the Russian Far East has been receiving close attention from the government of the Russian Federation. Accelerated economic development of the Far Eastern regions requires trade intensification with foreign and domestic markets, which implies a reduction of various barriers. The study aims to assess the external and internal trade barriers of the Russian Far East using a consistent dataset and relevant econometric model for estimations. The assessment of trade barriers, expressed as values of the relative trade intensity and transport costs in the framework of modern gravity models, confirmed the trade bias of the Russian Far East in favour of the domestic market in the long term. High values of relative transport costs were offset by a high relative trade intensity between the Russian Far East and the domestic market. The conducted analysis shows that the reduction of external trade barriers between the Russian Far East and foreign markets can significantly increase their turnover. The obtained estimates revealed a trend of linking the regions of the Russian Far East to the domestic market due to the barrier reduction in the form of transport costs. This study can be further developed, as the presented methodology for qualitative assessment of internal and external barriers can be applied to analyse the costs of trade in commodity markets, to decompose export and import barriers, as well as to determine the potential for expanding regional trade with foreign countries.