According to Eurostat data, in the first half of 2021, Russia was the European Union’s fifth largest partner in terms of trade turnover. Moscow accounted for a significant portion of that volume, exporting non-resource and non-energy exports worth USD 4.39 billion to the European Union between January and March, up an impressive 83.8% year-on-year. The top EU importers of local companies’ goods are Germany, the Netherlands, Italy, France, and Poland.
What do local businesses export?
Russia is leaning into its non-resource and non-energy exports as a national development priority, and the capital city is following suit. The Mosprom Centre for Export Support notes that in the first quarter of this year, local businesses exported USD 4.39 billion in goods to Europe, up 83.8% year-on-year and up 63% from the first half of 2019.
“Industrial products – everything from machines and electrical equipment to plastic items and immunologics – are a big part of Moscow’s exports to Europe. In the first eight months of this year alone, industrial exports were up 87% year-on-year. We see strong demand in the countries of the European Union for electronics, automobiles, and integrated circuits,” says Alexander Prokhorov, head of Moscow’s department for investment and industrial policy.
How can businesses tap into the EU market?
With economies recovering after the pandemic-associated downturn, there is a range of opportunities for businesses in Moscow and the rest of Russia.
“Local companies have a critical need for expertise and information support. There are business owners who would like to tap into international markets but don’t know where to start,” Prokhorov said. “The Mosprom Centre was established to assist Moscow-based non-resource and non-energy exporters. We offer companies custom reports on target markets, help find and negotiate with foreign buyers, and help companies participate in business missions and trade shows.”
One of the most important things a beginning exporter has to decide is what and where to export. Exports to the European Union have a degree of regulatory accessibility, since most of the laws, including those governing foreign trade, are the same across all member states. The region has a single customs tariff and unified customs regulations, and a company that already exports to a single EU member state can start exporting to other member states without additional customs formalities. That makes expanding in the region fairly easy.
Which EU country to export to depends largely on what a company manufactures, how much demand there is for its products in a specific market, and logistics issues. China is Russia’s top competitor in the European Union, often selling products in the same categories but at lower prices. Russian exporters of food products, on the other hand, primarily compete with producers in other EU countries. For example, an analysis by the Mosprom Centre shows that Russia is currently in 11th place for exports of chocolate, with Germany, Belgium, Italy, Poland, and the Netherlands all exporting more chocolate to neighbours in the region. However, the Centre’s experts some of the top importers of chocolate from Moscow are in Europe, and that Germany imported USD 3.61 million in chocolate from local companies. The bottom line? There is plenty of demand, even if competition is formidable.
Beginning exporters face two critical tasks: analysing the prospective market and finding the right niche. The Mosprom Centre’s experts can help with both of those tasks, offering SWOT analyses and data-backed advice. Continuing the chocolate example, the Centre is tracking the market for healthy desserts, since consumers in Europe and other developed nations are increasingly interested in healthy lifestyles and associated products.
Trade between Russia and the European Union can be complicated by a number of factors, among them the need for an internationally recognised quality management system and product conformity with quality certificates.
Almost any product exported to the European Union has to pass quality and safety certification and receive the Conformity Européenne marking, which confirms a product’s conformance with the requirements of the General Product Safety Directive, or GPSD, as well as with other EU directives and harmonised standards. In order to earn the marking, exporters sometimes have to modernise their facilities and hire new employees specifically for their export brands. The Mosprom Centre’s experts consult local companies on how to successfully obtain the CE marking.
Many countries have policies to protect domestic producers, and the European Union is no exception, with various barriers and quotas (called “non-tariff measures”) intended to keep exporters from driving out local businesses. Additionally, some products are subject to anti-dumping duties that can be levied when an exporter’s prices are hard for local companies to beat, even if the exporter is not intentionally engaging in dumping. In fact, the different in cost can be caused by something as simple as the distance between the salaries an exporter pays in rubbles and the euro-denominated salaries its European competitors pay.
Consumer goods have to be adapted for the European market, with changes potentially affecting everything from the configuration and product line to design, sales channels, promotion, and marketing activity. These are all tasks for experts with deep knowledge of the target markets, and the Mosprom Centre is here to help beginning exporters who want outside support.
Policy makers in Moscow are motivated to expand non-resource exports and broaden the range of goods exported to the European Union, and official support is available to help companies find their audience in European markets, optimise their processes, and create effective promotion strategies. Reaching out to international markets can be complex. The first step is to gather the information your company will need and identify the experts who can help overcome difficulties.