Trade Ministers from WTO member countries at the 8th Ministerial Conference of the WTO last December voted to adopt the terms and conditions for Russia’s accession as a member. The U.S. supported the action. Russia has until mid-July to change domestic laws to conform to the accession agreement and become part of the WTO 30 days later. For U.S. exporters to receive the benefits of the agreement, Congress must terminate the application of the Jackson-Vanik amendment to Russia and grant it Permanent Normal Trade Relations (PNTR) status.
According to Senator Max Baucus (MT-D), Chairman of the Senate Finance Committee, at a recent Senate hearing, passing PNTR would double U.S. exports to Russia in five years. It would also give the U.S. tools to ensure that Russia abides by its WTO commitments through internationally binding WTO dispute settlement. U.S. firms could take advantage of the market opening and transparency commitments that are part of Russia’s accession package.
The Jackson-Vanik amendment to the Trade Act of 1974 denies normal trade relations (NPR) to Communist and former Communist countries unless the President determines that the country permits free and unrestricted emigration of its citizens, including Jews from the then-Soviet Union. Russia terminated its exit fees on Jewish emigrants in 1991 and Russian Jews can freely emigrate. Since 1992, U.S. Presidents from both political parties have certified annually that Russia complies with the amendment’s provisions. This has allowed the U.S. to maintain NTR status with Russia.
No other WTO member has a law on emigration similar to the Jackson-Vanik amendment. All of Russia’s other trading partners who are WTO members will immediately benefit when Russia joins the WTO. If Congress fails to enact PNTR with Russia before then, U.S. industry will be at a disadvantage in Russia’s market without the tools provided by the WTO. Trade relations between the two countries will continue under the Bilateral Commercial Agreement of 1992.
Russia is the world’s seventh largest economy on a purchasing power parity basis, almost one-sixth the size of the U.S. economy and about the same as Brazil and the U.K., and is Europe’s largest consumer market with growing demand for high quality goods and services. Many of Russia’s WTO commitments will improve its business climate, such as its adherence to the rules of the international trading system with respect to intellectual property rights, and science and risk-based regulations for animal and plant health, and improve economic growth.
Some Senators on the Senate Finance Committee have opposed effort to terminate Jackson-Vanik pointing to Russia’s corruption and human rights record. They have argued that emigration is not an issue now, but Russia’s disregard for human rights and the rule of law is relevant today. The recent disputed election of Vladimir Putin as President is given as an example of Russia moving further away from international norms and values rather than towards them. The accession of China to the WTO, including the removal of Jackson-Vanik and granting of PNTR, and the increasing trade disagreements between the U.S. and China are used as examples of the failure of WTO rules to discipline actions of a new WTO member.
Policy disagreements over how to treat countries like Russia on trade issues are not new. For the past 60 years there have been two approaches. One side argues that the way to encourage countries to pursue more open policies is to make them part of world bodies and have them recognize over time that their best interests are ensured by more open policies. The alternative approach is to exclude countries from the wider community of nations until they make necessary internal reforms.
Both sides of the debate recognize that Russia has fundamental problems with general rules of commerce, intellectual property rights, health and safety rules for agricultural imports and human rights and election issues. Senator Baucus said at the Senate hearing that he has been in Russia and met with activists seeking reforms in government policies. They support ending the Jackson-Vanik amendment and granting PNTR as a way to remove them as anti-American tools used by those opposed to internal reforms. To them, Jackson-Vanik is not relevant to the issues of today in Russia.
U.S. exporters of beef, pork and poultry products have struggled with the uncertain nature of Russia current import regulations. Under the accession agreement Russia will comply with WTO rules on sanitary and phytosanitary (SPS) measures, including disciplines to protect against trade restrictions that are not science-based; procedures to recognize equivalence of SPS measures; and harmonization with international standards recognized by other countries.
U.S. agricultural exports to Russia were small at $1.49 billion in calendar 2011 with young chicken meat, beef, pork and live cattle totaling $747 million, 52.4 percent of agricultural exports. Young chicken meat exports were valued at $243 million, down from $798 million in 2008, beef at $228 million, up from $89 million in 2008, and pork at $209 million, down from $413 million in 2008. Exports of live cattle for the breeding herd were $93 million, up from $10 million in 2008. The largest non-meat U.S. export item was almonds at $76 million, up from $40 million in 2008.
The time to oppose Russian accession to the WTO or to set more strict conditions for entry was before the U.S. government voted at the meeting in December to approve Russia’s entry.
Based on the debate to date, Congress probably won’t approve PNTR before Russia joins the WTO this summer. Opponents may be able to extract some additional commitments from the Obama Administration to increase monitoring of conditions, but the Russian government is not likely to make concessions. Terminating the application of the Jackson-Vanik amendment and approving PNTR should be done sooner rather than later and allow freer trade to work to change how Russia relates to the rest of the world. Then the U.S., the EU, Japan and the other major trading countries should hold Russia accountable to its accession agreement.
Ross Korves is an economic policy analyst with Truth About Trade and Technology