Russia is the 23rd largest goods trading partner of the U.S. at $36.1 billion in trade in 2008 with $9.3 billion in exports to Russia and imports of $26.8 billion. Exports were led by vehicles and parts at $2.1 billion, machinery and parts at $2.1 billion and meat at $1.3 billion. Imports were dominated by petroleum and products at $17.0 billion, followed by inorganic chemicals at $1.7 billion, precious stones at $1.6 billion, iron and steel at $1.6 billion and fertilizers at $1.1 billion.
When USTR Kirk spoke to the U.S. Meat Export Federation late last month he specifically mentioned Russia, “We are particularly working to resolve outstanding issues with a key market for meat exporters: Russia. One problem facing U.S. pork exports to Russia is Russia’s application of sanitary and phyto-sanitary measures that are not based on international standards. These SPS measures are used to control and restrict trade. This problem has also resulted in the arbitrary delisting of many U.S. facilities that export to Russia over the last year.” Russia is one of 16 countries that have pork import bans of various kinds as a result of the H1N1 flu.
The President’s 2009 Trade Policy Agenda released in February stated, “The United States has supported Russia’s accession to the World Trade Organization (WTO) to
encourage Russia to align its economy and legal regime with the requirements of rules-based 21st century global institutions and to support the establishment of market-based economic reforms… During 2008, Russia made considerable progress in the multilateral negotiations on the terms for Russia’s accession, but Russia’s progress on integrating WTO provisions into domestic law and its compliance with bilateral agreements already in force was disappointing.”
Russia is the largest country that is not part of the WTO and first sought to join in 1993 under the previous General Agreement on Tariffs and Trade (GATT). The U.S. and Russia reached a bilateral WTO accession agreement in November 2006. Progress seemed to slow down when petroleum prices were at historical highs in 2007 and 2008. Some analysts who expected further economic reforms in Russia after petroleum prices collapsed in late 2008 and early 2009 have noted another decline in interest in reforms now that petroleum prices are over $60 per barrel.
The President’s 2009 Trade Policy Agenda, the 2009 National Trade Estimate Report on Foreign Trade Barriers and reports from the U.S. Agricultural Attaché in Russia show a repeated pattern of agreements between the U.S. and Russia that disintegrate over time with Russia increasing tariffs and imposing sanitary and phytosanitary barriers on agricultural products. Under the 2005 U.S.-Russia Meat Agreement, a four year agreement that expires at the end of 2009, the Russian government set tariff rate quota volumes and reduced in-quota tariffs for beef, pork, and poultry meat for 2006 to 2009. In October 2008, Russia proposed renegotiating the terms for poultry and pork for 2009 and in December 2008 the two countries agreed to decrease 2009 in-quota volume for U.S. poultry, increase the 2009 in-quota volume for pork, and increase over-quota tariff rates for poultry and pork. The U.S. expects to negotiate a new agreement this year.
As is true of almost all trade relationships today, SPS issues are among the most difficult between the two countries. In 2006 they signed bilateral agreements on SPS issues related to frozen pork, the certification of U.S. pork and poultry facilities and trade in beef and beef by-products. U.S. exporters of poultry and pork continue to have shipments rejected because of the presence of trace amounts of food-borne pathogens and other violations of SPS requirements that are not science based. When minimum residue levels differ from international standards, Russia has not provided risk assessments or a scientific basis. The Russian veterinary service has recently questioned the reliability of the current certification system for U.S. poultry, pork, and beef. In June 2008, the Russian government issued a regulation that would have implemented an SPS rule banning importing chlorine-treated chicken as of January 1, 2009. It has been delayed until January 1, 2010.
Other complaints abound, including high tariffs on fruit and processed foods. A new Customs Code meeting WTO requirements has been in force since 2004, but significant problems remain because the government does not publish all regulations, judicial decisions, and administrative rulings. In recent months Russia has increased tariffs for combine harvesters and dropped financing for foreign made agricultural equipment. Under a bilateral agreement signed in 2006, Russia was to establish a permanent biosafety regulatory system for biotechnology consistent with the WTO SPS Agreement. It has restarted approval of varieties for feed use, but not for planting. Russian law requires food products to be labeled as containing genetically engineered organisms if the biotechnology components in the food product are equal to or greater than 0.9 percent of the product’s weight.
If Russia were to become a WTO Member, it would be required to bind its tariffs on all agricultural products, providing more predictability in tariff rates. If they were bound low enough, there could be long-term market opportunities, but the government continues to provide subsidies to further develop its livestock and poultry industries and shrink the need for imports. SPS issues that are already problems would not likely be resolved.
Unless Ambassador Kirk gets strong signals that the Russian government is serious about keeping agreements they make, he should pull back from committing the U.S. to further efforts to bring Russia into the WTO. The WTO already has too many members who see membership as a one-way process of gaining advantages while spurning commitments. There is nothing to be gained by adding another one.