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Ed Gerwin

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Opening Russia

Posted: 04/ 2/2012 11:20 am

The World Trade Organization currently has 153 members, ranging from the United States and China, to Uruguay and Ukraine. The WTO is not an exclusive club. Venezuela, run by America-hating strongman Hugo Chavez, is a member. And plenty of other WTO countries have kings, presidents-for-life or juntas that are not making names for themselves as statesmen or democrats. Still, despite its varied membership, the WTO does play a vital role in opening markets and enforcing rules against unfair trade.

This summer, Russia will become the WTO's newest member. And that presents a quandary for the United States. Current U.S. law would put American companies at a real disadvantage in exporting to Russia once it joins the WTO. Unless Congress acts to change the law, as President Obama and Congressional leaders have urged, American jobs in companies doing business with Russia -- and the potential for tens of thousands more -- will be at risk.

Still, this isn't an easy decision. Vladimir Putin's recent re-accession to the Russian presidency, and his iron-fisted control for more than a decade, has been undemocratic and often brutally repressive. It is difficult for American leaders to do anything that would seem to validate Putin's brand of misrule.

But denying access to Russia's economy under WTO rules to America's own exporters is hardly an effective way to promote American ideals, democracy, or the rule of law. And the economic stakes, while not enormous, are substantial.

As the largest economy still outside of the WTO's rules, Russia currently has free reign to arbitrarily raise tariffs on American goods, use unjustified and non-scientific measures to block U.S. farm exports, exclude U.S. service providers from key sectors, and impose other unfair barriers on our trade. This will change when Russia joins the WTO. As a result of tough negotiations led in substantial part by the United States, Russia will take significant steps to open its market, the world's 11th largest.

Russia will place maximum caps on its import duties; reduce duties on farm products like fruits, pork and beef; cut tariffs on industrial products like chemicals, aircraft and computer equipment; and open up sectors including telecommunications, finance and transport to American service providers. It also will be subject to WTO limits on its ability to use arbitrary technical or farm rules, subsidies, or lax IP enforcement to block U.S. trade.

In a country in which economic rules are often not transparent, Russia will also establish greater openness and rule of law in its regulation of trade, including implementing notice and comment procedures for proposed rules, publishing applicable rules, and establishing appeal rights. And, perhaps most significantly, Russia will be subject to the WTO's binding disputes process, enabling America to haul Russia before a WTO panel if it violates its WTO commitments.

In exchange for this increased access and certainty for American exporters and their workers, the United States will not be required to make any economic concessions -- we won't have to reduce tariffs or change other market rules. Rather, America will simply have to extend to Russia on a permanent basis the same normal market access (known in trade-speak as Permanent Normal Trade Relations or PNTR) that it provides to our other trading partners -- and that it has provided to Russia on a temporary, annual basis for decades.

But that's where we get to the catch that could prevent American producers and workers from tapping into new opportunities in Russia. A Cold War-era law known as Jackson-Vanik places a condition on Russia's access to the U.S. market that's inconsistent with Russia's rights as a WTO member. Specifically, Jackson-Vanik requires that the president conduct an annual review of the emigration policies of "non-market" economies like Russia before they can be eligible for normal trade relations. Because of this requirement, unless Congress moves to "graduate" Russia from Jackson-Vanik and grants it PNTR, the United States would not be able to take full advantage of Russia's WTO trade concessions -- the very concessions that American negotiators worked so hard to achieve. Meanwhile, our foreign competitors would be able to use their newly gained access to Russia to leapfrog U.S. exporters in Russia's growing market.

To be clear, Jackson-Vanik's original intent no longer applies to modern Russia. The law was aimed at Soviet restrictions on the emigration of Jews. Neither that country nor those restrictions have existed for some two decades. Russian Jews are free to emigrate. Indeed, El Al has daily non-stops from Moscow to Tel Aviv.

Some argue that the United States should continue to use Jackson-Vanik to press for change in Russia's disturbing conduct on human rights, democracy, and foreign policy. But this is the wrong tool for the job. The U.S. Ambassador to Russia, Michael McFaul, is a staunch Putin critic, so much so that the Russian leader's team has likened McFaul to a rapist and child-killer. Ambassador McFaul has noted that while the United States should continue to press aggressively and directly for human rights and democratic reforms in Russia, using Jackson-Vanik and PNTR to do so would be a mistake. And democracy and human rights activists in Russia (including Jewish community leaders) support removing Russia from Jackson-Vanik, noting that the law provides no help in promoting democracy and human rights, while providing a useful anti-American propaganda tool for Russia's anti-democratic forces.

Bringing democratic reform to Russia will require concerted effort by the United States, our allies, NGOs, and the Russian people. Opening Russia's market under WTO rules can play a useful role in this effort. By requiring that Russia adopt fair and transparent trade and customs rules, the WTO and its members can help shine the light of openness on an important sector of the Russian economy and government, and ultimately help promote the rule of law on which the much larger effort toward reform in Russia will critically depend.

 

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