At least two significant things happened in 1993: I got my driver’s license, and the World Trade Organization established the Working Party on the Accession of the Russian Federation. Yet, so far, neither one has led to Russia becoming a WTO member.
That, however, is about to change. After receiving its formal invitation this past December, Russia is poised to join the WTO in the next few months. When it does, it will relinquish its status as the largest economy in the world not yet in the WTO, and it will open its markets to a wide variety of increased international trade opportunities.
There’s only one problem for businesses in the United States. Unless Congress passes permanent normal trade relations (PNTR) with Russia in advance of that country’s formal accession, U.S. firms will be forced to sit idly by while competitors from every other country take advantage of Russia’s lower tariffs and reduced market barriers. And, so far, Congress has not committed to taking this step.
Let’s start with why you should even care in the first place. Russia is the world’s 11th largest economy, but only our nation’s 31st largest export market. The list's 32nd country? Panama. So you get a sense of the missed opportunity. The good news is that things would be significantly improved when Russia joins the WTO. As part of its WTO accession, Russia will reduce more than one-third of its tariffs immediately, and will continue to decrease numerous tariffs over the next three years. In addition, they will enhance intellectual property protections, improve food safety standards, open service markets, and increase market access for a wide diversity of industries.
This issue is of particular interest to Washington state’s economy, because Russia is one of our fastest growing trade partners. From 2010 to 2011, Washington exports to Russia grew approximately 80 percent, compared to a 16 percent growth in overall state exports. PNTR with Russia will increase this trend exponentially, benefitting a wide variety of Washington industries from aerospace and manufacturing to IT and agriculture. For example, commercial airplane tariffs will be cut in half, and services companies will have significantly increased access to — and protections in — this market.
So why are we the only WTO member country that doesn’t automatically get all of these benefits? It all goes back to the work of one of Washington’s beloved senators, Henry “Scoop” Jackson. In 1974, the Jackson-Vanik Amendment denied most favored nation status to certain countries that restrict emigration. At the time, it was intended to address specific concerns with the Soviet Union, but is now applied to Russia. And so, without most favored nation status — now referred to as permanent normal trade relations — the U.S. is self-restricted from taking advantage of Russia’s WTO accession benefits.
From a business perspective, Congressional approval of PNTR is a no-brainer. First, unlike a free trade agreement negotiation, the United States would not be required to give any new access to our own markets in exchange for these benefits. Second, it’s not like we’re still enforcing Jackson-Vanik with Russia; every year since 1994, the president (both Democrats and Republicans) has approved an annual waiver of Jackson-Vanik for Russia. Perhaps most important to those U.S. businesses that are concerned about Russia’s commitment to fair trade practices, Russia’s WTO membership commits them to a wide variety of rules that the United States can use to enforce compliance.
Yet, with each passing day, Congress has still not acted on this legislation, and you can probably guess why: concerns about Russia’s human rights practices, questions about Russia’s commitment to democratic process, and anger at Russia’s stance on Syria — totally legitimate concerns about that country’s domestic and foreign policies.
The thing is, none of those concerns are impacted one way or the other by Congressional approval of PNTR. The United States’ refusal to accept Russian tariff reductions isn’t a punishment to them, only us. I’m sure that Russian businesses would be more than happy to keep U.S. firms at a disadvantage, and I know for sure that European Union and Asian businesses definitely feel that way.
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