Cold War Still Rages...In US Trade Policy on Russia

Remember the time before China joined the WTO when it was annually subjected to congressional dog-and-pony shows concerning whether a country that did not respect human rights deserved most-favoured nation (MFN) trade status with the US? Just as Americans from various walks of life still have a hankering for the good ol' days when Reagan was in office, so do there remain representatives who cannot let go of the Iron Curtain glory days.

While Russia already acceded to the WTO late last year, the United States still requires its lawmakers to sign off annually on Russia not disallowing emigration of its Jewish citizens--the obscure and quite frankly antiquated reason why Jackson-Vanik was established to stick it to the Soviets in 1974. In American trade lingo, Russia still does not have permanent normal trade relation status (PNTR)--what we know as MFN--alike China, and so most-favoured nation status must be re-approved annually ostensibly based on the appraisal of Russia's human rights practices. The main source of trouble for the United States now is that WTO members are in principle obligated to grant each other MFN status, which is clearly violated by Jackson-Vanik requiring annual re-approvals.

To be sure, the Obama administration has already told congress that Jackson-Vanik must be lifted so that the United States may meet its obligations to its fellow WTO member. That said, there again remain certain holdouts among American lawmakers (dreaming of Pershing missiles and Star Wars missile defence shields, no doubt).

Indeed, there even are legislative proposals to further play up links between human rights and trade with Russia than under Jackson-Vanik. In a Bloomberg editorial:

Some U.S. lawmakers want to combine the repeal of Jackson- Vanik with a punitive measure aimed at pressuring Russia for human-rights violations. The Sergei Magnitsky Rule of Law Accountability Act [text here], which was approved June 26 by the Senate Foreign Relations Committee, would name and sanction Russian officials thought to be responsible for the 2009 death in a Moscow prison of Sergei Magnitsky, a lawyer who disclosed evidence that government officials had embezzled $230 million. The scope of the act has been broadened from its initial focus on Russia and now requires the U.S. to seize the assets of and deny visas to any official deemed to be involved in any human- rights violations. 

(There is more on the politicking behind efforts to pass the Magnitsky Rule, which Russia has said it would retaliate against if passed.) This being Bloomberg--a business news organization--the emphasis is less on continuing human rights violations and more on how not giving Russia its due in the trade realm as a WTO member makes it less likely to follow global regimes and disadvantages American firms wishing to do business there in the process:

The Magnitsky case is just one of many reasons for grave concern over the Russian government’s repeated repression of democratic freedoms and human-rights violations. Yet combining the two pieces of legislation would do more harm than good. WTO membership will further bind Russia and President Vladimir Putin to a global regime of rules and laws and also open opportunities for U.S. companies. Those are important goals in their own right. Failure to repeal Jackson-Vanik would just give Russia free rein to punish U.S. companies. 

The latter point is similar to that made by the US Chamber of Commerce which has been lobbying for granting Russia MFN (PNTR). If Russia does not receive it from the US, then it has the right to suspend granting US firms PNTR--and disadvantages American firms in the process vis-a-vis those of other WTO member countries:

Under WTO rules, every WTO member must grant all other members unconditional Permanent Normal Trade Relations (also known as Most-Favored Nation status). This WTO rule mandates that any advantage granted to one WTO member by another member must be accorded unconditionally to all other members. The United States will be in clear violation of this rule if Congress fails to graduate Russia from Jackson-Vanik. Russia would thus be fully within its rights to withhold the benefits of its accession-related reforms from U.S. companies.

A newer Agence France-Presse article also cites the economic losses which may accrue if Jackson-Vanik is not dealt away with immediately:

The US Chamber of Commerce, the world's largest business organization, warned that Russia could retaliate if Congress fails to normalize trade relations. "Until Congress approves PNTR with Russia, Moscow will be free to deny the United States the full benefits of its reforms," Chamber president and chief executive Thomas Donohue said.

Under Russia's accession to the WTO, Moscow agreed to apply a final tariff ceiling of 7.8 percent for goods, compared with a 2011 average of 10 percent. "The United States gives up nothing -- not a single tariff -- in approving" normal trade relations, Donohue said. "It's a true jobs bill, and won't cost taxpayers one penny. Because of our inaction on PNTR, European and Asian companies have won a head start in the Russian market."

Russia, which became the 156th WTO member Wednesday after 18 years of negotiation, was the United States's 14th largest supplier of goods imports in 2011, led by oil imports.US goods exports to Russia have climbed steadily in recent years, and jumped almost 40 percent from 2010 to $8.3 billion last year.

How does the saying go? Give peace a chance. Last I checked, Russians could freely emigrate starting in 1991--a long time ago in a political economy far, far away from today's WTO member state--even if certain holdout Cold Warriors dream otherwise.