The Russian parliament voted this week to approve Russia’s bid to join the World Trade Organization (WTO), the body that sets global trade rules. The action means that tariffs on imports into Russia will decrease, key sectors of the Russian economy will be open to foreign investment and U.S. companies will benefit.
There is, however, one obstacle. American businesses cannot take advantage of the Russian market opening unless the U.S. Congress terminates the application of the Jackson-Vanik Amendment, enacted in the 1970s to pressure the former Soviet Union to allow Jews to emigrate – a purpose long since achieved.
Because the Jackson-Vanik amendment is inconsistent with WTO rules, Russia could deny U.S. exporters the concessions Russia made to join the WTO and put U.S. companies at a disadvantage versus manufacturers in Asia, Europe and elsewhere.
The solution - Congress needs to approve a bill extending permanent normal trade relations (PNTR) to Russia and repealing Jackson-Vanik. Associated Industries of Massachusetts (AIM) and numerous other national business organizations have signed a letter encouraging Congress to approve PNTR for Russia before the August recess.
Russia has already completed a number of economic reforms that were pre-requisites to WTO membership. Russia is now obligated to open its market to imports, protect intellectual property, safeguard foreign investors, and strengthen its compliance with “rule of law.” Other countries will be able to hold Russia accountable for fulfilling its trade commitments. The threat of WTO sanctions will discourage Russia’s arbitrary imposition of trade barriers.
An open Russian market is a benefit for US companies. Russia is the eleventh largest economy in the world and its rapidly growing middle class is already a lucrative market for high-quality goods and services.
Although Russia is not a major export destination for Massachusetts products at present (2011 exports from Massachusetts to Russia totaled $120 million), Bay State makers of industrial machinery, pharmaceuticals, medical devices, auto parts, pharmaceuticals and insurance are expected to benefit from Russia’s WTO membership. Many experts predict that US-Russia trade will double or even triple if Congress acts.