BPC Urges Congress to Graduate Russia from Jackson-Vanik

In late August, Russia officially became a member of the World Trade Organization (WTO), and agreed to abide by international rules to open its markets to foreign investments. Congress must graduate Russia from the Cold War Jackson-Vanik Amendment and grant them Permanent Normal Trade Relations (PNTR) if the United States is to take advantage of Russia’s membership and the opportunities for U.S. businesses and products this provides. Otherwise, Moscow will be permitted under WTO rules to discriminate against U.S. businesses and exports.

Russia’s demand for U.S. agricultural products, consumer goods and manufactured items is very robust, and major Russian companies need U.S. financial and human capital in a variety of high-technology sectors to modernize and sustain GDP growth. Experts estimate that American exports to Russia could double in five years – to $20 billion – which could spur job creation and growth here at home. Failure to grant PNTR will cause a wide range of U.S. companies and workers, from Silicon Valley to America’s agricultural and industrial heartlands, to miss out on the opportunities that their foreign competitors in the WTO will enjoy in Russia, one of the fastest growing markets in the world. With Russia embedded in the WTO’s institutions and commercial laws, the United States will also have a stronger toolkit to protect its investors and resolve trade disputes.

For every day that Congress does not grant PNTR to Russia, many sectors of the U.S. economy are losing out, including:

• Aerospace and automobiles – Russia is Europe’s largest automobile purchaser, and major U.S. automakers like Ford and General Motors are looking to penetrate the Russian market more deeply. Taken together, civilian aircraft, passenger cars and related equipment are the most valuable category of U.S. exports to Russia.
• Agricultural products – Russia is the world’s second largest importer of beef, pork and poultry products. Investment in Russia’s food industry by U.S. based companies such as Coca-Cola and PepsiCo has been very successful as well. WTO membership and PNTR can expand exports and investment opportunities by constraining and limiting Moscow’s arbitrary trade restrictions, and generate increased demand for U.S. agriculture goods.
• High-technology products and services – Once at the forefront of scientific research, Russia now lags behind the developed world. Moscow is seeking technology-sharing and investment agreements with the West to boost innovation and upgrade infrastructure.
• Industrial equipment – Russia’s abundant natural resources and struggling heavy industry generate strong demand for U.S.-made machinery to discover, extract and transport energy and other natural resources across the country’s vast expanses to export markets. Demand for U.S. industrial equipment is likely to grow as Moscow looks to maintain production levels by exploring and exploiting new reserves.

The U.S. can only enjoy the benefits of Russia’s WTO membership if it graduates Russia from the Jackson-Vanik amendment and extends PNTR to Russia. Failure to do so gives Russia legitimate grounds under WTO rules to discriminate against U.S. businesses, thus causing the United States to lose market share to companies from the European Union and East Asia. Congress must act swiftly to grant PNTR to Russia: until they do, U.S. companies are at a competitive disadvantage when it comes to opportunities provided by Russia’s WTO accession.

This should be part of a comprehensive policy framework – crafted by the Executive and Legislative Branches together with outside stakeholders – that advances U.S. interests, builds a more constructive bilateral relationship with Russia and promotes Russian human rights, rule of law, democracy, transparency, civil society, and commercial engagements.

Background: The Bipartisan Policy Center’s Russia Initiative was launched in 2011 and is led by former Senator Charles Robb (D-VA) and Secretary of Commerce Don Evans. For more information, including our full report on Jackson-Vanik, A Bull in Bear’s Clothing (January 2012), additional materials produced by the task force and recent op-ed pieces, please visit the Russia clearinghouse on our website or contact Laura Hall at [email protected].