U.S. sales to Russia poised for boost under WTO

Thursday - 7/26/2012, 12:08pm EDT

Caitlin Webber, trade policy analyst, Bloomberg Government

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By Caitlin Webber
Bloomberg Government

(Bloomberg) -- Legislation that would pave the way for the U.S. to recognize Russia as a member of the World Trade Organization — and give U.S. sales to Russia a leg up over U.S. exports to the rest of the world — was scheduled to come before the Senate Finance Committee on July 18.

The bill, S. 3285, would grant Russia permanent normal trade status, requiring the U.S. to provide Russia with tariff and trade treatment that's no less beneficial than what the U.S. applies to any other country with the same status.

Caitlin Webber

Timely U.S. recognition of Russia's membership in the World Trade Organization may boost the growth of U.S. exports to Russia about 50 percentage points higher than the rate of export growth to the rest of the world, according to a Bloomberg Government analysis. That's if U.S. exports to Russia during its first three years as a WTO member follow the pattern of U.S. sales to the five largest economies to join the WTO since 2000.

Lawmakers who support normal trade relations with Russia say current restrictions imposed by the so-called Jackson-Vanik amendment are a relic of the Cold War. President Barack Obama has urged Congress to repeal the 1975 law, which prohibits the U.S from applying normal, or "most-favored nation," tariff rates on imports from countries that restrict emigration.

Business Support

The business community overwhelmingly supports Russia's membership in the WTO as a means to increase U.S. exports to the world's ninth-largest economy in 2011. General Electric Co., which had $1.5 billion of revenue in Russia in 2008, said its sales to Russia could triple by 2020 if the U.S. gave Russia normal trade status. Russia was the U.S.'s 32nd-largest export destination in 2011, behind Peru, which ranked 44 spots behind Russia in economy size.

U.S. exports to the five largest economies to join the WTO since 2000 jumped by an average of 67 percent in the first three years after the new members' admission to the WTO. U.S. exports to the rest of the world grew by an average of 18 percent during the same period.

U.S. exports to Vietnam, for example, rose even in 2009, the first full year following the global recession, when exports to the rest of the world fell more than 9 percent from 2007 levels. U.S. exports to China grew more than three times faster than exports to the rest of the world during 2002 to 2004, the first three full years of its WTO membership.

Yearly Waivers

The president can waive Jackson-Vanik's trade restrictions on a yearly basis. Since June 1992, the U.S. has applied MFN tariff rates to products imported from Russia under the annual waiver.

Congress needs to provide Russia permanent normal trade status for U.S. exporters to take advantage of Russia's WTO commitments to reduce trade barriers. Jackson-Vanik is inconsistent with WTO principles of nondiscrimination, which require members to apply most-favored nation tariffs unconditionally on imports from all other members.

Congressional opposition to normalizing trade relations with Russia has centered on Russia's human rights record and its protective relationship with the regime of Syrian President Bashar al-Assad.

(Caitlin Webber is a trade policy analyst for Bloomberg Government. The views expressed are her own.)

(Read the full Bloomberg Government study, U.S. Sales to Russia Poised for Boost Under WTO: BGOV Insight. BGov.com is a paid site and requires a subscription for access.)

To contact the analyst: Caitlin Webber in Washington at cwebber4@bloomberg.net

To contact the editor responsible: Sanford Reback at sreback1@bloomberg.net