Russia, the world's ninth largest economy, will join the World Trade Organization today, plugging a major gap in the organization’s membership and concluding a nearly two-decade long process.
The impacts of Russia’s admission, which was initially approved last year, will likely be more muted in the United States than in other regions, due to U.S. human rights legislation from the 1970s that precludes Russia from being granted permanent normal trade relation status.
The sanctions, part of a 1974 provision called the Jackson-Vanik amendment, date back to a period when the then Soviet government hindered emigration from Jewish citizens by applying a so-called “diploma tax” on those trying to leave after having received state-funded higher education.
Russia has not imposed those restrictions for the last two decades, around the time it began applying for WTO membership. The last three U.S. presidents have urged Congress to repeal the amendment, but Capitol Hill lawmakers have not been swayed, citing Russia’s continued human rights violations against political dissenters, as well as its divergence from Western efforts to crack down on Iran, Syria, and other rogue governments.
The National Foreign Trade Council, in a conference call Tuesday about Russia’s WTO accession, said the United States stands to lose ground in Russia unless the outdated legislation is repealed or replaced with a more modern law that targets Russia less directly.
“The argument we’ve been making is this is about us, not them,” said NFTC President William Reinsch. “This doesn’t stop Russia from being acceded. The only question is whether we’ll get benefits out of it.”
Russia was the world’s largest economy outside the WTO fold, so adding a population of 143 million people, and a major link between Europe and Asia, was crucial. European and Asian companies, which have previously made larger inroads into the Russian economy than the United States, are expected to benefit significantly.
“This is a major market that is dominated by our competitors, one in which we are now putting ourselves in a less favorable position,” said NFTC Vice President Dan O’Flaherty.
Russia’s admission to the WTO means it will immediately lower import tariffs to 7 percent, from 15 percent previously, for the organization’s 155 other members. Without granting Russia PNTR status, Russia has no obligation to extend its agreed on WTO tariffs to the United States, a development that could affect U.S. exporters that have made inroads in Russia.
The New York Times
reported that those companies include Caterpillar, Deere and General Electric, who will now have to compete against companies from China, South Korea, Japan and Europe.
A Russian trade official told the newspaper Russia does not plan to enforce discriminatory tariffs against U.S. companies.
“We are not preparing any special tariffs for the United States, though legally we are not obliged to offer the same conditions,” said Yekaterina Y. Mayorova, deputy director of trade negotiations at the Russian ministry of economy.
The NFTC said there are some factions of support in Congress to repeal the Jackson-Vanik amendment, but likely not enough momentum to push anything through in the lame duck session before the presidential election in November.
Though Reinsch said, “if the House acts early in September, there would be momentum and pressure for Senate to follow suit.”
Congress is currently in recess. - Eric Johnson