Promoting U.S. Exports and the Rule of Law in Russia

by Daniel Griswold at www.cato.org

Although global trade talks are going nowhere, the ministerial meeting of World Trade Organization members in Geneva next week will accomplish at least one item of major importance: admitting Russia to the club. Whether U.S. companies can reap the benefits of a more open Russian market will depend on the repeal of a U.S. law that has become an awkward relic of the Cold War.

The law is the 1974 Jackson-Vanik amendment, which was aimed at forcing the Soviet Union to allow Jews to emigrate by withholding "normal trade relations" (NTR) access to the U.S. market. Even though Jackson-Vanik never worked as intended, the law remains on the books two decades after the Soviet Union expired, requiring Congress to renew Russia's NTR status annually.
Granting Russia permanent normal trade relations (PNTR) by repealing Jackson-Vanik is key to promoting bilateral trade. If the law remains in effect, Russia will join the WTO within the next month or so, but U.S. companies will be denied the enhanced access to Russia's market that the U.S. government and other WTO members negotiated in Russia's accession protocol. That would be a costly mistake.
Russia remains by far the largest economy and the only member of the Group of 20 still outside the WTO. Russia's increasing economic (if not political) liberalization in recent years has coincided with a sharp increase in U.S. exports. Russia is an especially promising market for U.S. computer software and hardware, civilian aircraft, heavy machinery used to extract resources and U.S.-raised beef and poultry.
Opponents of granting PNTR point to Russia's abuse of health and safety measures to protect its agricultural sector, its lack of intellectual property protection and restrictions on civil and political liberties. Each of those concerns is real, but withholding PNTR will not address any one of them.
In fact, granting PNTR will allow the U.S. government to use the organization's dispute settlement mechanism to challenge any Russian violation of its WTO commitments. Any continued use of regulations as disguised trade barriers could be challenged under the WTO's sanitary and phytosanitary agreement. Violations of intellectual property would be open to challenge through the agreement on trade-related aspects of intellectual property.
As for human rights, it is a simple historical fact that trade policy has proved to be an ineffective tool for imposing fundamental political changes in other countries. The World Trade Organization was not set up to enforce human rights but more narrowly to promote trade liberalization among its members. Promoting respect for human rights around the world is a worthy cause, but threatening to withdraw trade access for an entire nation is not a proper human rights tool.
Just as WTO member governments pursue a wide range of trade policies, they also represent a wide range of political regimes. Of the organization's 153 members, more than 20 are at least as repressive of civil and political liberties as Russia, as measured in the annual survey by Freedom House. The list of WTO members that, like Russia, are classified as "not free" includes Bahrain, Cambodia, Chad, China, Cuba, Egypt, Jordan, Oman, Qatar, Rwanda, Saudi Arabia, Vietnam, the United Arab Emirates and Zimbabwe. It would be inconsistent with the spirit of the WTO, as well as established U.S. policy, to oppose Russia's membership in the organization because of its restrictions on political and civil freedoms.
On balance, the United States would benefit more from having Russia in, rather than out of, the transparent, multilateral and rules-based trade system. While no results can be guaranteed, granting Russia permanent normal trade relations would expand the freedom of American companies to reach new customers while further encouraging Russia's uncertain progress toward a more open, modern and globally integrated economy.