Time to act on PNTR

Author: us-russia
Comments: 0
Time to act on PNTR
Published 14-08-2012, 10:16

Edward S. Verona

President and CEO at The U.S.-Russia Business Council

On August 6, NASA put a vehicle the size of a compact car on Mars. Curiosity, as it is called, hurtled approximately 50 million miles through space, entered the Martian atmosphere at 15,000 miles per hour and then, by means of a computer-controlled "sky crane," gently landed on the surface. Eight years transpired between the decision to undertake the project and Curiosity's touch-down on the red planet. Some might question the wisdom of spending public funds to explore Mars, though just about everybody marvels at the photographs streaming back from the rover and admires the technical virtuosity of the endeavor. It was a remarkable achievement that serves as a testament to human ingenuity and imagination.

While lacking the gee-whiz factor of the Mars landing, the negotiations for Russia's WTO membership drew upon comparable resources of technical expertise, persistence and determination to overcome obstacles. The 1000-page accession agreement is the longest ever negotiated, covering every eligible sector in painstaking detail and leaving little scope for equivocation or ambiguity.


WTO membership is not without its critics in Russia. Some industries fear the foreign competition that the opening will bring. The Communists and other left wing political groups mounted a vigorous campaign against accession, including an unsuccessful constitutional challenge. Other opposition leaders strongly supported accession. In their view, joining the WTO will spur economic growth and modernization, bolstering the reform-oriented middle class and exerting pressure on the government to be more transparent and accountable. The final vote in the State Duma was no slam dunk: 238 for and 208 against. However, the result was final: Russia will join the WTO.


This is good news for companies that have been doing - or want to do - business in Russia. It is the world's ninth-largest economy and imports approximately $400 billion of goods and services annually. Russia's 140 million consumers like the high-quality goods and services that American companies make or provide. The range of successful U.S. products and services in Russia is broad: commercial aircraft, automobiles and components, farm equipment, pharmaceuticals, fast-moving consumer goods, high-tech equipment and financial services. U.S. exports to Russia have grown at an average annual rate of 15 percent since 2001, and the Washington-based Peterson Institute predicts that U.S. exports to Russia could double within five years as a result of WTO accession.


Unfortunately, as things stand, the United States will be the only country in the WTO that will not automatically extend Permanent Normal Trade Relations (PNTR) to Russia. Consequently, we will not enjoy the access to that market that our competitors from every other WTO member country will receive. Meanwhile, Russia is under no obligation to grant to us any of the concessions that it made under its accession agreement. Ironically, these were secured in large part by our own negotiators.


The cause of this situation is the persistence on our books of the Jackson-Vanik Amendment, a 1974 law that prevents us from extending PNTR to Russia. Basically, Jackson-Vanik links PNTR to Soviet-era restrictions on Jewish emigration, a total irrelevance to present-day Russia. Every year since 1992 the U.S. government has either waived it or declared Russia to be in compliance. Until now there was no compelling reason to make the political effort to lift Jackson-Vanik. That will change with Russia's accession.


PNTR is the top international trade priority of the business community this year; the USRBC-led Coalition for U.S.-Russia Trade, which includes nearly 150 companies and trade associations, has been holding daily meetings on Capitol Hill and in the Executive Branch to make the case for lifting Jackson-Vanik and extending PNTR. In this regard, it is extremely gratifying to observe significant progress in recent weeks.

Senator Max Baucus (D-MT), Chairman of the Finance Committee, became a strong advocate for PNTR following his visit to Russia earlier this year. He held a mark-up of the PNTR bill in the Committee on July 18 and won a unanimous vote with strong support from Ranking Member Orrin Hatch (R-UT). House Ways and Means Committee Chairman David Camp (R-MI) held a mark-up of an identical PNTR bill in that committee on July 26 with backing from Ranking Member Sander Levin (D-MI) and eight other Committee members who signed on as original co-sponsors. That bill passed on a voice vote with just one "nay."


The business community had hoped that both bills would be brought to floor votes before the August recess, but for reasons that remain unclear that did not happen. Blame gets apportioned to all (absurdly, some to the business community!), but judging by public statements from all parties, there is bipartisan support for getting this done. A record 73 freshmen Republican congressmen signed a letter of support for PNTR on July 13; the Administration has reiterated its support on numerous occasions; and the business community has been doggedly pressing for action. We are greatly encouraged that both House Majority leader Eric Cantor and Minority Whip Steny Hoyer have called for a PNTR vote as soon as Congress reconvenes in September, adding that they see strong support for it.


Assuming an affirmative vote does occur in early September, U.S. companies will suffer only three weeks of potential disadvantage in the Russian market. It will be awkward for our delegation at the APEC Summit in Vladivostok September 1-8 (headed by Secretary of State Clinton) to represent the only country at such a disadvantage, but if we're lucky we won't lose out on any major deals.  


Finally, what does one say to those who continue to oppose PNTR?


  • Those who argue that Russia's WTO commitments are "not good enough" fail to recognize that Russia's WTO membership is inevitable, like it or not. In not extending PNTR, we only hurt ourselves by denying our companies the benefit of Russia's unilateral concessions.
  • Those who equate Russia PNTR with China PNTR overlook the composition of our trade with Russia: Russia exports low value-added commodities to us while we export to them high value-added, job-creating products, such as commercial jetliners. (Members of The International Association of Machinists and Aerospace Workers should take special note of this; their union sent a letter to Congress opposing PNTR.)
  • Those who argue that PNTR would be an undeserved political "gift" to Russia should look at the text of the Senate bill and the statement of Chairman Camp during the Ways & Means Committee meeting. There will be no PNTR without a bill addressing human rights issues (i.e., the Magnitsky Bill). The Russian Government has made its objections to this abundantly clear. A bill which incorporates such legislation would hardly be seen by it as a gift.

Just like the Curiosity landing on Mars, Russia's WTO membership will become a reality this month after years of hard work. The results are worth the wait. But American businesses cannot afford to wait until a human colony is established on Mars for passage of PNTR. It's time to move beyond this deadlock and pass PNTR so that U.S. business and jobs are not jeopardized in such an important emerging market.