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What is Business Roundtable

Business Roundtable (BRT) is an association of chief executive officers of leading U.S. companies working to promote sound public policy and a thriving U.S. economy.

Russia, WTO and the stakes for the U.S. economy

Apr 5, 2012
Carter Wood

The Wall Street Journal covers a major issue for BRT-affiliated companies and the U.S. economy in a well-reported piece, "U.S. Firms Fear Missing Russia Boom." Excerpt:

Russia is on the cusp of joining the World Trade Organization after a two-decade journey, a landmark move to integrate the emerging economy into the international trading system.

There's one problem for U.S. companies: They may be left out of the parade.

Election-year sparring could keep the U.S. from lifting long-standing restrictions on trade with Russia by the time the country joins the WTO this summer. As a result, U.S. companies wouldn't receive the same legal protections against Russian tariffs and other hurdles to business that companies from other countries would gain, putting the U.S. businesses at a competitive disadvantage, executives say.

WSJ reporter Sudeep Reddy also discusses recent developments in this Marketwatch video.

One obstacle is the Jackson-Vanick Amendment, a 1974 law meant to pressure the Soviet Union into allowing Jews to emigrate, primarily to Israel. Grover Norquist and his Americans for Tax Reform have called for the repeal of the amendment, explained in a blog post, "An Antiquated Amendment: Jackson-Vanik Needs Repeal":

This vestigial legislation is a relic from a past conflict with a country that no longer exists.  Over the last few years, millions of jobs have disappeared drastically increasing the need to open new markets to American goods. As Russia prepares to join the World Trade Organization (WTO) this summer, it is imperative that American goods enjoy the same economic liberalization benefits as Asian and European goods.  Unless repealed, the Jackson-Vanik Amendment would allow Russia to deny American exporters equal access to its market under WTO rules.

Permanent Normal Trade Relations with Russia would open up new markets for U.S. manufacturing and agricultural products while providing consumers with lower priced products at home.

Farm groups have been vocal in urging Congress to take the necessary steps to grant Russia Permanent Normal Trade Relations (PNTR). For example, see this Farm Bureau fact sheet and related radio interview on the Voice of Agriculture.

Business Roundtable is certainly engaged in the issue. BRT-member CEO Sam Allen, Chairman and CEO of Deere & Company, testified recently to the Senate Committee on Finance on the need for Russian PNTR, explaining: "PNTR for Russia is crucial for U.S. manufacturers, service providers and agricultural producers to receive the full benefits of Russia’s WTO accession, and to compete on a level playing field for Russian customers. PNTR with Russia is, simply put, a benefit to the United States rather than an accommodation to Russia.”

BRT has also developed state fact sheets to illustrate the economic potential of expanded trade with Russia that would result from enactment of Permanent Normal Trade Relations. Let's consider the case of New York:

  • New York exported $89 million worth of  aircraft and parts to Russia in 2011. Russia’s WTO entry requires it to reduce average tariffs on narrow-‐body  civil aircraft to 12.5% and its average tariffs on aircraft engines, which are currently 10%, to 5%.
  • New York exported $60 million worth of autos and parts in 2011 to Russia, which is expected to become the 6th largest market for automobiles in the world.  Yet the U.S. share of Russian auto imports is just 4%, compared to 41% for the EU and 31% for Japan. To join the WTO, Russia agreed to reduce its car tariffs to 15% from 20-­‐35% and bind tariffs on auto parts at 5%.
  • New York exported $13 million in medical equipment to Russia in 2011. It faces strong competition from China, which has increased its share of the Russian market in each of the last 10 years. To join the WTO, Russia agreed to reduce average tariffs on medical equipment to 4.3% and cut its top tariffs from 15% to 7%.

See also this BRT The Bottom Line fact sheet.