Russia’s lower chamber voted Tuesday to ratify the country’s accession to the World Trade Organization (WTO), capping 18 years of negotiations.  Membership becomes official in 30 days once Russia’s upper chamber approves the agreement and President Vladimir Putin signs the official documents.  Both actions are expectly in the near future.  As a member of WTO, Russia will be required to dismantle its protectionist policies, but the goal for Russia is to attract more foreign investors with the new reassurances that rules will be obeyed and not subject to bureaucratic caprices.

The lower chamber’s vote, 238 to 208,  in favor of ratification was unusually tight with opposition led by the Communists, who make up the second-largest group in the Duma or lower house.  The Communists declared that Russia’s industry was too vulnerable to survive without protections, killing the remnants of Russia’s Soviet-inherited industry and creating unemployment.  Russia has a $1.9 trillion economy, making it the largest outside the WTO.

Once Russia’s WTO membership becomes official, U.S. companies could be at an immediate disadvantage because of Jackson-Vanik, the 1974 trade law amendment introduced to pressure the then-Soviet Union to allow Jews and others to emigrate.  With Russia officially a member of WTO, the existence of Jackson-Vanik puts the United States in violation of WTO rules, resulting in unfavorable trade terms for U.S. companies doing business with Russia, despite the fact that sanctions have been waived each year since the Soviet Union’s collapse.

President Obama has been pushing Congress to approve “permanent normal trade relations” (PNTR) with Russia this year before Russia officially joins the WTO to ensure U.S. exporters immediately get the full benefits of Russia’s entry.  If lawmakers fail to approve PNTR and revoke the Jackson-Vanik amendment, WTO rules would allow Russia to deny United States the new access it has negotiated in the Russian market while providing it to other WTO members.  Concern over Russia’s record on human rights and its commitment to the rule of law are expected to enter into the debate on PNTR, requiring the president to mount a major lobbying effort with Congress if it is serious about winning approval, one congressional aide recently said.

A delegation from Russia’s upper house, the Federation Council, is in Washington this week meeting with members of Congress over moves by the Obama Administration and U.S. business leaders to repeal Jackson-Vanik.

With Russia’s membership in the WTO becoming official before the end of August, Russia’s trade liberalization commitments will begin to take effect.  The U.S. Congress is beginning to take more serious steps to not lose the benefit of Russia’s WTO membership.  The Senate Finance Committee will hold a hearing July 17 on legislation to repeal the Jackson-Vanik Amendment and grant permanent normal trade relations status to Russia.  At the same time, Chairman Max Baucus is expected to attach a bill to the legislation addressing human rights violations in Russia and other countries.  Russia has expressed opposition to such a measure but it is widely seen as necessary to pass PNTR.

 

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