Emergency Committee For American Trade - Publications

Section 3: Russia’s WTO Accession and Permanent Normal Trade Relations

Since the dissolution of the USSR in 1992, Russia has been struggling with the challenges of ending state economic control and establishing a stable, market-oriented democratic system. Russia had made progress in reaching some of these goals over the last several years, with a reduction in military spending, market-economy structural reforms, and an increase in private-sector economic activity. Additional reform remains important, particularly with respect to intellectual property, agricultural access, customs regulations, standards and licensing, government procurement, and other barriers. Broader concerns include the lack of transparency and the rule of law.

U.S. trade with Russia equaled almost $24.5 billion in 2006. U.S. exports of agricultural, consumer and industrial products to Russia increased by $2.3 billion or nearly 96 percent between 2002 and 2006 to $4.7 billion in 2006. Principal U.S. exports included large machinery, vehicles, meat, electrical machinery, medical equipment, aircraft, plastics and chemicals, which have all significantly increased since 2002. U.S. goods imports equaled $19.8 billion in 2006, of which the more than half were energy imports. Other imports include steel, aluminum, chemicals and pearls. U.S. service suppliers play important roles in Russia’s energy, financial, information technology, transportation and other service sectors. U.S. foreign direct investment rose to $5.6 billion in 2005.

While U.S. farmers, manufacturers and service providers have already made significant headway in participating in the Russian market, there is great potential for increased growth. Russia’s market is large, with over 143 million people, many of whom have increasing disposable income and important opportunities for growth in numerous sectors, from information technology, medical equipment and pharmaceuticals to automotive, energy, healthcare and building products and services. Already the 10th largest economy in the world (by GDP), the Russian economy continues to grow as evidenced by its six-percent GDP growth in 2005, a construction boom and strong consumer spending. In 2005, Russia was the world’s 24th largest importer of merchandise, with imports of $96 billion -- the United States supplied only about three percent of that merchandise. Russia is also the 13th largest importer of services worldwide.

Russia is negotiating its terms of accession to the World Trade Organization (WTO). As discussed below, Russia remains subject to the Jackson-Vanik provisions of the Trade Act of 1974, and enjoys normal–trade-relations status, which is currently granted annually based on Presidential certification, subject to a potential Congressional vote of disapproval.

Russia’s Proposed WTO Accession

The Working Group on Russia’s accession was established on June 16, 1993, and negotiations have been ongoing since 1995. Russia indicated its interest in accelerating negotiations starting in 2002 and the 30th meeting of the Working Party was held in March 2006. WTO members have reported that significant progress has been made, although several major issues remain outstanding to complete the multilateral accession negotiations.

The United States and Russia completed bilateral negotiations for Russia’s accession on November 19, 2006. With this agreement, Russia committed itself to substantial new market access for agricultural and manufactured goods and services, as well as other key issues. Key elements of the U.S.-Russia bilateral agreement include:

Binding of tariffs for industrial products at an average rate of eight percent, representing a reduction of 36 percent from rates in 2000. Tariffs on many commercial products of particular interest to the United States will drop even more significantly to an average of 6.5 percent.
Commitment to join the Information Technology Agreement, with 95 percent of implementation to take place within three years of the accession.
New market access for key services sectors, including audiovisual, energy, express delivery, financial and telecommunications services.
Commitments to reduce tariffs and barriers to a wide range of agricultural products from fruits (such as apples, grapes and raisins), nuts, grains, soybeans, corn, dairy, pet food, snack foods, breakfast cereals, frozen fries and potato chips, soup and wine.
Commitment to negotiation, with specific timelines and parameters, of meat-market-access issues after the expiry of the U.S.-Russia Bilateral Meat Agreement in 2009, which is incorporated into the bilateral agreement.
Binding of 90 percent of agricultural tariffs at 15 percent or lower, with low tariffs in particular on key U.S. agricultural products, such as corn, rice, soybean meal, apples, raisins and many baked goods.
Full participation in key sectoral initiatives, including the Information Technology Agreement, chemical harmonization, and the elimination of all duties on aircraft and parts.
Commitments to the Technical Barriers to Trade Agreement, including the elimination of pre-approval requirements.
Commitments to WTO sanitary and phytosanitary rules and commitment to eliminate ban on hormone-treated beef and on unnecessary shelf-life requirements.

In separate agreements, the United States and Russia addressed several key issues, including:

Sanitary and phytosanitary issues for pork¸ beef, poultry and biotechnology products.

Import licensing of information technology products with encryption technology, including commitments to implement transparent, non-discriminatory and WTO-consistent procedures allowing import of most commercially traded information technology products with encryption (such as mobile phones and operating systems).

Intellectual property protection requiring Russia to undertake specific actions by specific dates, including fighting optical disc piracy, fighting Internet piracy, protecting pharmaceutical test data and deterring piracy and counterfeiting through criminal penalties, and strengthened borders.

Russia still needs to close bilateral agreements with a small group of countries.

Work on Russia’s accession will continue and potentially conclude this year if Russia moves forward to commit to needed reforms to ensure a strong and commercially meaningful accession package. A strong, comprehensive package will create important new economic opportunities for the United States and help address key barriers and difficulties in Russia, from opaque barriers to intellectual-property-rights piracy.

Successfully integrating Russia into the rules-based global trading system will help advance America's vital stake not only in Russia’ economy, but in the security and prosperity of the region. Trade is much more than the sale of U.S. goods and services; it is an exchange of ideas, beliefs, and values that changes and enriches those who participate. Trade can help change Russia by supporting economic freedom, private enterprise, access to information, higher living standards, and the rule of law for the Russian people.

Permanent Normal Trade Relations with Russia

Russia currently receives normal trade relations (NTR) treatment on an annual basis from the United States, pursuant to the Jackson-Vanik provisions of Title IV of the Trade Act of 1974, which governs the extension of NTR treatment to non-market economy countries. The Jackson-Vanik provisions condition the extension of NTR treatment to compliance with freedom of emigration criteria and require that NTR be renewed annually. Russia has been found to be in compliance with the freedom of emigration criteria since 1994.

To reap fully the benefits of Russia's WTO opening commitments and to be able to use WTO dispute settlement to enforce Russia’s commitments, the United States must provide permanent normal trade relations (PNTR) with Russia - the same non-discriminatory tariff treatment that the United States provides to other WTO members. Unless Congress and the Administration together provide PNTR, Russia would be legally entitled to withhold key WTO market-access concessions from U.S. goods, services, and farm products. Because Russia has received NTR treatment under U.S. law on an annual basis since 1992, U.S. tariffs would remain exactly the same if PNTR is approved. In contrast, failure to extend PNTR to Russia would effectively shut many American farmers, manufacturers and service providers out of the important and growing Russian market for years to come.

ECAT Position: ECAT supports Russia’s continued work to complete its negotiations to accede to the WTO on a commercially strong basis and Russia’s full implementation of the IPR and other commitments it has made bilaterally with the United States as part of the accession process. ECAT supports the President’s authorization of Permanent Normal Trade Relations with Russia when it has completed its accession negotiations, as well as fulfilled its bilateral commitments with the United States. ECAT also supports continued work to promote the rule of law and greater transparency and accountability in the Russian government, as well as to address issues of specific concern in the U.S.-Russia commercial relationship.