August 11, 2012
Trade Relations With Russia
Congress was supposed to pass a bill to improve trade relations with Russia before it left town for summer recess. That did not happen, and American companies that do business in Russia, or want to, may find themselves at a disadvantage with foreign competitors once Russia joins the World Trade Organization on Aug. 22.
The issue hangs on an anachronism called the Jackson-Vanik amendment, which was enacted in 1974 to pressure Moscow to grant Jews the freedom to leave the country by effectively imposing higher tariffs on imports from the Soviet Union. Two decades later, Jewish emigration is no longer a problem, but the law is.
Since 1992, American presidents have waived application of the law and granted Russia temporary, normal trade status, which allows lower import duties. With Russia becoming the last major economy to win admission to the W.T.O., that status needs to be made permanent. If Jackson-Vanik is not lifted, the United States will be in violation of W.T.O. rules. And American exporters will have to pay higher tariffs to Russia to enter its markets than European and Asian competitors do. The fallout for American workers should be obvious.
President Obama has made this legislation a trade priority. The business community also put it at the top of its agenda and lobbied hard for it. But some in Congress are uneasy with approving any law that seems to benefit Russia given the autocratic ways of President Vladimir Putin, his flashes of anti-Americanism and his support for President Bashar al-Assad of Syria. The situation is particularly awkward for the Republicans because their presumptive presidential candidate, Mitt Romney, has recklessly and incorrectly proclaimed Russia to be America’s “No. 1 geopolitical foe.”
Repealing Jackson-Vanik should not be seen as a favor to the Putin regime. Experts say it could result in a doubling of annual American exports to Russia to $19 billion in five years. Improving trade ties would also help open the Russian economy and facilitate change. As recent street protests have shown, the middle class there is demanding more of government.
That should be reason enough to pass the bill. But the legislation also includes a provision that would have the United States ban visas and freeze the assets of people believed responsible for the death of Sergei Magnitsky, an anticorruption lawyer who died in 2009 after a year in Russian jails. Other human rights abusers could also be made subject to these penalties.
Russia has threatened to retaliate. But this provision would be strong condemnation at a time when Mr. Putin’s government has tightened control over Internet sites, protesters and nonprofit organizations.
The are some differences in the House and Senate versions of the Magnitsky provision. Congressional aides say they are close to reconciling the differences, and there are sufficient votes in both the House and the Senate to pass the overall trade bill. Eric Cantor, the House majority leader, said last week that the House would take up the legislation in September. He should make good on that promise.
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