From Russia, With Love (of Tariffs)

My wife didn’t think this blog post title made sense…since it’s really about how Russia doesn’t love tariffs and is willing to lower them to join the World Trade Organization. But you get the idea, plus it’s a James Bond reference (my second on this blog to date), so it’s a win-win. In addition, this post is another entry in your favorite – our ongoing series on WCIT’s policy priorities – which means that’s three reasons right there to read on.

But, of course, the reason you really want to read this post is to understand why Washington state would possibly have an interest in whether or not Russia joins the WTO. And I’ll give you a hint: it has nothing to do with whether or not I can see Russia from my house…

The policy issue is officially called Russian WTO Accession because, like everything in international trade law, it can’t be simple. Russia isn’t trying to “join” the WTO, it must “undergo an accession process.” But I digress. The point is that, for Russia to become a member of the WTO, it has to negotiate the terms of its entry with current WTO members. That is, Russia – or any other country trying to enter (there are 29 currently in various stages, from Yemen to the Bahamas) – has to show that it’s committed to WTO provisions: stable and predictable market access, adoption of policies and practices that encourage trade and investment, etc. Nothing too surprising.

What is surprising is how long it’s taken Russia to go through this process; they initially applied for accession in 1993, which makes their accession negotiation the longest in WTO history. Why? Well, probably a lot of reasons, including the Russian government’s off-and-on interest in joining the WTO, as well as recurring Russian political tensions with the West. That whole war with Georgia didn’t really help matters either (especially since Georgia is in the WTO already and Russia has to negotiate with them to get entry…awkward!). But one of the main issues that the US to resolve is a little something called the Jackson-Vanik Amendment.

Now Jackson-Vanik should have a special place in the hearts of all Washingtonians because one of the two eponymous sponsors is our own beloved Henry “Scoop” Jackson. But if you’re not a Scoop buff or an international trade aficionado, you probably don’t know it. The amendment, passed in 1974 as part of the Trade Act, says very simply that the United States cannot give most favored nation status to countries with non-market economies that restrict emigration. In its day, that was especially a big deal for Jews like me for whom the cause of Soviet Jewry was a big deal; J-V led to the eventual emigration of over a million Soviet Jews to Israel. OK, now we’re really off-topic. Let’s get back to it.

Russia wants to “access” (“acceed”?) to the WTO. The US is generally in favor of it, pending a number of final agreements on things like IP and agriculture. But we’re getting pretty close on those. However, we can’t really move forward full bore unless we first grant Russia “permanent normal trade relations” status (PNTR is necessary to allow U.S. farmers, ranchers, manufacturers and service providers to take full advantage of Russia’s accession), which we can’t do unless we repeal Jackson-Vanik. Not an impossible barrier by any means, but have you noticed how hard it is to get Congress to agree to anything these days? It’s going to take a lot of focus from the business community – including the Washington Council on International Trade and its members – to really force Congressional action.

So now you’re saying, “Yeah, I guess we could spend our time and energy on that, but why would we?” Here’s the thing about Russia: it’s the world’s 10th largest market with a large middle class consumer base, but it is only the United States’ 37th largest trading partner. So there’s a big economic opportunity there. Russia WTO accession would lead to significantly lower tariffs on U.S. exports, and prevent other trade barriers on products like agricultural goods.

That’s why the whole country cares, but it’s even more exciting for our state. Let’s start, for example, with the fact that airplane tariffs will be cut in half under this agreement (which would be sort of a good thing for Boeing and all). Or that Microsoft has a huge, growing presence there already, and is the exclusive software provider to the Russian hosted 2014 Olympics. In fact, Washington is one of the top 10 states in the country in terms of export to Russia, and it’s one of our fastest growing markets. So, our state stands to benefit greatly from WTO accession, which means that it’s very much in our best interest to do everything we can to ensure that it happens.

There you have it. A clear case for why Washington state businesses should care about Russian WTO accession, and I got through it without making one “Russian Dolls” reference. Damn, I guess I just did. But at least no weird Cold War jokes. Regardless, that gets us to the end of yet another WCIT Policy Priorities blog post. And, although we’ve done so many already that it’s hard to imagine what else we could talk about, there’s yet another in this series coming soon. Next week’s topic? International tourism, with a post entitled “Come and Visit! (Bring Money.)

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