On July 10, the Russian parliament ratified the nation’s entry into the World Trade Organization. This move presents the United States with a historic opportunity to fully normalize trade relations with the world’s ninth largest economy. Making Russia a full-fledged trading partner would generate significant economic rewards here in Arizona.
According to the Business Roundtable, Arizona’s exports to Russia topped $24 million last year, which directly supported scores of local jobs.
The trade reforms Russia will install to enter the WTO should dramatically expand that figure — but only if federal lawmakers grant Russia what’s officially known as “permanent normal trade relations,” or “PNTR” for short.
Without PNTR, Russia won’t have to abide by the new rules when dealing with American businesses — and Arizona would lose out on millions of dollars in new trade.
Of course, Arizona isn’t the only state with a stake in normalizing trade with Russia. The entire country will benefit from reduced trade restrictions for Russia’s $300 billion import market.
Today, U.S. exports to Russia total about $11 billion. With PNTR, that figure could double by 2017. Refusing to normalize trade with the country, on the other hand, would put all of that trade in jeopardy.
When the U.S. extended PNTR to China, we saw a boost in exports, and now Arizona’s tax structure is even better positioned to attract export-oriented industries and the well-paying jobs that come with them. The recent creation of the Arizona Commerce Authority increases our exposure to markets around the world, which PNTR would help magnify.
Regardless of what the U.S. chooses to do, Russia will join the WTO. The only question for the U.S. is whether Congress will let U.S. firms take advantage of Russia’s entry. In order to do that, legislators in Washington must permanently repeal a decades-old, long-irrelevant trade provision known as the Jackson-Vanik amendment.
Jackson-Vanik linked the trade status of foreign countries to emigration rules, and was intended to pressure the Cold War Soviet Union into allowing Jewish Soviets to emigrate out of the USSR.
The amendment no longer serves any useful purpose. Following the collapse of the Soviet system, Russia opened up its borders, allowing free emigration for all. Each year since 1992, presidents from both parties have declared that Russia is in full compliance with Jackson-Vanik. Indeed, over 1.5 million Jewish Russians have left since the height of the Cold War.
Russia’s two decades of good behavior on emigration have been sufficient for major Jewish organizations to strongly support repeal of Jackson-Vanik. Even Israel has announced that it favors U.S. repeal of the provision.
Our own Sen. John McCain, a co-sponsor of the legislation that will grant PNTR to Russia, has also signed on to a bill to accompany Jackson-Vanik’s repeal that would impose new penalties on Russian officials found guilty of human rights violations. The Sergei Magnitsky Rule of Law Accountability Act would help protect against any future political persecutions and further liberalize the country.
All the U.S. has to do is decide to act. America won’t have to change any of its current trade policies on imports. Russia, on the other hand, will allow American businesses better access to a major new international marketplace, lower existing import tariffs on automobiles and aircraft parts, and grant American telecommunications and financial services firms new access to its tech and financial markets.
Manufacturers all over Arizona — from the Rebaling Center, which exports women’s clothing from Kingman, to Westmed, Inc., which ships medical devices from Tucson — already do business with Russian buyers.
These reduced trade restrictions will mean more and better export opportunities for Arizona’s businesses.
Last year, the state sent $6.2 million in airplanes and aircraft parts to Russia. Under WTO rules, Russia will have to reduce average tariffs for narrow-body civil aircraft and airplane engines. Arizona’s farm and food products industry, meanwhile, exported $2.9 million worth of beef products to Russia, an amount that will certainly increase once WTO rules govern Russia beef imports.
The size of the potential economic opportunity is considerable: Some estimates suggest that Russia will spend as much as $500 billion on infrastructure in the years ahead. Much of that demand can be met by U.S. businesses — if Congress acts to seize the opportunity.
In June, six former U.S. trade representatives warned that American firms will be at a significant disadvantage compared to foreign competitors if Congress fails to approve PNTR and repeal Jackson-Vanik.
The time to act is now — before Russia’s WTO membership takes effect. If we don’t act, the downsides are all too clear. Fortunately, so are the upsides if we do.
Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry.