Cold War Era Legislation Could Hinder US-Russia Trade

Andre de Nesnera

March 21, 2012

A relic of the Cold War era between the United States and Soviet Union could soon be an obstacle to improving trade between the U.S. and Russia, experts say.

Jackson-Vanik amendment

The relic in question is known as “the Jackson-Vanik amendment,” which Congress passed as a modification to the 1974 Trade Act that regulated commerce between the United States and nations that were then controlled by communist governments.

Under Jackson-Vanik, Washington could not establish normal trade relations with another country unless that country granted its citizens full and unrestricted rights to emigrate. At the time, the Soviet Union and its Warsaw Pact allies severely restricted emigration.

“Congress initially passed the law in response to the Soviet Union’s emigration restrictions, particularly with respect to its Jewish citizens,” Sen. Max Baucus, chairman of the Senate Finance Committee, said during a recent hearing. “Jackson-Vanik served its purpose. It helped millions of Jews emigrate freely.”

“But it is now a relic of the past,” Baucus said. “Every president, regardless of political party, has waived Jackson-Vanik’s requirements for Russia for the past 20 years.”

Economic impact

The Obama administration agrees, saying U.S. businesses will suffer unless Congress repeals Jackson-Vanik. Repeal would open the way for U.S. companies to continue doing normal business on a permanent basis with Russia, which is expected to become a full member of the Geneva-based World Trade Organization (WTO) this year.

The WTO, which oversees the rules of international trade, approved Russia’s membership application last December and trade experts expect Moscow to ratify the agreement by July.

As a full WTO member, Moscow must agree to a series of trade rules, including a ceiling on tariff levels imposed on imported goods and the protection of intellectual property. In addition, Russia will have to amend its economic and trade laws to make them conform to international standards.

Most trade experts agree that Jackson-Vanik should be repealed as soon as possible.

“First, it applies to a country that no longer exists - the Soviet Union,” Anders Aslund, a Russia expert with the Peterson Institute for International Economics, told VOA. “Secondly, the problem in question is emigration and that has not been a problem for many years.”

Business

Thirdly, adds Aslund, if the Jackson-Vanik amendment is not repealed, tariffs on Russian goods to the United States could increase to 50 percent, severely curtailing, if not ending, all Russian exports to the United States. U.S. exports to Russia would also be greatly affected, he said.

U.S. business leaders are closely watching the issue. They say their business in Russia will suffer unless Moscow is granted “permanent normal trade relations,” or PNTR, with the United States. This trade status can be granted only after Jackson-Vanik is revoked.

“Russia has committed upon accession (to WTO) to significantly reduce its tariffs on imported agricultural equipment, from 15 percent to five percent,” Sam Allen, chairman of Deere and Company, told a recent congressional hearing. “However, it is likely that Russia would not extend the lower tariff rates to the U.S.-made products until it is granted PNTR.”

Caution suggested

But while American businesses are calling for the swift repeal of the amendment, others are urging caution.

One of those is Sen. Jon Kyl, who recently addressed his colleagues on the matter.

“While emigration may no longer be the issue, Russia’s blatant disregard for human rights and the rule of law is every bit as relevant today as it was decades ago,” Kyl said. “Human rights cannot be divorced from the discussion of our economic relationship with Russia, particularly since some of the most egregious cases of abuse involve citizens exercising their economic and commercial rights.”

Kyl also says Russia is moving away from international norms and values.

“In recent months, Moscow has not only blocked United Nations Security Council action on Syria, but has continued to sell arms to Assad’s regime, which is responsible for the slaughter of innocent citizens,” the Arizona Republican said. “This is not a government that can be trusted to uphold its international commitments or give a fair shake to American businesses.”

Kyl concluded that there was no need to consider repealing the Jackson-Vanik amendment anytime soon, adding that a thorough examination of U.S.-Russia relations was needed first.