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Russia’s Joining the WTO — Different Approaches to Human Rights Concerns Across the Atlantic

Russia’s Joining the WTO — Different Approaches to Human Rights Concerns Across the Atlantic

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This policy brief looks at leverage the United States and EU will use on Russia following WTO admission.
This policy brief looks at leverage the United States and EU will use on Russia following WTO admission.

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Categories:Types, Research
Published by: German Marshall Fund of the United States on Jul 19, 2012
Copyright:Attribution Non-commercial


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When Russia be-comes a member of the WorldTrade Organization in the coming months, Europe and the UnitedStates are expected to takedifferent approaches to put-ting pressure on the country toimprove its human rights record.The United States is likely to use
trade, specically the granting of 
permanent normal trade rela-tions status, as an incentive.Europe, on the other hand, willcount on the European Court of Human Rights to penalize humanrights failings. The question is,which approach will ultimately bemost successful?
Economic Policy Program
Policy Brie 
Russia’s Joining the WTO — DifferentApproaches to Human RightsConcerns Across the Atlantic
by Jennifer Hillman
July 2012
1744 R Street NWWashington, DC 200091 202 683 2650F 1 202 265 1662E ino@gmus.org
Amid much anare in Geneva lastDecember, the members o theWorld rade Organization (WO),including the United States andEurope, welcomed Russia into theirold, ollowing nearly 18 years o on-again, o-again negotiations. Teapproval by the WO’s MinisterialConerence o Russia’s accession to theWO means that Russia will becomea member 30 days aer it inorms theorganization that it has made all thenecessary changes to its laws, regula-tions, and tari schedules to ensurecompliance with the commitmentsRussia made in its accession docu-ments. Tat notication will come very soon (by July 23, 2012 at the latest —with Russia’s Duma having passed thenecessary legislation on July 9 and itsupper chamber slated to take it up onJuly 18). Tirty days later, Russia willautomatically become a ull-edgedmember o the WO. Tis will happenno matter what the U.S. Congress does— or does not do — with respect togranting Russia Permanent Normalrade Relations (PNR) status.What will happen should Congress ailto act on a PNR bill by the end o thissummer? Currently, trade relationsbetween the United States and Russiaare governed by a 1992 U.S.-RussiaBilateral rade Relations Agreement,signed with the Soviet Union in 1990,but entered into orce with the RussianFederation in 1992, which providesthat both countries agree to give eachother the benet o most avorednation (MFN) tari treatment ontrade in goods. Unless and until theCongress passes PNR or Russia, thisagreement will remain in place andwill continue to govern trade relationsbetween the United States and Russia,even aer Russia ormally accedes tothe WO. However, the agreementcovers only the tari and customstreatment o goods, along with taxesor internal charges on imports orexports and the rules concerning thesales and distribution o products inthe Russian market. It does
coverservices, specic intellectual property protections, sanitary or phytosantiary standards, or disciplines on subsi-dies. It does not provide or nationaltreatment or U.S. goods, includerules governing customs valuation, orprovide any guarantees o a country specic tari-rate quota, includingon key products o interest to theUnited States, such as pork. Nor does
Economic Policy Program
Policy Brief 
If Congress fails to pass PNTRlegislation, Russia will still becomea member of the WTO.
it provide or a dispute settlement mechanism should eitherside abrogate its terms.I Congress ails to pass PNR legislation, Russia will stillbecome a member o the WO, and the obligations andcommitments Russia made in doing so will be applicable toall other members o the WO, but not to the United States.In December 2011 when the members o the WO ormally granted Russia entry into the WO, the United Statesinvoked an exception, stating that it would not apply theWO rules and commitments to Russia. Te United Stateswas orced to invoke this exception because it could notcommit to granting Russia “immediate and unconditional”Most-Favored Nation (or, in U.S. parlance, Normal radeRelations) with Russia. While the United States has inreality granted Russia Normal rade Relations every singleyear since 1992, those grants o Normal rade Relationshave not technically been “unconditional.” Te “condition”placed on them stems rom the Jackson-Vanik Amendmentto the rade Act o 1974 relating to the right o reedom o emigration. Following the break-up o the Soviet Union,Russia implemented ull reedom-o-emigration poli-cies, and every year since 1994, every U.S. president hasdeclared that Russia is in ull compliance with the require-ments o Jackson-Vanik. Every year the Congress has hadthe right to review or overturn that declaration, but it hasnever done so. As such, Russia has received Normal radeRelations treatment consistently since 1992, but not on abasis that can legally be declared ree o conditions or thatwould allow the United States to apply the WO rules andcommitments to Russia. Tereore, trade relations betweenthe United States and Russia will continue to be governednot by the broad-reaching and binding rules o the WO,but rather by the terms o the more limited 1992 Bilateralrade Relations Agreement, until the United States canrevoke its December exception.
Russia’s Accession to the WTO — A Long and Winding Road
Russia ormally applied or accession to the General Agree-ment on aris and rade (GA) in 1993, in an eortlaunched by then President Boris Yeltsin. wo years later,when the WO was created with the conclusion o theUruguay Round as the successor to the GA, the WOtook up Russia’s application. Numerous meetings o theWorking Party established to guide Russia’s accessionprocess were held and 56 members o the WO conductedand completed bilateral market access negotiations withRussia to ensure that Russia would lower its taris orremove its barriers on the products o most interest to eacho those WO members.Among the early and staunchest supporters o Russias entry to the WO was the European Union, and the EU’s bilat-eral market access agreement with Russia was completedin 2004. Ten and now, the EU is Russia’s largest tradingpartner and the largest source o oreign direct investmentin Russia. Te United States was also a strong supportero Russia’s eort to join the WO, and completed its ownmarket access negotiations with Russia two years aer theEU, in 2006. Tese various bilateral agreements and theoutcome o the Working Party meetings were ultimately consolidated into a Protocol o Accession and a WorkingParty report that set out the terms on which Russia willsoon be joining the WO.Te twists and turns along the road were numerous, withmuch progress grinding to a halt during the internationalcrises in 1997 and 1998, periods o indierence underPutin, and a urther slowing o progress during the globalnancial crisis in 2007-2008. An agreement looked like itwas just around the corner when in June o 2009, Putin saidhe would abandon application as Russia but would seek to join the WO as part o a customs union with Belarus andKazakhstan, which would require a new start on much o the work. In the end, Putin decided that Russia, Belarus,and Kazakhstan would each pursue WO membershipor themselves. Te nal hurdle came rom WO memberGeorgia, who objected to the proposed customs treatmento goods moving in and out o the separatist Georgian terri-tories o Abkhazia and South Ossetia. As the deadline inGeneva loomed, the Swiss government came orward witha plan to allow an independent private company to check customs on all border crossing points between Russia and
Economic Policy Program
Policy Brief 
Georgia, in exchange or which Georgia removed its objec-tion rom Russia’s accession to the WO.
 For both Russia and its trading partners, accession to theWO marks a major milestone or bringing Russia intothe rules-based trading system. It presents a tremendousopportunity or Russia, particularly as WO membership islikely to make Russia a more attractive home or the oreigndirect investment it needs to und its “new industrializa-tion” policy. For the WO, Russia, with its 143 millionpeople and its $1.791 trillion in GDP, represents the largesttrading country that was not yet a member. And or thebiggest traders, the United States and the European Union,Russia’s accession means signicantly improved access tothe Russian market and greater assurance that Russia willplay by the WO rules.Te stakes or Europe and the economic relationshipbetween the EU and Russia are particularly high. Te EU isby ar Russia’s largest trading partner, accounting or 47.1percent o Russia’s overall trade. Europe is also by ar themost important investor in Russia, with FDI stocks investedin Russia o more than €120 billion. Europe largely importsenergy and mineral uels rom Russia, along with somemanuactured goods, chemicals, and raw materials, whileEuropes exports to Russia cover a wide variety o goods,ood, machinery, and transport equipment.For the United States, Russia is a smaller but very importanttrading partner, with two-way trade between the UnitedStates and Russia o $31.7 billion, making Russia the UnitedStates’ 23
largest goods trading partner. For the UnitedStates, Russia is a key market or machinery ($1.7 billionin exports), meat ($642 million), vehicles ($484 million),electrical machinery ($395 million), and optic and medicalinstruments ($383 million). Like Europe, U.S. importsrom Russia are concentrated in oil ($18.5 billion), iron andsteel ($1.3 billion), enriched uranium ($1.3 billion), nickel($727 million), and platinum ($710 million). Comparedto Europe, the United States has a much smaller level o oreign investment at $9.9 billion, with Russian investmentin the United States at $7.8 billion.
1 For the details and implications of the agreement regarding Georgia, see AndrasRacz, “Russian WTO Accession and the Geneva Agreements: Implications for Russiaand Georgia,” Transatlantic Academy, December 2011.http://www.gmfus.org/archives/russian-wto-accession-and-the-geneva-agreements-implications-for-russia-and-georgia.
Recent studies examining the eect o Russias accessionto the WO indicate signicant positive economic eects virtually across the board, along with critical but harder toquantiy benets o having Russia part o the rule-basedtrading system and subject to disciplines that guard againstprotectionist measures or unilateral actions. For the UnitedStates, Anders Aslund and Gary Huauer predict that i theCongress grants PNR status to Russia, allowing the UnitedStates to reap all o the benets contained in Russia’s acces-sion package, U.S. exports o goods and services to Russiawill likely double within ve years, rom $11 billion in 2011
Russia’s Accession Protocol Package
Protocol of Accession
— basic legal text of what
Russia has commied to do to bring its trade lawsand pracces into compliance with WTO rules,including non-discriminatory treatment of goodsand services imports; ensuring transparencywhen implemenng trade measures; liming andreducing agriculture subsidies; enforcing intellec-tual property rights; opening government procure-ment contract opportunies to foreign rms; andacceptance of WTO dispute selement procedures.
Working Party Report
— summarizes proceedingsand sets forth more detailed condions of entry;some paragraphs are expressly incorporated byparagraph number into the Protocol and henceinto the WTO Agreements.
Schedules for tari bindings
— reducons in tarison industrial and consumer goods from almost 10percent to 7.8 percent on average, with larger cutsfor chemicals, aircra, and farm machinery, andcuts to 0 percent on informaon technology prod-ucts; reducons in taris on farm products from 13percent to 10.8 percent on average.
Schedules for services bindings
— openingservices markets to 100 percent foreign ownershipof companies in banking, securies, non-life insur-ance, telecommunicaons, audiovisual, wholesale,distribuon, retail, and franchises.

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