WTO: Wish, Trouble, Opportunity

Posted on 22. Jun, 2011 by Svetlana Babaeva in Eurasia, Latest, RIA Novosti

Regardless of the optimism Obama’s administration radiates, it is still uncertain whether Russia will join the World Trade Organization by the end of the year. Too many problems are in one knot to be untangled in such a short time. The first and, to a large extent, the key factor is Russia’s willingness to pursue this goal. The most recent factor sounded during the St. Petersburg Economic Forum, when Deputy Prime Minister Igor Shuvalov expressed his confidence that the remaining issues would be resolved within a few weeks. He warned that otherwise Russia’s accession to the WTO could be drawn out. Following him, Russia’s Economic Development Minister Elvira Nabiullina echoed this sentiment and added that authorities responsible for the negotiations “are doing their best to reach an agreement.” However, it seems that in reality Russia is willing to enjoy the benefits of the world trade network while not ready to give any rebates required of such a multilateral membership. The recent case of Russia imposing a ban on European vegetables after the e-coli infection outbreak in Germany demonstrated this. This measure was severely

condemned by the EU representative in Moscow, who said that the ban does not comply with the spirit of the WTO. According to him, Russia should follow the rules if it wants to join the organization this year. A strong response swiftly followed. Prime Minister Vladimir Putin declared that the Russian government would not poison its citizens for the sake of spirit. And reiterated “what he said a hundred times,” that Russia would not place restrictions or bear the costs until it had received the real benefits of membership. This generally reflects the country’s attitude toward doing business, first demanding concessions from others and only then making clear that it will consider whether to give something in return. Such an approach gives the impression that doing business with Russia is a privilege rather than a routine, and most of its economic deals are a gesture of national generosity rather than a common exchange. One of the results is that major transactions, both domestic and international, are still publicly perceived as shady dealings aimed to enrich certain individuals rather than serve the nation’s prosperity. However, even if Russia overcomes its negativism for more competitive open trade, it may face obstacles that are beyond its authority, and the first among them involves developments in the United States. Although Russia’s WTO membership does not directly derive from the will of the U.S. Congress, the lawmakers can have their final say. Until the notorious Jackson-Vanik Amendment is repealed, Russia cannot be granted Permanent Normal Trade Status, and without this, American companies doing business with Russia will lose out to their European and Asian competitors. This is the key argument the Obama administration has put forth in its debates with the Hill. Unfortunately, Russia’s share in U.S. trade is too insignificant to draw Congress to act. According to the Office of the U.S. Trade Representative, Russia was in 2010 the 24th largest goods trading partner of the United States with $31.7 billion in total goods trade and the 37th largest goods export market. The only truly considerable trade issue for the United States is poultry. “For U.S. poultry and meat producers, the economic stakes of Russian import actions are significant,” according to the Congressional Research Service, which ranks Russia as one of the largest export markets with 18% of total U.S. poultry exports.

However, this argument is unlikely to be determinative for all lawmakers. And a bill recently introduced by Senator Ben Cardin (D-MD) serves as evidence. The CoChairman of the Commission on Security and Cooperation in Europe along with 15 other senators introduced a bill that would freeze assets and block visas of individuals who commit, according to the authors, human rights violations in Russia. It has already been called “the Magnitsky Bill” in honor of a lawyer at an investment company accused of tax fraud. He was arrested for collusion with the fraudsters and died in custody under suspicious circumstances in a pre-trial detention center at the age of 37. Russian President Dmitry Medvedev has promised a full inquiry into his death. The bill was introduced in May and coincided with the efforts of the U.S. administration to call for the Jackson-Vanik Amendment to be repealed and to enliven U.S.-Russian economic relations. Those who understand the workings of Congress advise taking the bill seriously, as it was co-sponsored not only by hardline Republicans but also by eight Democrats. And unlike the Jackson-Vanik Amendment, which formally has not been repealed and does not apply because of a year-long presidential waiver, the newly introduced bill provides formidable mechanisms that can significantly complicate bilateral relations. This relationship, hence, remains unsettlingly fragile, as the two countries do not yet have any solid common background that could quell an eventual turmoil. This article was originally published on RIA Novosti. By Svetlana Babaeva Tags: Deputy Prime Minister Igor Shuvalov, Obama Administration, Prime Minister Vladimir Putin, Russia, WTO

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