Russia’s WTO Membership Approved, But Will U.S. Companies Benefit?

At their ongoing ministerial meeting in Geneva, the World Trade Organization’s 153 members earlier today unanimously approved Russia’s accession as a member. The ball is now in the court of the U.S. Congress to effectively ratify this historic development or to forfeit significant benefits for the U.S. economy.

Russia will officially become a member 30 days after its legislative Duma gives its final approval, which is expected to occur in March, April, or May of next year. But U.S. companies will enjoy enhanced access to the Russian market only after Congress votes to repeal application of the 1974 Jackson-Vanik amendment.

The Cold-War-era amendment bars normal trade relations from applying to communist and formerly communist nations that restricted the emigration of Jews. Although that issue disappeared decades ago, the amendment still requires an annual exemption for Russia. As long as the amendment applies, Russia can withhold the more liberal access to its market that it agreed to extend to all other WTO members upon its accession. As Reuters reports today:

The Jackson-Vanik amendment, a 1974 provision linking trade to emigration rights for Soviet Jews, would have to be revoked for Washington to be able to apply so-called “permanent normal trade relations” to Russia.

Failure to do so would allow Russia to deny the United States preferential access to its markets in what would amount to an own-goal for U.S. businesses such as Pepsico or Alcoa that have already invested billions of dollars in Russia.

With Washington and Moscow exchanging reproaches over the conduct of Russia’s parliamentary vote, repealing Jackson-Vanik will be a challenge as Republicans, who control the House, gird for next year’s U.S. presidential election.

“Russia’s membership in the WTO marks an important milestone in its history, but there is hard work yet to be done on the American side,” said Edward Verona, head of the U.S.-Russia Business Council, a business lobby that backs Russian WTO entry.

“If Jackson-Vanik still applies to Russia once it accedes, then U.S. companies and farmers will be at a disadvantage to their global competitors and will not have access to the preferential trade regime negotiated over the last 18 years.”

As for our take on why Congress should repeal Jackson-Vanik as soon as possible, you can read the long and the short of it on our website.