Good News
Russia joined the WTO yesterday! This is kind of a big deal. The country’s leaders, although still as authoritarian and illiberal as we all know they are, nevertheless committed to open Russia’s domestic markets to foreign competition by significantly reducing import duties and eliminating protectionist regulations. Just as important, by locking in these policies in the form of international obligations, Russia has provided investors with some certainty and security that the government will not revert to harmful past practices.
The greatest beneficiary of Russia’s entry will be the Russian people, whose standard of living is sure to rise as they gain access to higher quality goods and services. Some Russian manufacturers who have been supported by the state and insulated from competition will have a hard time adjusting, but many others will take advantage of cheaper inputs available from abroad to become more competitive in global markets. Even if Russia shirks on some of its commitments (as the U.S., EU, and China certainly do), the globalization of Russia’s economy makes the entire world more free and slightly richer.
Bad News
Congress thinks you don’t really want that. Eight and a half months after Russia’s two-decade-long WTO accession negotiations concluded, Congress still has not repealed an embarrassingly obsolete Cold War trade restriction. The 1974 Jackson-Vanik amendment was supposed to pressure the Kremlin to allow Jews to leave the Soviet Union; now it allows the Kremlin to prohibit U.S. goods from entering Russia. Some people in Congress (I’m looking at you, House leadership) short-sightedly fear that repealing Jackson-Vanik will make them look soft on Russia, but as long as Jackson-Vanik is on the books, Russia’s WTO obligations do not apply to trade with the United States.
As many people have explained many times (including myself), there is no downside to repealing Jackson-Vanik, and not doing so will prevent U.S. businesses from taking advantage of Russia’s newly opened economy. Even if Congress eventually acts, the fact that they haven’t done it yet (and we don’t really know when or if they will) creates enough uncertainty to keep U.S. companies from engaging the Russian market. The most troubling part of all this is that literally billions of people are more free than they were Tuesday, but I am not.