Trade in Russia

Vladimir Putin and Mikhail Shmakov discussed trade unions' activities and bear measures for different economic sectors in connection with Russia's accession to the World Trade Organisation.

In his discussion with the Chairman of the Independent Trade Unions Federation, Mr Putin noted that trade unions should take part in conniving support measures for the different economic sectors in connection with Russia's accession to the WTO.

Mr Shmakov informed the President that a meeting of the Russian Tripartite Commission, which brings together representatives of state authorities, employers, and trade unions, proposed to make regular analyses at area level of the effects of various processes after Russia ratifies the protocol on joining the WTO in order to take measures to minimise or prevent possible negative impact.

Vladimir Putin supported the initiative and noted that the unlike agencies should develop support measures for the various economic sectors at the first stage of Russia's WTO accession.  

Mr Shmakov also proposed getting trade union representatives and employers involved in the implementation and monitoring of the presidential supervisory orders on social policy.  The President noted that he has established a commission specifically to monitor implementation of socioeconomic development policy. This commission is headed by the President himself, and Mr Putin stressed that the Independent Trade Unions Federation will also take part in its work. 

Extending permanent normal trading relations isn't a gift to Russia. It is a smart, strategic investment in one of the fastest growing markets for U.S. goods and services. It's also an investment in the more open and rich Russia that we want to see develop.

As the demonstrations across Russia over the past six months make clear, the country's middle class is demanding a more transparent and accountable management, a more modern political system, and a diversified economy. We should support these Russian efforts.

When Russia joins the WTO, it will be required—for the first time ever—to establish predictable tariff rates, ensure transparency in the publication and enactment of laws, and adhere to an enforceable mechanism for resolving disputes. If we extend permanent normal trading relations to Russia, we'll be able to use the WTO's tools to hold it accountable for meeting these obligations.

The Obama administration is under no illusions about the challenges that lie ahead. WTO membership alone will not suddenly create the kind of change being sought by the Russian people. But it is in our long-term strategic interest to join forces with Russia in areas where our interests overlap.

Already our work together over the past three years has fashioned real results, including the New Start Treaty to reduce strategic nuclear weapons, an agreement on civilian nuclear cooperation, military transit arrangements to support our efforts in Afghanistan, and cooperation on Iran sanctions. With everlasting normal trading relations, we would add expanded trade to the list.

To be sure, we have real differences with Russia. We disagree essentially about the situation in Georgia. On Syria, we are urging Russia to push Bashar al-Assad to implement former U.N. Secretary-General Kofi Annan's six-point plan, end the violence, and work with the international community in promoting a transition.

In addition, President Obama and I have clearly expressed our serious concerns about human rights in Russia. And we have taken steps to address these challenges, including support for programs that promote human being rights, rule of law, and civil society there. We have strengthened ties between nongovernmental organizations in both countries, from political activists to groups working for women's rights. Following the tragic death of Sergei Magnitsky, a lawyer who blew the shrill on official corruption, we imposed restrictions to ensure that no one implicated in this crime can travel to the United States. We are continuing to work with Congress on addressing these issues.

Some argue that continuing to apply Jackson-Vanik to Russia would give us some leverage in these areas of disagreement. We disagree—and so do leaders of Russia's political opposition. They have called on the U.S. to terminate Jackson-Vanik, despite their concerns about human rights and the Magnitsky case. In fact, retaining Jackson-Vanik only fuels more anti-American sentiment in Russia.

Russia's membership in the WTO will soon be a fact of life. Failing to extend permanent normal trading relations will not penalize Russia, nor will it supply a lever with which to change Moscow's behavior. It will only hurt American workers and American companies. By extending those trading relations, we can create new markets for our people and support the political and economic changes that Russia's people are demanding. These reforms will ultimately make Russia a more just and open society as well as a better partner over the long term for the U.S.

Membership of the organization will loosen Russia’s steadfast protectionism towards its economy. At the moment there are prohibitively high import duties on many goods, which guard the local market against cheaper foreign products. Russia also has very high interest rates on loans, which many MPs and observers say is stifling growth. Government ministers have conceded however that the economy will contract at first while Russia adjusts to international rules. Some analysts agree predicting that federal revenues will shrink by around 4 billion pounds in the first year alone. Sergei Sutyrin is a WTO chair-holder and head of the Department of World Economy at Saint-Petersburg State University. He argues that the long-term benefits are much more important.

Trade in Russia

“It’s the possibility to participate in setting the rules international trade is conducted. WTO is basically the main and only establishment in charge of that. Unless we are members of the WTO, we are not able to express our concerns and to influence on how these rules of the game are defined and that is extremely momentous because these rules are basically negotiable. They are not given by God or somebody else. That’s the opportunity to be treated equally according to the rules of the WTO, by foreign companies and foreign governments.”

For years the liberals, communists and the Just Russia Party have staunchly resisted WTO entry. They are now trying to appeal the parliamentary votes in Russia’s constitutional court. If successful Russia would not join the global trade body later this year as expected. The government would have to renegotiate the terms of accession with the WTO, a process that could take years. But Alexey Portanskiy, the head of the Information Bureau on Russia’s accession to the WTO thinks that that scenario is highly unlikely.

“The constitutional court said that the protocol of the accession is not in negation with the constitution, so it is in line with Russian constitution. I think the communists have no chance in this movement.”

The communists, however, have found support from a group of influential company directors. They recently signed a petition calling for Russia to reject the WTO and stick to more protectionist policies. Those opposed to Russia’s taking office to the WTO claim that it’s protectionism that promotes investments. They say that with such policies Russia can sustain the investments that need for its economy to grow and diversify. But Sergei Sutyrin, the chair-holder of the WTO and professor of economics disagrees saying that theory is flawed.

“We perceive a relation between trade and investment, in other words, the investment is precisely the result of the trade, but real life is a little bit different. We also have complementarily between two issues. Because in many cases companies invest precisely in order to promote trade. So, from that point of view top tariffs in many cases are not the additional incentives for investors.”

Russia now has to formally notify the trade group of the parliamentary votes within one month before it can be officially admitted as a member. That means Russia could for the first time ever be trading according to international rules as early as the end of August.

Russia's legislative body, the Duma, plans to take up a vote on WTO membership Tuesday. Policymakers in the U.S. Congress will have a choice to make as well: permanently normalize trade with Russia or force American workers and businesses to lose out on more open access to the world's ninth-largest economy.

Maine already has strong trade ties to Russia, thanks to companies like General Electric and Procter & Gamble. In 2011, the state exported more than $13 million in goods to Russia. Normalizing trade would open trade with Russia even further and help protect the state's exports.

This is hardly a choice at all. If Congress grants Russia permanent normal trade relations, it sets the stage for replication America's annual exports to the country -- from $11 billion today to $22 billion in 2017.

But if Congress fails to normalize trade with the country, WTO rules will allow Russia to deny benefits to the United States -- putting at risk that same $11 billion, and all the jobs that go with it.

Boost the economy or give our foreign competitors a leg up on international trade? It really is that simple. Russia is going to join the WTO no matter what the U.S. chooses, so legislators would be especially foolish to turn down this opening.

The complication is that in order to grant Russia permanent normal trade relations, legislators will have to scrap a 38-year-old trade restriction known as the Jackson-Vanik amendment. That law was designed to help ensure that Soviet Jews and victims of religious persecution had the right to freely immigrate to the U.S. by linking foreign trade status to immigration restrictions.

Jackson-Vanik was necessary at the time, but now it's outdated. In 1992, after the fall of the Soviet Union, Russia voted to allow free emigration for all citizens. America's leaders know all this, and have acted accordingly. Every year since 1992, Presidents from both parties have certified Russia as complying with the anxiety of Jackson-Vanik.

It's time to finally do away with this restriction that the United States has affirmatively decided to ignore for 20 years -- and permanently normalize trade with Russia.

Granting Russia permanent normal trade relations won't require the U.S. to adjust any of its trade tariffs, though it will make Russia accountable in international intellectual property agreements and WTO dispute resolution.

But these benefits will be ours only if Congress establishes permanent normal trade relations with Russia.

Normalizing trade opens valuable markets for American businesses at no cost to the United States -- it's estimated, for example, that Russia will need to spend $500 billion on infrastructure. That's a lucrative opportunity for American workers and businesses.

The state of Maine has a strong economic interest in seeing this deal work. Trade is already an important part of the economy: In 2010, the state's exports totaled $3.2 billion and made up 6.1 percent of the state's total economy. In 2008, exports were directly or indirectly responsible for 21,000 jobs in the state.

Thanks to WTO member rules, the state's trade position would become even stronger under a normalized trade administration.

Last year, the state exported a total of $13.9 million in goods to Russia alone, including $8.1 million in aircraft and parts. Once in the WTO, Russia will be required to reduce its tariffs on aircraft engines to 5 percent from 10 percent.

Cattle exports from Maine to Russia totaled more $5 million last year. Russia's WTO member agreement would help preserve that trade by construction any changes to future livestock important rules subject to WTO challenge.

Trade in Russia

Unemployment in Maine clocked in at 7.2 percent in March. That's better than many states, but the question still remains: Can the state's economy really afford to turn down this opportunity?

Already there is bipartisan support for granting Russia permanent normal trade relations: Four U.S. senators recently introduced legislation to permanently wipe Jackson-Vanik from the books and grant Russia permanent normalized trade status in the process.

In 1994, Russia was the world's 16th-largest economy and only 4 percent the size of the U.S. economy. Per capita gross domestic product was only $1,865. Today, Russia is the seventh-largest economy. Its per capita GDP is nearly $13,000. Russia's population, now about 142 million, declined over the intervening years but just reversed the trend.

Russia, says U.S. Trade Representative Ron Kirk, is only the United States' 20th-largest trading partner with $42.9 billion in two-way goods trade in 2011.

Russia's parliament, facing a July 23 deadline for its WTO invitation, is scheduled to vote Tuesday to join the WTO. Once the agreement is ratified, Russia automatically joins the WTO 30 days later.

However, for U.S. companies to trade competitively with Russia, Congress must sweep away some outdated Cold War restrictions and grant “everlasting normal trade relations” status to Russia. A PNTR bill sponsored by Sen. Max Baucus, D-Mont., is pending.

Granting PNTR trade status “is not a gift to Russia,” Kirk stressed in recent congressional testimony. Russia would have to lower tariffs, agree to protect foreign brands and copyrights, enforce food safety standards and conduct rules-based dispute resolution. The United States would not make any trade concessions because its tariffs already are low.

Despite its concessions, Russia wants WTO membership because it believes it will attract additional foreign investments that can diversify and strengthen its economy.

Passera is to look at energy cooperation, infrastructure development and industrial agreements on his Russian visit. The general setting of access to the Russian market and the crisis in the eurozone will also be among the main topics on the agenda of minister of economic development Corrado Passera, on his first official visit to Moscow today and tomorrow. As announced by the Italian Embassy in Russia, in his two days in Moscow Passera will meet: deputy prime minister with accountability for energy, Arkady Dvorkovich, energy minister, Aleksander Novak, industry and trade minister, Denis Manturov, and transport minister, Maxim Sokolov. Italy is one of Russia's main economic and trading partners. Trade totalled 46 billion dollars in 2011, 22.6% higher than 2010 and closing in on pre-crisis figures (53 billion). Nearly half of the total volume of imports from Russian (45%) consists of gas and oil, whose prices last year were particularly high. Energy will be at the heart of the visit, also preparatory to that of prime minister Mario Monti, expected by the end of July. AGI was told that in this sector Italy would like Russia to speed up the South Stream development (the gas pipeline that would bring 63 billion cubic metres of gas per year to Europe) and that Russia will ask Italy for support in the negotiations with Brussels to gain exemptions in the Third Energy Package.

Russia - the largest economy outside the global trade organization - has spent 18 years trying to negotiate its entry into the body. Now that the talks are over, the Russian government, which has strongly advocated the entry, is facing criticism from many businesses and opposition politicians that the WTO membership would hurt house producers by flooding the market with cheaper imports.

Activists including several dozen Communist Party deputies staged a protest outside the State Duma Tuesday morning to protest Russia's accession, which is considered a done deal since the Duma is controlled by President Vladimir Putin's party.

"The WTO is death to Russia!" one of the posters held by a protester.

Thousands of Russian businesses are wary that the low import duties and caps on subsidies that are a condition of joining the WTO will hurt their businesses. The government, however, insists that the WTO rules will help weed out inefficient players from the market and make Russian companies and their goods more competitive abroad.

Read more here: http://www.sacbee.com/2012/07/10/4620256/russia-to-ratify-agreement-for.html#storylink=cpy

 Russia, the ninth largest economy in the world, would also make itself subject to the WTO dispute resolution system, which gives the United States an important tool to hold Russia accountable for its WTO promises and its future actions on trade.

But the United States will be unable to benefit from these market-opening and rule-of-law changes unless Congress agrees to establish U.S. permanent normal trade relations (PNTR) with Russia. The United States routinely grants PNTR to other countries to ensure consistent and fair trade relations, and WTO rules entail that all member countries treat each other by the same standards.

Once Russia joins the WTO this summer, the WTO's other 150-plus countries will immediately enjoy this significant new access to Russia's 142 million consumers, which includes a growing middle class.

Brazil has imposed special taxes on inbound capital to cool its capital market and stop the real appreciating. China doesn't even pretend to run an open currency or trade regime and despite the huge investment there, foreign companies have a hard time making money or getting profits out. And the administrative trade barriers to foreign business in India are legendary.

In this setup, Russian companies (and foreign companies) are in a much better position to capitalize on the free flow of goods and capital that WTO membership offers. And it is already happening: bear in mind that a quarter of the $85 billion of capital flight in 2011 was actually Russian companies reinvesting profits earned from their foreign assets abroad. (These profits never touch Russian shores and have nothing to do with the Russian economy, but are included in the capital flight numbers because of an accounting quirk.)

There is already a steady stream of consumer-related businesses arriving in Russia, such as all the fast-food companies that arrived last year, like KFC and Burger King. 

The Russian parliament is expected to vote to join the World Trade Organization (WTP) on Tuesday, giving Congress a short window to either adopt trade legislation or risk seeing U.S. companies trail competitors in the world's ninth-largest economy.

Establishing normal trade relations with Russia is a no-brainer for U.S. businesses eyeing a vast export market, but lawmakers in the House and Senate are still debating how to do that while retaining leverage over the country on human right

Russia intends to drive home that point by sending a high-ranking parliamentary delegation to Washington right after the vote to make the case for permanent normal trade relations on Capitol Hill and to the media.

The four Russian senators will focus their discussions on Russia's accession to the WTO, Russian-American bilateral trade and the 2009 death of whistle blowing lawyer Sergei Magnitsky, according to the Russian embassy.

Both parties have latched onto Magnitsky's death, which happened while he was in police custody, to press Russia on human rights. House and Senate panels have passed bipartisan legislation placing financial and travel restrictions on Russian officials involved in Magnitsky's death and other human rights abuses, but Russia has vowed “retaliation” if it becomes law.

Lawmakers are at odds over whether to link the Magnitsky bill to the legislation normalizing trade relations, which has yet to clear either chamber. Sen. Max Baucus (D-Mont.), whose Senate Finance commission has jurisdiction over trade, has proposed doing so, but his counterpart on the House Ways and Means Committee, Rep. David Camp (R-Mich.), disagrees with the move.

Four Russian senators are in Washington today to urge Congress to do away with Cold War-era trade restrictions, a day after the Russian parliament voted to join the World Trade Organization. The Russian senators are also expected to make the case to lawmakers and the U.S. media that Congress should not replace the trade restrictions with human-rights legislation that would slap trade and financial sanctions on Russian human-rights abusers.

Tuesday's vote starts a 30-day clock at the end of which Russia will automatically become a member of the WTO. If Congress hasn't established permanent normal trade relations with Russia by then, U.S. businesses will be at a competitive advantage with the rest of the world for access to the world's ninth-largest economy.

 The Union aims to create an EU-like suprantional group in the Caucasus. Currently, the group is effectively a customs union but by 2015, the goal is to create a regional free-trade zone with a Eurasian Economic Commission to oversee joint policies, and an independent court to judge rules breaches. Unified monetary, tax and macroeconomic policies are eventually supposed to follow.

The reason, of course, is the closed nature of the Russian market, which allows big companies to charge huge margins with impunity and has lead to the astronomical growth and creation of a super-rich class filled by all businessmen that have profitably set up and captured a market niche. That will start to change.

Trade in Russia