The Heritage Foundation

Executive Summary #1551 on Russia

May 22, 2002

May 22, 2002 | Executive Summary on Russia

Executive Summary: Why Russia's Accession to the WTO is in America's Economic and Strategic Interests

Among the important topics of discussion for President George W. Bush and Russian President Vladimir Putin at their May 23-25 summits in Moscow and St. Petersburg will likely be Russia's accession to the World Trade Organization (WTO). The issue richly deserves their attention. Since China's accession to the WTO in November 2001, Russia is the largest economy that is not a part of this global trade forum. Given Russia's growing importance as a strategic partner of the United States in the war on terrorism and the growth in its economy over the past three years, Russia's accession to the WTO is clearly in America's interests.

The objectives of U.S. trade policy include achieving more equitable and reciprocal market access for U.S. goods, services, and investment, and reducing and eliminating barriers to trade and other market-distorting policies and practices. Consumers in America will benefit from reducing trade barriers to Russian goods, such as steel, fuel for nuclear reactors, and certain types of aircraft. Negotiations over Russia's accession to the WTO should clearly focus on such mutual benefits.

Complying with WTO Requirements.
To join the organization, however, Russia must first implement important economic adjustments that would enable it to comply with WTO requirements. These include eliminating tariffs on certain goods; creating a non-discriminatory, transparent environment for foreign goods and services; reforming the financial and banking sectors; and introducing decisive measures to protect foreign investors and intellectual property rights. These requirements are part of the universal accession policy for all WTO candidate countries, and Russia should not be subject to any special considerations or compromises. The United States should be clear and unwavering on this point: Russia must fully implement all of the WTO accession requirements.

Promoting Russia's Accession.
In discussions and negotiations with Russia as well as in the WTO Quad Group with representatives of the European Union (EU), Canada, and Japan, which is taking the lead in the Russian accession talks, the United States should:

  • Support Russia's efforts to open its economy to trade and investment , which will facilitate its integration into the community of democratic market-oriented states and boost its role as an anti-terrorism partner of the United States. In Moscow, President Bush should encourage Putin, the Russian government, and Russia's business community to improve the overall performance of the Russian economy by opening markets to trade and investment.
  • Endorse Russia's "graduation" from Jackson-Vanik restrictions that prevent it from enjoying permanent normal trade relations (PNTR) with the United States. The Jackson-Vanik Amendment prevents Russia's equal treatment as a trade partner, which is required by WTO rules. The United States, and Congress in particular, should take the first step to pave the way for Russia's accession to the WTO by permanently lifting these Jackson-Vanik restrictions.
  • Focus discussions on the tariffs that Russia must eliminate or reduce, as required by WTO accession rules. These should include sectors and products that Russia has tried to protect, such as pharmaceuticals; medical, construction, and agricultural equipment; aerospace; autos; and steel. These tariffs should also be discussed at the WTO Quad Group meetings.
  • Support Russia's membership in the WTO Agreement on Government Procurement. The WTO Quad Group also should include a requirement for accession that Russia sign this agreement, which stipulates that members provide transparency and non-discrimination in government procurement.
  • Advise the Russian government and Central Bank on ways to reform and open the banking, financial, and insurance services sectors. The U.S. Trade Representative should recommend that the WTO Quad Group make financial-sector reform before WTO accession a priority.
  • Request that the Russian Ministry of Trade and Economic Development implement the WTO's intellectual property rights requirements (known as TRIPS) prior to WTO accession.

Conclusion.
President Putin understands that only the West has the capacity to become Russia's principal source of investment capital and a substantial market for Russia's energy resources. Putin and Prime Minister Mikhail Kasyanov have stated that Russia is eager to join the WTO and that it will become a reliable trade partner and energy supplier for the West, regardless of what may happen to the flow of oil from the Middle East. The lack of WTO membership slows both trade and investment activity in Russia.

The United States should support Russia's efforts to join the WTO but also make clear that the Russian government must follow the WTO's universal requirements for membership, including taking decisive measures to protect intellectual property rights, eliminate and reduce tariffs, create a non-discriminatory and transparent environment for foreign goods and services, and reform the banking sector. At the May summit meetings, President Bush should publicly support Russia's accession to the WTO, provided its negotiations with the WTO are completed successfully.

Ariel Cohen, Ph.D., is Research Fellow in Russian and Eurasian Studies in the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation.

About the Author

Ariel Cohen, Ph.D. Visiting Fellow in Russian and Eurasian Studies and International Energy Policy in the Douglas and Sarah Allison Center for Foreign and National Security Policy, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation
Douglas and Sarah Allison Center for Foreign and National Security Policy