On November 19, 2006, America and Russia signed a bilateral
market access agreement that details U.S. requirements for Russia's
accession to the World Trade Organization (WTO). Russia will now
work to combine the bilateral accession agreements into a formal
multilateral draft Protocol of Accession that the WTO General
Council must approve before Russia can become a member of the WTO.
As part of this process, Russia will likely face calls for
additional commitments to bring its trade regime into compliance
with WTO rules, including the elimination of domestic subsidies,
improved customs and regulatory transparency, privatization of
state-owned enterprises, and stronger intellectual property rights
(IPR) protection. The final multilateral accession agreement should
both integrate Russia into the global, rules-based trading system
and help lock in the reforms needed to improve Russia's long-term
In order for the U.S. to share the benefits of Russia's eventual
accession to the WTO, Congress must vote to ratify Permanent Normal
Trading Relations (PNTR) with Russia. America's businesses,
farmers, and households stand to gain from Russia joining the WTO,
but, without PNTR, they will be at a disadvantage competing with
their foreign counterparts in the Russian market. The successful
approval of such legislation is also an important step in
strengthening the U.S.-Russia economic relationship and maintaining
open channels for discussions to advance issues of concern to the
United States, such as access to hydrocarbons and other natural
The Case for PNTR
As a member of the WTO, the United States is generally obligated
to provide reciprocal, unconditioned most-favored-nation (MFN)
treatment to the goods of all other WTO members. As such, the U.S.
must either extend PNTR to Russia or invoke the non-application
provision of Article XIII of the WTO agreement. The non-application
provision allows member countries to exclude other members from MFN
benefits at the risk of reciprocal treatment. If the U.S. opts to
invoke the provision, Russia would have the right to deny the U.S.
equal treatment under the WTO agreement. Thus, the U.S. would be
left to watch other countries reap the benefits of Russia's
accession. These benefits include:
- Expanded access to non-agricultural goods markets.
Average tariffs for industrial goods will fall roughly 36 percent
to an average bound rate of 8 percent. Information technology
products, aircraft, chemicals, and various capital equipment
products will face even lower average tariffs.
- Significant new services market access in banking and
securities; insurance; telecommunications; audio-visual services;
energy and energy-related services; express delivery; wholesale,
retail, franchise and direct sales distribution; business services;
and environmental services. In the U.S.-Russia bilateral agreement,
Russia maintains the ability to limit foreign direct investment in
the banking and non-life insurance sectors. The U.S. Trade
Representative (USTR) should insist on elimination-or at least a
short-term phase-out-of this provision in the final multilateral
- New market access provisions and more transparent and
predictable tariff treatment for agriculture products. U.S.
farmers, ranchers, and food processors will benefit from greater
opportunities to sell to the Russian market.
- Reduced non-tariff barriers to trade. These include
limits on export subsidies, improved customs procedures,
streamlined and more transparent agriculture inspection procedures,
and greater adherence to science-based sanitary and phyto-sanitary
- Extensive binding improvements to Russia's protection and
enforcement of intellectual property rights. The U.S.-Russia
bilateral agreement establishes a solid starting point for the
final set of commitments needed for the multilateral accession
agreement. The bilateral agreement contains provisions dealing with
piracy, counterfeiting, border control, and protection for
pharmaceutical test data; it also provides for continued
cooperation and progress on resolving IPR issues.
Even before these new commitments to liberalize trade were made,
U.S. companies, such as Boeing, ConocoPhillips, Johnson &
Johnson, General Motors, and Ford, have enjoyed unprecedented
profits in Russian markets. Russia has enjoyed unprecedented
economic growth, averaging around 7 percent a year, which has been
bolstered by high oil prices since 1999. This growth has also
helped expand the bilateral trade relationship between the U.S. and
the Russian Federation, with total two-way trade growing an average
of 15 percent per year between 2000 and 2005 and valuing over $19
billion in 2005. With Russia's new accession commitments,
this relationship should only become stronger and more important to
the two economies.
No trade agreement alone, no matter how comprehensive, can solve
all of the economic policy and structural issues a country faces.
But, trade agreements can help maintain the momentum for economic
reform and put additional pressure on foreign governments to
enforce the rule of law. The growing Russian market is an
opportunity that American businesses cannot and should not miss.
The provisions of the U.S.-Russian bilateral accession agreement go
far toward insuring that the final protocol pulls Russia into a
world trade regime that promotes fairness and opportunity for
Russia and other WTO members.
The U.S.-Russia bilateral agreement is especially effective in
insuring that Russia's accession will result in greater opportunity
for all WTO countries. Farmers, manufacturers, and service
exporters will gain new, meaningful market access to Russian
markets. Russia must reduce or dismantle tariffs and non-tariff
barriers to trade, and Russia will have to operate according to
international rules of trade or be subject to action by the WTO
dispute settlement process. And, the agreement will strengthen
intellectual property rights protection. Importantly, U.S. ability
to raise important issues in the WTO framework, such as providing a
level playing field to all companies in the natural resources
sectors, will also be strengthened. Russian economic reformers'
capacity to push forward with domestic economic reform will also be
Congressional approval of Permanent Normal Trade Relations with
Russia will successfully conclude a process that began 13 years ago
with the establishment of the Working Party on the Accession of the
Russian Federation to the WTO. America would benefit from Russia,
an increasingly important global trader, joining the WTO's
rules-based trade regime.
Markheim is Jay Van Andel Senior Analyst in Trade Policy in the
Center for International Trade and Economics, and Ariel
Cohen, Ph.D., is Senior Research Fellow in Russian and Eurasian
Studies and International Energy Security in the Douglas and Sarah
Allison Center for Foreign Policy Studies, a division of the
Kathryn and Shelby Cullom Davis Institute for International
Studies, at The Heritage Foundation.
Department of Commerce, International Trade Administration,
"National Trade Data," at http://tse.export.gov/
(November 29, 2006).