Texans who want to increase their opportunities could have that chance this summer when Russia officially joins the World Trade Organization. But unless Congress acts quickly, the United States, and especially Texas, will miss out.
Russia’s accession to the WTO has been a long time coming: 18 years of wrangling to reach an agreement between the organization’s 155 member countries. The Lone Star State is already an established exporter to Russia. In 2011 alone, we sent $299 million worth of mining equipment parts and $73 million in beef products there.
Russian businesses have already imported engines from Briggs & Stratton of Dallas, and mining machinery from Atlas Copco Drilling Solutions of Garland.
But Texas and Russia could be doing much more once the country joins the WTO. When that happens, Russian tariffs — a tax imposed on imports from other countries — on mining equipment that can now be as high as 25 percent would drop to a mere 5.3 percent. Tariffs on beef, which risk climbing to almost 30 percent, would be reduced to 15 percent.
Unfortunately, unless Congress repeals what’s known as the Jackson-Vanik Amendment many U.S. products will be more expensive in Russia than our competitors.
Signed into law in 1975, this well-intentioned rule prevented permanent normalized trade relations (PNTRs) with the Soviet Union in an attempt to pressure the country to allow Jews and others suffering religious persecution to emigrate from the country.
However, Russia has not restricted Jewish emigration since 1991, and the United States has granted a yearly waiver since 1992, temporarily normalizing trade relations with Moscow. In other words, Congress overrides Jackson-Vanik every year, so it has not had any real impact for two decades.
And yet the amendment is still viable, prohibiting the establishment of permanent normal trade relations between the United States and Russia. The WTO requires that all members extend PNTR to one another.
Until Congress lifts Jackson-Vanik, the United States will not be able to fully benefit from Russia’s WTO commitments, nor be able to use the WTO’s enforcement provisions to ensure Russia honors its commitments.
As a result, other WTO members will likely beat the United States in newly opened markets for any number of Texas-made goods, from agricultural equipment to pharmaceuticals.
Fortunately, there is wide bipartisan support for repealing the amendment in Congress, including the White House. However, a number of repeal supporters also want the United States to take a stand against human rights abuses, and have put forward the Magnitsky Act, named after a Russian attorney who died in jail while awaiting trial on what are widely considered to be fabricated charges over tax fraud and evasion.
The Act attempts to hold accountable human rights abusers, including the Russians allegedly involved in the Magnitsky case, by denying them visas and, where the U.S. government has the option, freezing their assets. The White House opposes the Act and instead has placed 64 Russians allegedly involved in the case on the visa blacklist.
Both approaches take an important step: They try to hold guilty individuals, rather than whole countries, responsible for their actions. Punishing a country for the actions of a few is a blunt economic hammer and should be avoided if at all possible.
Voluntary trade, as free as possible of tariffs, benefits both trading nations. Texans make a lot of things Russians want, and Russians make things we want. Artificially raising the price of our products in Russia — which is what will happen unless Jackson-Vanik is repealed — only reduces our sales. And in a global economy and tough economic times, that’s the last thing we need.
