Russia – Permanent Normal Trade Relations

Russia – Permanent Normal Trade Relations

“…And this Congress should make sure that no foreign company has an
advantage over American manufacturing when it comes to accessing financing or new markets like Russia…”
– President Obama, State of the Union Address, January 24, 2012

Current:
Presidential Proclamation — To Extend Nondiscriminatory Treatment
(Normal Trade Relations Treatment) to the Products of the
Russian Federation and the Republic of Moldova
December 20, 2012

On August 22, Russia entered the WTO, and on December 7, US Congress passed the Russia PNTR legislation.

Russia has the world’s 9th largest national economy and 140 million increasingly prosperous consumers. Congress must pass PNTR or else risk putting U.S. businesses, workers and farmers at a long-term disadvantage in this important market.

U.S. Senate Passes Legislation Ensuring U.S. Access to Russian Market

Yesterday, the U.S. Senate approved California Chamber of Commerce-supported legislation that will enable U.S. companies to compete in the growing and profitable Russian marketplace.
CalChamber, December 7, 2012

CalChamber’s PNTR Support Letter

CalChamber Praises House Passage and Urges Senate Action to Ensure U.S. Access to Russian Market
On Friday, November 16, the U.S. House of Representatives approved California Chamber of Commerce-supported legislation that will enable U.S. companies to compete in the growing and profitable Russian marketplace.
CalChamber, November 19, 2012

Additional Information:

Business Community Urges Action on Russia PNTR in Lame Duck Session
Coalition for U.S. – Russia Trade, November 8, 2012

Coalition for Russia Trade Letter sent to the President
November 8, 2012

Coalition for Russia Trade Letter sent to the Congress
November 8, 2012

CalChamber Urges Congressional Action to Ensure U.S. Access to Russian Market
CalChamber, October 30, 2012

CalChamber Urges Support for Permanent Normal Trade Relations with Russia
CalChamber Alert, August 21, 2012

U.S. Trade Representative Kirk Comments on Russia World Trade Organization Vote
U.S. Trade Representative, July, 2012

Joint Statement by the President of the United States of America Barack Obama and the President of the Russian Federation Vladimir Putin
White House, June 18, 2012

Chairman Camp Announces Hearing on Russia’s Accession to the World Trade Organization and Granting Russia Permanent Normal Trade Relations
House Ways and Means, June 18, 2012

Senate Hearing – Russia’s WTO Accession – Administration’s Views on the Implications for the United States

Senate Finance Committee, June 18, 2012

Senators Baucus, Thune, Kerry, McCain Unveil Bill Enabling U.S. Businesses to Boost Exports to Russia, Create Jobs at Home
Senate Finance Committee, June 12, 2012

U.S. Trade Representative Ron Kirk Statement on Russia Trade Bill
U.S. Trade Representative, June 12, 2012

USRBC Applauds Introduction of Russia PNTR
Legislation in the U.S. Senate
U.S.-Russia Business Council, June 12, 2012

U.S. Chamber Applauds Russia PNTR Bill Introduction in Senate
U.S. Chamber of Commerce, June 12, 2012

Russia PNTR Primer
U.S. Chamber of Commerce

US official urges repeal of Russia trade law
Associated Press, June 7, 2012

Russia Ready to Ratify WTO Agreements
RIA Novosti – Russia, June 7, 2012
_______________________________________

 

The United States and Russia: A Multifaceted Relationship
U.S. Department of State, June 2012

WTO Ministers decided to formally invite Russia to become a member of the WTO at the Eighth Annual WTO Ministerial Conference in Geneva, Switzerland on December 16, 2011.

The Russian Federation will have 220 days to ratify its accession package. Thirty days after the WTO is notified of the ratification, the Russian Federation will become a full-fledged member.

The United States and the Russian Federation reached a bilateral trade agreement in November 2006, which cleared a major hurdle to their WTO membership. This follows the 2005 completion of bilateral negotiations on goods with 29 total WTO members, accounting for countries that provide 87 percent of all Russian imports. In September 2010, U.S. and Russian negotiators agreed on several commitments needed for Russia’s accession to the WTO. As Russia joins the WTO, the United States looks forward to further enhancing bilateral trade relations with Russia.

Background:

The Russian Federation applied to the World Trade Organization (WTO) in June 1993 and on November 10, 2011, the Working Party on Russia’s accession, agreed on the terms of the country’s membership to the WTO by adopting the package containing reforms to Russia’s trade regime, and the commitments that Russia undertook to implement as part of its WTO accession.

“It has been a long journey, but today Russia has taken a big step towards its destination of membership in the WTO. In acceding to the WTO, Russia embraces a series of rules and commitments that are the foundation of an open, transparent and non-discriminatory global trading system. This system provides important guarantees for Russia and for the 153 other Members of our organization. This win-win result will bring Russia more firmly into the global economy and make it a more attractive place to do business. For the WTO, it comes as a most welcome deliverable for the upcoming WTO Ministerial Conference and signals anew the relevance and vibrancy of the WTO as an instrument for international co-operation,” said Director-General Pascal Lamy.

From the date of accession, the Russian Federation has committed to fully apply all WTO provisions, with recourse to very few transitional periods. The Russian Federation’s commitments will include the following, per the WTO:

  • Market access for goods and services As part of the accession, Russia concluded 30 bilateral agreements on market access for services and 57 on market access for goods.
  • Government Procurement Agreement The Russian Federation intends to join the WTO Government Procurement Agreement (GPA). Russian government agencies would, upon accession, award contracts in a transparent manner.
  • Industrial subsidies The Russian Federation would eliminate all its industrial subsidies programs or modify them so that any subsidy provided would not be contingent upon exportation or upon the use of domestic over imported goods.
  • Agricultural subsidies The total trade distorting agricultural support would not exceed USD 9 billion in 2012 and would be gradually reduced to USD 4.4 billion by 2018.
  • Pricing of energy Producers and distributors of natural gas in the Russian Federation would operate on the basis of normal commercial considerations, based on recovery of costs and profit. The Russian Federation would continue to regulate price supplies to households and other non-commercial users, based on domestic social policy considerations.
  • Sanitary and phytosanitary measures (SPS) All SPS measures would be developed and applied in the Russian Federation and the Custom Union, in accordance with the WTO Agreement.
  • Technical barriers to trade (TBT) The Russian Federation would ensure that all legislation related to technical regulations, standards and conformity assessment procedures complies with the WTO TBT Agreement.
  • Trade-related investment measures The Russian Federation would ensure that all laws, regulations and other measures related to the Agreement on Trade-Related Investment Measures would be consistent with the WTO provisions.
  • Protection of trade-related intellectual property The Russian Federation would fully apply the provisions of the WTO Agreement on Trade-related Aspects of Intellectual Property Rights including provisions for enforcement, without recourse to any transitional period.
  • Transparency The provisions of the WTO Agreement would be applied uniformly throughout the Russian Federation territory. All legislation affecting trade in goods, services and intellectual property rights would be published promptly, consistent with WTO requirements. The Russian Federation would regularly update its official publications including websites and make these laws readily available to WTO members, individuals and enterprises.
  • Functioning of the Custom Union between Russia, Kazakhstan and Belarus The Custom Union between Russia, Kazakhstan and Belarus was created on 1 January 2010. All customs borders were removed between the three countries on 1 July 2011.

SME Exports

  • 83% of the approximately 5,000 U.S. companies that currently export to Russia are small- or medium-sized firms.
  • SMEs account for nearly ½ of all U.S. exports to Russia!
  • $523,000: Average annual dollar amount of small business exports to Russia.

SMEs exported $2.1 billion of goods to Russia, and those exports could reach $4.2 billion by 2014, according to some estimates.
Sources: National Association of Manufacturers

Services Sector

According to the US Russia Trade Coalition (4/17/12), the U.S. services sector will be poised to capture substantial commercial benefits from Russia’s entry to the WTO – but only when Congress passes legislation to graduate Russia from the Jackson-Vanik amendment and enacts permanent normal trade relations (PNTR) with Russia. Without PNTR, none of Russia’s services commitments will apply to U.S. firms – but they will benefit competitor nations.

Russia’s accession will give U.S. services companies more certain and predictable access to Russia’s markets. U.S. services firms will also find Russia’s commitments in the areas of national treatment, transparency and rule of law particularly attractive. As part of its market-opening concessions, Russia has committed to:

 

  • Allow unrestricted access for cross-border wholesale and retail distribution, enabling e-commerce to flourish.
  • Allow cross-border provision of services via the Internet, such as financial information, data processing, and professional services, including legal, accounting, architectural, and educational services.
  • Allow telecommunications companies and providers of express delivery and distribution services to operate as 100 percent foreign-owned enterprises.
  • Allow 100 percent foreign ownership of all commercially meaningful types of non-insurance financial services firms, including banks, broker dealers, and investment companies.
  • Allow 100 percent foreign ownership of non-life insurance firms.
  • Phase out existing restrictions on foreign insurance firms over five years.
  • Allow foreign insurance companies to open direct branches for life and non-life insurance, reinsurance, and services auxiliary to insurance after nine years.

Auto Sector

U.S. Exports Can Race Forward in Russia’s Growing Auto Market per the Coalition for US-Russian Trade – April 24, 2012

  • When Russia enters the WTO this summer, its tariffs on foreign autos will go from 30% to as low as 12%, and it will be among the most open auto markets in the world.
  • According to the U.S. Department of Commerce, in the next two to three years, Russia could become the largest single car market in all of Europe.
  • U.S. exports of autos and auto parts to Russia have surged in recent years following the global economic crisis, but the industry needs PNTR to have a level playing field and stay competitive in the market.
  • GM’s Chevrolet is currently the top-selling foreign brand in Russia, and the Ford Focus is the fourth-highest selling model overall in Russia today.
  • In 2011, U.S. auto exports to Russia totaled more than $455 million – growing 140% over the 2010 total of $189 million.
  • 2011 was the highest-grossing year on record for U.S. motor vehicle part exports to Russia, reaching more than $211 million (a 347% increase over 2010!). The previous high was $151 million in 2008.

U.S. Agriculture Exports To Grow with Russia PNTR
Coalition for US-Russian Trade – May 8, 2012 & May 31, 2012

  • Russia imported more than $32 billion of agricultural goods in 2011.
  • Russia is the world’s 3rd-largest importer of meat and poultry products. The United States is the top supplier of poultry to Russia, accounting for 50% of Russia’s imports.
  • Russia’s $100 billion packaged food market is among the fastest-growing in the world.
  • The United States accounts for 29% of Russia’s import market for tree nuts, making us Russia’s largest nut supplier. In 2011, U.S. nut exports to Russia reached a record $90 million, double the annual average from between 2007 and 2009.
  • Russia has 8% of the world’s farmland, but the country needs to replace 70% of its aging agricultural machinery in order to efficiently develop its agricultural resources.

As Russia’s market becomes more certain and predictable with its WTO entry, U.S. agriculture can continue to benefit, but only when Congress passes legislation to graduate Russia from the Jackson-Vanik amendment and enacts Permanent Normal Trade Relations (PNTR) with Russia.

THE BENEFITS OF RUSSIA PNTR FOR AMERICA’S FARMERS

  • Russia’s commitment not to raise tariffs on any products above the negotiated rates and to apply non-tariff measures in a uniform and transparent manner.
  • Russia’s commitment to apply the WTO Agreement on Sanitary and Phytosanitary Measures, limiting its ability to impose arbitrary measures that are not based on sound science and that have impeded trade in the past.
  • The United States’ ability to enforce Russia’s compliance with its WTO obligations, including those on tariffs and non-tariff measures, through WTO dispute settlement.

Impact:

In a November 2011, statement, President Obama said: “After nearly two decades of negotiations, Russia will now be able to join to the WTO. This is a significant day for U.S.-Russia relations, and for our commitment to a growing, rules-based global economy. Russia’s membership in the WTO also will benefit American companies and their workers by integrating Russia into a system of rules governing legal transparency and trade behavior and providing the means to enforce those rules.”

Following entry into the WTO, Russia could be open to membership in the Organization for Economic Cooperation and Development (OECD), with other advanced industrialized economies for which WTO membership is a prerequisite.

Anticipated Action:
To ensure that U.S. firms enjoy the full benefits of Russia’s accession, it will be necessary for the U.S. Congress to lift the Jackson-Vanik amendment with respect to Russia and authorize the President to extend Permanent Normal Trade Relations (PNTR) to Russia. This will entail Congressional hearings and a vote in both houses of Congress.
According to the US-Russia Business Council, Presidents Obama, Bush and Clinton are on record as supporting the permanent lifting of the Jackson-Vanik Amendment as it pertains to Russia. This provision in U.S. trade law, which was enacted in 1974, prevents the U.S. from extending permanent normal trade relations (PNTR) to any non-market economy which restricts emigration. At the time of enactment Jews were prevented from leaving the Soviet Union unless they paid large indemnities for the cost of their education. The Soviet Union is history, and Russia now has a visa-free travel regime with Israel.

The U.S. has granted Russia annual waivers from Jackson-Vanik since 1994. However, when a new member that is subject to the Jackson-Vanik Amendment joins the WTO, the United States must either extend permanent normal trade relations or issue formal notification of its intent not to do so. Since Jackson-Vanik is incompatible with PNTR, the U.S. would be forced to issue such notification if the amendment were to remain in effect once a final agreement on Russia’s membership is achieved.

All other WTO members have unconditional free trade with Russia, and those countries would immediately benefit from the lowering of Russian tariffs and other market liberalizing measures Russia adopts as part of its accession.

Our competitors would be quick to exploit that window of opportunity and, as a result, American companies could lose significant opportunities and competitive advantage. Our European and Asian competitors will move quickly to sign contracts with Russian buyers, possibly shutting out U.S. manufacturers and farmers for a good time to come.

This is where U.S. exporters stand to lose, unless US legislation is approved which lifts Jackson-Vanik and grants PNTR to Russia.

TIME LINE

December 2012 – Congress passed the Russia PNTR and Jackson-Vanik Repeal Act

August 22, 2012 – Russia officially joins the WTO

July 26, 2012 – US House Committee on Ways and Means pass Russia PNTR bill and Jackson-Vanik Repeal Act

July 20, 2012 – Russian President Vladamir Putin signs WTO Accession Protocol

July 18, 2012 – US Senate Finance Committee passes Russia PNTR bill and Jackson-Vanik Repeal Act

July 18, 2012 – Russia Federation Council ratifies WTO Accession Protocol

July 10, 2012 – Russia State Duma ratifies WTO Accession Protocol

November 10, 2011 – WTO Working party agrees to allow Russia to join the WTO

 

UPDATE

California Governor Brown signs-on to support letter for Russia PNTR
July 2012

BRT Praises House Ways & Means Committee’s Approval of Russia PNTR; Urges Immediate House and Senate Action
July 26, 2012

Business Coalition Urges Senate Co-Sponsors and Swift Action on Bill to Keep U.S. Firms and Farmers Competitive in Growing Russian Market
U.S. Russia Business Council, June 21, 2012

Letter from Coalition for U.S. – Russia Trade Supporting Russia’s PNTR
June 21, 2012

Letter to Congressional Leaders from former US Trade Representatives supporting Russia’s PNTR
June 19, 2012

California and the Russian Market
Coalition for US-Russia Trade

Russian Political, Economic, and Security Issues and U.S. Interests
Congressional Research Service, February 2012

The True Cost of Jackson-Vanik
The National Interest, March 29, 2012

Why Approving Permanent Normal Trade Relations with Russia is in the U.S. National Interest
U.S. Chamber of Commerce, March 2012

McFaul Pushes for Trade Status
Moscow Times, March 14, 2012

USRBC Urges Congress to Not Hold Business Back from Opportunities in Russia
US – Russia Business Council, March 14, 2012

Business Coalition Urges Legislation to Keep U.S. Firms Competitive in Russia’s Growing Market
US – Russia Business council, March 14, 2012

Coalition Letter to Congress –
Support Russia PNTR
US – Russia Business Council, March 14, 2012

World Trade Organization – Ministerial
Conference approves Russia’s WTO
membership
World Trade Organization, December 16, 2011

The USRBC Applauds Russia’s Formal
Invitation to Join the WTO Package
US – Russia Business council, December 16, 2011

Coalition for U.S.-Russia Trade
Housed at the U.S.-Russia Business Council,
this is a non-profit, non-partisan advocacy group of U.S.-based trade associations and corporations committed to strengtheningU.S.-Russian commercial ties and preserving the competitiveness of U.S. firms, farmers and workers in the Russian market.

The Coalition is the U.S. business community’s vehicle for advocating Congressional approval of permanent normal trade relations (PNTR) with Russia in connection with Russia’s accession to the World Trade Organization (WTO).
For further information visit
www.usrussiatrade.org

Russia PNTR Fact of the Week

Additional Links

CalChamber’s Russia Trading Portal