Today’s accession (22 August 2012) of Russia to the World Trade Organization (WTO) marks a milestone in the progress of the world trading system and the culmination of a nearly 18 year process. Russia, which was the largest economy in the world still outside the WTO, has finally been officially accepted as a full member. But what does that mean for Russia—and for American small businesses looking to expand into this newly opened market?
Put simply, full membership in the WTO commits Russia to play by the same rules as other WTO members, including the United States. In joining the WTO, Russia commits to bring its trade laws and practices into compliance with international standards. As a result, Russia agrees to offer non-discriminatory treatment to imports of goods and services, reduce applied tariffs and binding tariff levels, ensure transparency when implementing trade measures, limit agricultural subsidies, enforce intellectual property rights, forgo the use of local content requirements and other investment measures that limit imports, open government procurement contract opportunities to foreign firms, and accept WTO dispute settlement procedures. In return, Russia has an opportunity to meaningfully participate in and craft global trade policy, negotiate in WTO agreements, and reap the proportional benefits which must be extended to it by fellow WTO members.
With over 140 million consumers and a highly educated and sophisticated growing middle class, Russia is a promising market for US exporters. As a WTO member, Russia can no longer discriminate against foreign goods, giving American small businesses the opportunity to enter the Russian market and introduce American goods and services to a whole new demographic. This offers both an advantage and a disadvantage to Russia, however, in that Russia now must now compete with lower-priced, higher-quality foreign goods which it had traditionally sought to exclude from its marketplace through protectionist measures. Once WTO measures have been phased-in, domestic high-cost, inefficient industries, which once depended on Russian government subsidies to survive, will now be forced to modernize in order to remain competitive in the international market.
Now that Russia’s accession is official, it is more important than ever for the US Congress to repeal the Jackson-Vanik amendment, which will allow US exporters to benefit from Russia’s membership in the WTO. Without its repeal, the US is limited in its ability to enforce Russia’s WTO commitments, and US exporters may lose valuable opportunities to expand and build relationships in Russia’s emerging market. Industry organizations like the US-Russia Business Council have worked to ensure Jackson-Vanik is repealed and permanent Normal Trade Relations (PNTR) is granted. A vote for Russia PNTR is expected when Congress resumes in September, and it is anticipated that the bill will pass. The bill also establishes useful tools for US businesses and US policy makers including requirements that: 1) the US Department of Commerce set up a hotline to report incidents of corruption and bribery in Russia, 2) the US Trade Representative (USTR) monitor and report on Russia’s obligations related to sanitary and phyto-sanitary (SPS) issues and protection of intellectual property, and 3) USTR and the US Department of State report on Russia’s efforts on rule of law.
Here at TradeMoves, we congratulate Russia on its accession to the World Trade Organization and look forward to helping American businesses of all sizes navigate the changes and opportunities Russia’s new WTO membership provides.
Elena Fowlkes / EFowlkes@TradeMoves.net / 443.668.8683
Shawn Marie Jarosz / SJarosz@TradeMoves.net / 202.415.4016