Russia's Entry into the World Trade Organization Is in America's Interest

December 16, 2011

Russia is poised to join the World Trade Organization (WTO), solidifying its transition from a closed communist economy to a full participant in the global marketplace.  The only question is whether the United States will embrace Russia as a fellow WTO member or forfeit the benefits for the sake of an outdated policy rooted in the Cold War.  The 1974 Jackson-Vanik Amendment requires Congress to annually pass a special exemption for Russia extending it conditional access to the U.S. market.  If the law is not revoked, American exports will not benefit from the market-opening policies that Russia will adopt upon its accession, say Daniel Griswold and Douglas Petersen of the Cato Institute.

  • Through the first three quarters of 2011, Russia ranked 31st among nations as a market for U.S. goods exports and 16th as a source of U.S. goods imports.
  • In two-way trade (exports plus imports), Russia ranks as America's 23rd largest trading partner.
  • Russia is by far the largest economy in the world to have not been granted membership into the WTO, with Iran as the only other economy among the largest 50 in the same position.

Not only is Russia one of America's top trading partners, but also this relationship has been severely underdeveloped by previously existing trade barriers.  If these barriers to commerce are removed, trade will probably expand even further, granting substantial benefits on each economy.

  • From 2000 to 2010, U.S. goods exports to Russia increased by 187 percent and U.S. imports from Russia increased by 235 percent.
  • During the same period, total U.S. exports and imports to and from the entire world grew only 63 percent and 57 percent, respectively.
  • By some estimates, U.S. exports to Russia could double in the five years following its accession to the WTO.

These facts and estimates suggest that the removal of trade barriers could greatly spur commerce with Russia and act as a significant boon to President Obama's National Export Initiative goal to double exports from 2009 to 2014.  There remain substantial obstacles to expanded trade with Russia; however, if these obstacles can be overcome, the benefits to America's trade balance could be substantial.

Source: Daniel Griswold and Douglas Petersen, "Trading with the Bear: Why Russia's Entry into the WTO Is in America's Interest," Cato Institute, December 6, 2011.

For text:

http://www.cato.org/pub_display.php?pub_id=13909

 

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