Uncle Sam’s Old Grudge

Decades have passed since the infamous Cuban crisis nearly sent nations into oblivion. Decades have also passed since the death of the Iron Curtain was portrayed with fall of the Berlin Wall. Tensions have died down, people have been reunited and yet, one can still find a Cold War-era law in the USA’s legal system upheld to retaliate against a ghost, a Communist Soviet Union.

Russia’s entry into the WTO might leave the U.S. at a disadvantage of a 22% rebate in tariffs that states from Europe and Asia will enjoy. In 1974, The U.S. Congress adopted the Jackson-Vanik amendment which calls for the cessation of auspicious trade relations with the Soviet Union as long as it forbade Jewish adults from emigrating.

Unless Congress abolishes this law, the U.S. business community will not be at equal balance with its European and Asian counterparts. In other words, Russia joining the WTO means that the U.S. will not enjoy the same advantage anymore.

U.S. exports to Russia will most certainly double in five years to $19 billion from $9 billion in 2010 under the shade of the WTO membership. More importantly, WTO norms dictate that Russia change its trading trends and move away from protectionism to become a more open trade partner with more unchanging food safety regulations. According to a U.S. Trade Representative office, the U.S. had a $19.7 billion trade necessity with Russia in 2010. Since 1993, trade between the two nations increased sevenfold due to extenuation annual waivers from Uncle Sam’s side of the camp.   Russia’s membership in a WTO will reduce tariffs, improve general entrance to Russia’s services markets, hold the Russian supervision accountable to a complement of rules governing trade behaviour, and yield a means to make those rules. That perception isn’t embraced in Congress where some members doubt whether Russia has undertaken the adequate steps to avow full transformation processes from a Communist Soviet Union to a liberal Federation where an open market can truly flourish.

Rumours have been circulating that members in congress, in general, are not too eager to raise the Jackson-Vanik amendments. They argue that democratic reforms in Russia have been nothing but a façade and that power is still centralised. In addition, the argument persists and includes the claim that should Russia enlarge its democracy; as in, until Russia implements true democratic reforms, the Jackson-Vanik amendment remains. These claims have been bolstered by demonstrations that swept some 30 cities in the Russian Federation opposing the recent parliamentary elections under fraud allegations.

In the end, one wonders, why have the flags been raised on this issue? Are there any other hidden reasons behind Congress and its robust stance against lifting the Jackson-Vanik amendment? Moreover, if this is to persist, how will it affect U.S. Investments in Russia? Are U.S. companies being deliberately hindered into not taking the full advantages that the Russian market has to offer? And how is it that Russian markets are being left wide open to the Europeans?

Photo by Osipovva & WTO

Posted on February 2, 2012, in Analysis, Emerging Markets, GeoPolitics, Strategy and tagged , . Bookmark the permalink. Leave a comment.

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