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Tuesday, August 7, 2012

Russia’s Accession to the WTO and Its Implications for the United States

William H. Cooper
Specialist in International Trade and Finance

In 1993, Russia formally applied for accession to the General Agreement on Tariffs and Trade (GATT). In 1995, its application was taken up by the World Trade Organization (WTO), the successor organization of the GATT. Russia is the largest economy not in the WTO; after a number of fits and starts during the 18-year process, the then-153 members of the WTO, on December 16, 2011, invited Russia to join the WTO during the Ministerial Conference in Geneva. On July 10 and July 18, 2012, respectively, the lower house of the Russian parliament—the State Duma—and the upper house—the Federal Council—approved the protocol of accession. President Putin signed the measure into law on July 21, allowing Russia to formally join the WTO on August 22.

The immediate policy issue for Congress will be whether to enact legislation authorizing the President to grant permanent normal trade relations (PNTR) status for Russia, a status that all WTO members are required to provide each other. Some Members of Congress have indicated that they view congressional consideration of PNTR legislation as the opportunity to ensure that the conditions on which Russia is invited to join the WTO address U.S. concerns.

On July 18, 2012, the Senate Finance Committee reported out S. 3406. On July 26, the House Ways and Means Committee reported out H.R. 6156. The two bills would authorize PNTR for Russia.

In joining the WTO, Russia has committed to bring its trade laws and practices into compliance with WTO rules and other market-opening measures. In doing so, it will take a major step in integrating its trading system with the rest of the world. Those commitments include

  • nondiscriminatory treatment of imports of goods and services; 
  • reducing tariffs and binding tariff levels; 
  • ensuring transparency when implementing trade measures; 
  • limiting agriculture subsidies; 
  • enforcing intellectual property rights (IPR) of foreign holders of such rights; 
  • forgoing the use of local content requirements and other investment measures that limit imports; and 
  • opening government procurement contract opportunities to foreign firms. 
In joining the WTO, Russia commits to accepting WTO dispute settlement procedures. In return, Russia will have a voice in shaping and implementing the international trade regime. It will be able to hold its WTO partners accountable for adhering to WTO rules in conducting their trade relations with Russia, making those trade relations more predictable and stable. In addition, Russian economic reformers anticipate that WTO membership will make Russia a more attractive location for foreign producers and investors to do business by locking in trade-liberalizing reforms, which could increase Russia’s economic growth.

Concerns among U.S. stakeholders regarding Russia’s WTO accession are not so much over whether Russia should be admitted into the WTO but rather whether the conditions for its accession are adequate to ensure that Russia fulfills its obligations and provides meaningful trade and investment opportunities for U.S. firms. U.S. IPR holders remain cautious that Russia will enforce its commitments on IPR protection. Russia is currently a relatively small U.S. trading partner. However, U.S. manufacturing, agriculture, and service providers view WTO accession as an opportunity to broaden the bilateral trading relationship. In Russia, agriculture interests and some manufacturers, such as auto producers, are concerned that WTO membership will expose them to foreign competition that will adversely affect their interests.

Date of Report: July 26, 2012
Number of Pages: 23
Order Number: R42085
Price: $29.95

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