Wisconsin’s economy could get a boost if Congress moves quickly to take advantage of new trade opportunities with Russia. Congressional inaction, on the other hand, would allow other countries’ companies to get into the market first and gain a competitive edge over companies from Wisconsin and the United States.
Later this summer Russia will formally join the World Trade Organization (WTO), in the process lowering its tariffs on agricultural and industrial goods, opening its service sectors, improving protection of intellectual property rights, and providing greater certainty for U.S. companies doing business in Russia.
Russia, the ninth largest economy in the world, would also make itself subject to the WTO dispute resolution system, which gives the United States an important tool to hold Russia accountable for its WTO promises and its future actions on trade.
But the United States will be unable to benefit from these market-opening and rule-of-law changes unless Congress agrees to establish U.S. permanent normal trade relations (PNTR) with Russia. The United States routinely grants PNTR to other countries to ensure consistent and fair trade relations, and WTO rules require that all member countries treat each other by the same standards.
Once Russia joins the WTO this summer, the WTO’s other 150-plus countries will immediately enjoy this significant new access to Russia’s 142 million consumers, which includes a growing middle class.
But will Wisconsin? That depends on whether or not Congress acts.
Wisconsin has good trade ties with Russia and has the potential to strengthen those ties if Congress passes Russia PNTR. According to a state fact sheet prepared by Business Roundtable last year, Wisconsin exported $208 million worth of goods to Russia, directly supporting an estimated 680 jobs in the state. The state’s goods exports cross many industry sectors: Machinery, computers and electronics, food products, transportation equipment and chemicals.
Yet the competition is already tough, and it’s bound to get tougher without approval of PNTR. Congress’ failure to pass PNTR legislation would make it harder for companies in Wisconsin and the United States to compete in Russia against companies from other countries, many of whom export more to Russia today than the United States does.
More specifically:
· Wisconsin exported $56 million in shovel loaders to Russia in 2011. Although the United States was the top exporter to Russia in 2000, it now ranks behind Japan and China.
· Wisconsin exported $16 million in medical equipment in 2011 to Russia, whose imports are growing by 25% per year. Yet China’s share of Russia’s medical equipment imports has increased each year.
· Wisconsin exported $12 million in beef products to Russia in 2011, but the U.S. share of Russian beef imports is just 4%, while Russian imports from Brazil, Uruguay, and Paraguay account for 70%.
To gain entry into the WTO, Russia agreed to lower it tariffs on all these kind of products, in many cases cutting them in half or more. If Congress fails to approve PNTR, there is no guarantee that Russia will actually lower such tariffs on U.S. exports and the United States would have no recourse. This would make American products more expensive and less competitive in Russia.
Support for Russia PNTR crosses party lines in Congress. Legislation to approve such U.S. trade relations with Russia was introduced in June by four prominent Senators of both parties: Max Baucus (D-MT), John Thune (R-SD), John Kerry (D-MA) and John McCain (R-AZ).
There is building momentum in Congress for action on Russia PNTR. Congress should harness that momentum and pass PNTR by August, when Russia is due to enter the WTO and start to open its markets. If Congress waits until later in the year to act, America and Wisconsin’s foreign competitors will have gotten a jump in the Russian market, concluding deals that could have benefited U.S. companies and their workers and could lock them out of future deals.
As Russia opens its market to the rest of the world, Wisconsin stands to expand its trade with Russia — and the jobs that depend on such trade. But Congress must first approve Russia PNTR legislation so Wisconsin and other U.S. companies can capitalize on those opportunities and the United States can use the WTO’s enforcement mechanisms to ensure Russia meets its WTO commitments and acts fairly. Failure to approve PNTR would represent a missed opportunity for the United States — and Wisconsin.
David Thomas is vice president for trade policy at the Business Roundtable, an association of chief executives of leading U.S. companies.
