Saturday, March 17, 2012

Trade: The era of Jackson-Vanik amendment about to end

Alexander Perechny


Read the original in Russian

Washington is starting the procedure that Russia has been waiting to happen for decades. The U.S. Senate will begin consideration of the repeal of the notorious Jackson-Vanik amendment. The formal reason for its action has disappeared during the Soviet era, after the fall of the "Iron Curtain." The Americans have repeatedly promised to repeal the amendment, but something has always been in the way.

In 1974, Congressmen Henry Jackson and Charles Vanik initiated amendments to the U.S. trade. The proposed innovation prohibited granting top trade status with the United States to the countries that did not have market economies and violated human rights. Despite the vagueness of the wording, the main purpose of the amendment was crystal clear - the Soviet Union. It was a response to a de facto ban on the immigration of Soviet citizens introduced by the Government of the world's first state of workers and peasants two years earlier. Formally, the government did not limit the opportunity for permanent residents to travel abroad. However, for those wishing to permanently leave the Soviet Union compensation for the free education obtained in the country was established. The number was so high that the average resident of the Soviet Union did not have the slightest chance to pay it.

It was not until May of 1991 when the new law on the order of immigration from the Soviet Union was adopted, which annulled the ban on the immigration. This destroyed the formal grounds for the application of the Jackson-Vanik amendment. Credit must be given to the American administration that in the following year introduced a moratorium on its action against the new Russia that became the successor of the Union. However, the amendment seemed to be too convenient of a tool for influencing Moscow to abolish it completely, because the US could always threaten to revoke the moratorium. The situation has not changed even after the United States in 2002 recognized Russia as a market economy, eliminating the last formal obstacle to its final abolition. Despite numerous requests from the Russian authorities to cancel the obsolete rule, Washington with ingenuity worthy of a much better use time and again found reasons not to do so. Apparently, the image of Russia as the main enemy of the United States was too strong to provide it the top-trade status.

The US started moving only after the accession of Russia to the WTO, as the Jackson-Vanik Amendment directly violates the norms of the trade organization. In addition, even the most stubborn Russophobes of the American political establishment understand that from now on continuation of the amendment in respect to Russia will do more harm than good to the U.S.

Chairman of the Senate Finance Committee Max Bocas said last week in Congress that If the respective bill giving Russia the status of a normal trading partner of the U.S. is not adopted by this summer, American companies will lose it to competitors in China, Europe, and another 150 WTO member countries. As the American economy continues to recover, this cannot be allowed to happen, he added. He is absolutely right. The economic relations between Russia and the U.S. are developing, and the bilateral trade volume last year reached a record $43 billion dollars, which means that the Americans have something to lose. The Chinese would be happy to win over a portion of these cash flows.

Previously, the head of the Department of State Hilary Clinton stated that the abolition of the notorious amendment should be a priority for the Congress. She has made great efforts to reach even the worst Russophobes.

The U.S. Secretary of State said that in order for the American farmers, workers and businessmen to receive maximum benefit from membership of the Russian Federation in the WTO, the US should establish permanent normal trade relations with Russia without any additional conditions, including the Jackson-Vanik amendment. She added that the amendment reached its objectives in its time and has helped thousands of Jews to emigrate from the Soviet Union. Now this amendment is not an effective tool for promoting human rights in Russia. Clinton concluded that while the US will continue to insist on respect for human rights in Russia, the refusal to repeal the amendment would put the American farmers, workers and businesses at a disadvantage.

The Secretary of State made this effort not without reason. Despite the fact that the abnormality of the situation in the trade relations between Russia and the United States is acknowledged by everyone, the position of those who seek to link economic issues to policy is still strong in Congress. Their position was expressed by the head of the International Committee of the House of Representatives Ileana Ros-Lehtinen, who said that the congressmen would vote for the repeal only if a law to ban entry to the U.S. of persons involved in the death of Hermitage Capital lawyer Sergei Magnitsky in prison is introduced. The Obama administration, including the American ambassador to Russia Michael McFaul, is strongly against this initiative.

McFaul stated that he did not believe that the preservation of the Jackson-Vanik amendment in any form would promote democracy, improve human rights and the rule of law in Russia, as there is no connection here. He challenged the audience to get up and tell him how this will promote the rule of law, democracy and human rights. Given the attitude of the envoy towards Russia, where he recently was sent on a diplomatic mission, this is a very strange statement.

It is not clear if anyone took up his challenge. It is not clear if his address was that last straw that broke the backbone of the inert thinking of "cold war" times. It is clear though that the finance committee of the upper chambers of the U.S. Congress will finally begin to address this ubiquitous problem of old Russian-American relations - the repeal of the Jackson-Vanik amendment.