The United States Should Establish Permanent Normal Trade Relations with Russia

by Anders Åslund, Gary Clyde Hufbauer

Overview

In the coming year, Congress is likely to face a critical vote on granting Permanent Normal Trade Relations (PNTR) to Russia in connection with its impending membership to the World Trade Organization (WTO). A "yes" on PNTR for Russia could set the tone for economic relations between the United States and Russia for the next decade, and would give the global agenda of trade and investment liberalization a fresh boost, as Russia is the last major economy to join the WTO. Congressional failure to permanently normalize trade relations would likely have broad consequences, since it would send a clear message of US skepticism that the WTO is a suitable forum for handling commercial relations between major powers. This study presents an analysis of the current US-Russia economic relations, provides estimates on the potential increase in US exports to Russia, and potential growth of two-way trade within the WTO framework. Drawing on conclusions from this analysis, and from previous work conducted by the Institute on US-Russia relations, this monograph summarizes the implications of PNTR for US producers, Russian economic growth, and bilateral commercial relations.

Product Details

ISBN-13:	9780881326208
Publisher:	Peterson Institute for International Economics
Publication date:	12/15/2011
Series:	Policy Analyses in International Economics , #97
Pages:	200
Product dimensions:	5.90(w) x 8.90(h) x 0.40(d)
Age Range:	18 Years

About the Author

Anders Åslund was a senior fellow at the Peterson Institute for International Economics from 2006 to May 2015. He examined the economic policies of Russia, Ukraine, and Eastern Europe, as well as the broader implications of economic transition. Åslund served as an economic adviser to the governments of Russia in 1991-94 and Ukraine in 1994-97. He is a leading specialist on postcommunist economic transformation with more than 30 years of experience in the field.

Gary Clyde Hufbauer, Reginald Jones Senior Fellow since 1992, was formerly the Maurice Greenberg Chair and Director of Studies at the Council on Foreign Relations (1996–98), the Marcus Wallenberg Professor of International Finance Diplomacy at Georgetown University (1985–92), senior fellow at the Institute (1981–85), deputy director of the International Law Institute at Georgetown University (1979–81); deputy assistant secretary for international trade and investment policy of the US Treasury (1977–79); and director of the international tax staff at the Treasury (1974–76).

Table of Contents

Preface vii

Acknowledgments xi

Executive Summary xiii

1 Introduction 1

Why the United States Should Grant Russia PNTR 4

2 Russia's Rising Economic Significance 7

Impact of the Global Economic Crisis on Russia 9

Russia: The Wealthiest of the BRICs and Very Different from China 11

Role in World Trade 14

Role in US Trade 16

US Direct Investment in Russia 23

3 US Opportunities through Russia's Accession to the WTO and PNTR 31

Tariff and Nontariff Barriers 34

Access for US Agricultural Exports 38

Access for US Industrial Exports 41

Intellectual Property Rights 45

Access for US Services Providers 49

4 Russia and the World Trade Organization 55

History of Russia's WTO Application 55

Effects of WTO Accession on the Russian Economy 58

5 Conclusion 63

Appendix A Gravity Model Assessment of the Impact of WTO Accession on Russian Trade 67

References 73

Index 77

Tables

2.1 Russia compared with other emerging-market countries, selected indicators, 2011 13

2.2 Russian and US merchandise and commercial services exports, 1995 and 2010 17

2.3 Russian trade with the world, 2000 and 2010 18

2.4 Imports of BRICs by end use, 1996 and 2010 20

2.5 Export-to-GDP ratios, selected countries, 2010 23

2.6 Russian trade with the United States, 2000 and 2010 24

2.7 Services trade for selected emerging-market economies, 2010 26

2.8 Russian trade in services, selected partners, 2010 27

2.9 US foreign direct investment stock in Russia, 2000 and 2010 28

3.1 Russian tariffs on major imports from the United States, 2010 36

3.2 US stock of foreign direct investment in the manufacturing sector, selected countries, 2000 and 2010 42

3.3 US tariffs on major imports from Russia, 2010 46

3.4 US trade remedy actions against Russian imports 48

4.1 Impact of WTO accession: Decomposition of effects in the medium term 59

A.1 Estimates for nonfuel and manufacturers trade by industrial countries with all partners, with WTO membership and foreign direct investment (FDI) explanatory variables, 1976-2005 69

Figures

2.1 Russian GDP, 1999-2011 8

2.2 Russian oil and gas production, 1985-2010 12

2.3 Russian merchandise exports and imports, 1999-2011 15

2.4 Russia's major export partners, 2010 21

2.5 Russia's major import partners, 2010 22

Boxes

ES.1 US gains from granting PNTR status to Russia xvi

3.1 Russia's bilateral WTO accession agreement with the United States 32