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American business in RF needs Jackson-Vanik amendment repeal

September 14, 2011, 14:30 UTC+3

When Russia joins the WTO none of Russia’s obligations will be applied to companies from the United States because of the Jackson-Vanik amendment

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NEW YORK, September 14 (Itar-Tass) — Abolition of the Jackson-Vanik amendment that restricts US trade with Russia meets the interests of American businesses, Executive Vice President of the US-Russia Business Council (USRBC) Randi Levinas said on Tuesday at a seminar at the Carnegie Council for Ethics in International Affairs in New York.

When Russia joins the World Trade Organization (WTO), and this could happen at the end of this year, because of the Jackson-Vanik amendment, none of Russia’s obligations will be applied to companies from the United States, which would be a serious problem for American business, Levinas said. According to her, there are some industries that are not covered by bilateral agreements on the Most Favoured Nations (MFN) regime. After Russia’s accession to the WTO, the USRBC vice president noted, American companies may give up their positions in them to competitors from other countries.

USRBC is a Washington-based trade association that provides significant business development, dispute resolution, government relations, and market intelligence services to its American and Russian member companies. The USRBC provides senior management of American companies a forum to continually monitor their Russian market strategies as conditions change. The Council has also successfully acted on behalf of member firms to resolve specific commercial disputes and to influence Russian policies that negatively impact their business in Russia. For Russian companies looking to raise their profile and grow their business – within Russia and in the United States — the USRBC leverages relationships with major industry players, international finance organizations, and US government agencies to assist in strategic planning and in partner searches. Russian members benefit from an unparalleled forum for visibility and networking, thereby demonstrating their commitment to open and transparent commercial activities.

The basic principle of the WTO is an absolute free-trade regime. The fact of the Jackson-Vanik amendment presence in US law means that the United States imposes conditions on trade with Russia. The United States in this case would violate WTO rules. And it will become a problem when Russia joins the organisation, Levinas said.

According to her, Russia, being the 11th economy in the world, is a very attractive market, which has considerable potential. After the crisis, Russia’s GDP annual growth was 4 percent. In every industry, including automotive, pharmaceuticals, energy, high-tech industry, there are opportunities for American businesses, Levinas said. She also noted that Russia’s advantage before the other BRIC countries (Brazil, Russia, India, China) is a “strong middle class, ready to buy high quality goods.”

Since 1992, the United States in trade with Russia has been using the MFN on a permanent and unconditional basis. At the same time, unlike most other countries (including all East European), Russia still falls under the Jackson-Vanik amendment to the Trade Act of 1974 and thus enjoys MFN treatment in the US only on a temporary basis. Since 1991, the US president by special decrees suspends the amendment, but each time only for one year. Russia has repeatedly called on US authorities to repeal the Jackson-Vanik amendment, because it does not meet the modern conditions. However, the US Congress has not passed a bill on repealing the amendment against Russia.

The Jackson-Vanik amendment is a 1974 provision in United States federal law, intended to affect US trade relations with countries with non-market economies (originally, countries of the Communist bloc) that restrict freedom of emigration and other human rights. It was a response to the Soviet Union's “diploma taxes” levied on Jews attempting to emigrate.

The amendment, named after its major co-sponsors Henry M. “Scoop” Jackson of Washington in the Senate and Charles Vanik of Ohio in the House of Representatives, both Democrats, is contained in Title IV of the 1974 Trade Act. The amendment passed both houses of the United States Congress unanimously. President Gerald Ford signed the bill into law with the adopted amendment on January 3, 1975. It remains to be valid, though it has been regularly granted a waiver vis-a-vis the Russian Federation. In 2011, US Vice President Joe Biden urged a repeal of the law. The amendment denies most favoured nation status to certain countries with non-market economies that restrict emigration, which is considered a human right. Permanent normal trade relations can be extended to a country subject to the law only if the President determines that it complies with the freedom of emigration requirements of the amendment. However, the President has the authority to grant a yearly waiver to the provisions of Jackson-Vanik, and these waivers were granted to the People's Republic of China starting in the late 1970s and later to Vietnam. Jackson-Vanik is still in force and applies to Russia, among other countries. Critics of the amendment argue that with the end of the Cold War, Jackson-Vanik is now a merely counterproductive trade discrimination.

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