By Jill Dougherty and Jamie Crawford
Almost four decades ago, as the Cold War raged, the U.S. Congress passed an amendment to the Trade Act of 1974 aimed squarely at the Soviet Union's policy preventing Jews from emigrating from the USSR.
The Jackson-Vanik amendment, which denied favorable trade relations to the Soviet Union, worked. In 1991, Russia stopped slapping exit fees on Jews who wished to emigrate and they have been free to leave ever since.
But the amendment has stayed on the books even though it has outlived its purpose, a Cold War relic that infuriated the Kremlin. In reality, it was only symbolic; since 1994, presidents, Republicans and Democrats have certified annually that Russia complies with the amendment. In fact, the U.S. maintains normal trade relations with Russia.
As part of its "reset" with Moscow, the Obama administration urged Congress to abolish the amendment, to "graduate" Russia from Jackson-Vanik. Now, there's an economic reason to do it.
Last December, after 18 years of trying, Russia was given the green light to join the World Trade Organization. Russia's Parliament is expected to ratify and approve entry, and President Vladimir Putin to sign it by the end of July. Once that happens, the Jackson-Vanik amendment could end up hurting the U.S. instead of Russia.
Having it on the books means the U.S. is in violation of WTO rules requiring all members to grant other members "immediate and unconditional free trade." The U.S. would not be able to take advantage of all the concessions Russia will make as a WTO member – including market liberalization, transparency, committing to intellectual property protection, eliminating nontariff barriers and other provisions – and that would mean higher tariffs for American businesses seeking access to Russian markets.
The Obama administration and many members of Congress have called for the amendment's repeal, moving forward with a permanent normal trade relations pact with Russia. But disagreements between the U.S. and Russia over human rights, missile defense, Syria, Georgia and other issues are complicating that move.
In a Tuesday editorial in The Wall Street Journal, Secretary of State Hillary Clinton tried to make the case that "Trade with Russia Is a Win-Win."
Ending Jackson-Vanik is not "a gift to Russia," Clinton argued. "It is a smart, strategic investment in one of the fastest growing markets for U.S. goods and services."
By extending permanent normal trading relations to Moscow, Clinton said, "will be a vote to create jobs in America. Until then, Russia's markets will open and our competitors will benefit, but U.S. companies will be disadvantaged."
From the G-20 meeting in Mexico, Putin said he agrees.
"I hope the amendment, which discriminates against Russia on U.S. markets, will be canceled," he said Tuesday, "especially since we are joining the World Trade Organization and its preservation would only harm American companies working on the Russian market."
The U.S. Chamber of Commerce, the Business Roundtable, the U.S.-Russia Business Council and other business groups support ending the Jackson-Vanik amendment and enacting Permanent Normal Trade Relations (PNTR) with Russia.
"PNTR is all about U.S. companies and farmers and workers. Unless we do this, we're shooting ourselves in the foot," says USRBC's executive vice president, Randi Levinas. Levinas also is executive director of the Coalition for US-Russian Trade, the umbrella organization supporting PNTR.
U.S. Trade Representative Ron Kirk on Wednesday told the House of Representatives Ways and Means Committee that not ending Jackson-Vanik will have an adverse impact on U.S. businesses.
"We could be paying tariffs sometimes double what other countries are paying," Kirk said.
PNTR has bipartisan support from Democrats such as Senators Max Baucus and John Kerry, and Republicans John Thune and John McCain.
But even if many members of Congress support ending Jackson-Vanik and passing a new trade pact with Russia, some still think the U.S. needs a way of holding Russia's feet to the fire on human rights and other issues. They support the "Sergei Magnitsky Rule of Law Accountability Act," named in memory of the Russian lawyer Sergei Magnitsky who died in 2009 after a year in prison, apparently beaten to death, after revealing official corruption.
Under the law, which is not linked to trade, the U.S. would deny visas and freeze the assets of Russians linked to Magnitsky's death or to human rights abuses. A House committee passed its version but a Senate committee delayed a vote until later this month.
Rep. Ileana Ros-Lehtinen (R-FL), chairman of the House Foreign Affairs Committee says the bill "strikes directly at the corrupt officials and others in power who have benefited from their crimes and those who have sent their stolen wealth abroad."
But Ros-Lehtinen and others in Congress say the issues of normalizing trade and passage of the Magnitsky bill are distinct and should proceed on separate tracks.
Sen. Ben Cardin (D-MD), the main sponsor of the Senate version of the Magnitsky bill disagrees and wants to link its passage to any extension of normalized trade relations with Russia.
"Russia's disregard for human rights in their own country, combined with their enabling of human rights abuses in Syria and elsewhere solidifies the need for the Magnitsky Act,” he says.
The Obama administration says it agrees with the aim of the legislation, but says it is not needed. The State Department has imposed restrictions on travel to the U.S. by anyone implicated in Magnitsky's death.
And the legislation has infuriated the Kremlin. Moscow says if the bill passes, the Russian government will devise its own list of alleged American violators of human rights and ban them from travel to Russia.