U.S. could feel effects of amendment meant to hurt Russia
U.S. President Barack Obama and Russian President Vladimir Putin discussed trade and other issues earlier this week when they met at the G-20 summit in Mexico. Photo: AFP/Getty Images
June 21st, 2012
12:00 AM ET

U.S. could feel effects of amendment meant to hurt Russia

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.

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  51. AlexShch

    "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." - what Jill Dougherty and Jamie Crawford forgot to mention is that yes, Russia kind of stopped resisting emigration of Jews after 1991, however in 2001 Russia imposed stiff regulation on imported chicken meat restricting amounts of chlorine and hormones, which effectively bans US-made poultry (popularly known as "Bush's legs" in Russia named after the elderly president George H. W. Bush). US alleges (with some credibly basis) that these new regulations were imposed by Russia simply because the domestic agriculture started recovering and Russia no longer needs to import poultry, but rather acts as protectionist for its own domestic producers.

    The matter was discussed in u

    So it is no longer about Russia's refusal to export Jews, but is about refusal to eat US-made chicken quarters.

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    June 21, 2012 at 2:00 pm | Reply
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    June 21, 2012 at 11:23 am | Reply
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      June 22, 2012 at 5:14 pm | Reply
  53. Bianca

    Russia is COUNTING on the Amendment staying on. Let us see who in Congress will defy their paymasters and vote to have it cancelled? As someone already said in this forum, it is about reciprocity - not superiority. Many of our mighty lobby lords have for too long learned the game of superiority, and cannot let go. But now, it is hurting our economy. It is a foregone conclusion that our lords have their best interests at heart when promting Congress to do one thing or the other. There are many other things they want. Some is a sense of power. Other is vanity and greed, venality and pettiness. And when things are not working, there is a tendency to dig the hole deeper, instead of looking out there to see what is happening. Russia is not the only country that knows it. FULL reciprocity in dealing with others. But then, we have to be prepared for others to play by the same rules. So, China has rare earth metals, and is trying to liming export in order to have more for internal consumption. OK, not fair. But is it fair that we have an abundance of these, but chose to keep them in the ground? Reciprocity is a fair way to view international trade, but the childish practice of pointing out what is "unfair" from "others" - while smirking over the unfair things we do - must stop first. Over our lords' venal and vane bodies.

    June 21, 2012 at 10:43 am | Reply
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    June 21, 2012 at 10:11 am | Reply
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    June 21, 2012 at 8:00 am | Reply
  58. a cnn reader

    "In 1991, Russia stopped slapping exit fees on Jews who wished to emigrate and they have been free to leave ever since."

    you think this happened because of the J-V amendment rather than the fact that the USSR dissolved this very year? facepalm.

    June 21, 2012 at 7:13 am | Reply
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      Thanks to all the pols Russia opened the gates for those wishing to leave. Due to that decision we in America received the Russian Mafia ,dealers in and slavery !

      June 21, 2012 at 9:59 am | Reply
  59. sinbad

    The picture looks like Obama trying to look tough and Putin is trying not to laugh.

    June 21, 2012 at 5:01 am | Reply
  60. Jim Craig

    well said david

    June 21, 2012 at 2:39 am | Reply
  61. Emigdio Alvarez

    the picture looks like Obama and Putin having a staring contest.

    June 21, 2012 at 2:32 am | Reply
    • EG

      fummy

      June 21, 2012 at 10:14 am | Reply
      • EG

        funny even!

        June 21, 2012 at 10:14 am |
  62. Dave Sanford

    Or here's another way to go – exit the freaking WTO. "Free trade" and "globalization" are what got this country into this mess and sent all the decent jobs overseas. Let's make our own rules and if other countries don't like them they don't have to sell their products here.

    June 21, 2012 at 2:26 am | Reply
    • Johan S

      So if someone wants to spend his earned money and buy something from a foreign country you want to steal some of his money?

      June 21, 2012 at 3:13 am | Reply
    • Steve

      I have the simple rules for you: We shall use each country's tariffs against their products. If Europe imposes 10% duty on American cars, we shall impose 10% duty on European cars. If China imposes 12% duty on American machinery, we shall impose 12% duty on Chinese machinery. Reciprocity, it makes the playing field even.

      June 21, 2012 at 3:19 am | Reply
      • nirvichara

        Brilliant solution. Then all cheap China products will go to Russia and in 5 years we will see a long lines in US for a toilet paper – exactly like in USSR back 30 years ago ...LOL

        June 21, 2012 at 11:48 am |

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