RESEARCH PAPER ASSIGNMENT

“The Impact Of Russia’s Accession Join The

World Trade Organization Towards The
United States Of America”

Compiled by Firdaus Ginanjar Kusumah Shan

To fulfill the course of the United States Global Politics
Lecturer: Ratih Herningtyas, S.IP., M.A.

INTERNATIONAL PROGRAM FOR INTERNATIONAL RELATIONS

FACULTY OF SOCIAL AND POLITICAL SCIENCE
UNIVERSITAS MUHAMMADIYAH YOGYAKARTA
2016

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Background

Nowadays, we know that the relationship between the United States of America and
Russia looks friendly in the post-cold war era where those countries have created a concept of
interdependence through the international organization in economic cooperation.1 This thing
is indicated by the actualization of Russia officially entries to become a membership into
WTO (World Trade Organization) in 2012 after 19 years of negotiations, Russia’s parliament
voted to ratify the country’s accession which restricts import duties and subsidies in an
attempt to create a level playing field for international trade. However, the U.S. government
has supported Russia’s accession to the WTO as part of its efforts to “reset” U.S. relations
with Russia. 2

Furthermore, The U.S. government has provided advice to the Russian government
aimed to make its trade and investment which is compatible with regime WTO in order to
educate and reconstruct Russian firms on the implications of WTO accession. As matter of
fact, the U.S. is the world’s largest economy which has an important role as well as a lot of
influence within the WTO, and its support is critical to the success of Russia’s application
which provides meaningful trade liberalization and a market economy based on WTO
agreements upon accession. This policy is itself part of a larger U.S. foreign policy strategy to
anchor Russia in the world community and to reshape the U.S -Russian relationship into one
of economic cooperation.

Therefore, this phenomenon describes a brief overview of the reformation of Russian

policy, the accession process in general and the commitments that Russia has made to join the
WTO. On the contrary, the paper discusses U.S. policy toward Russia’s accession in the
context of the U.S.-Russia economic relationship. Then, the goals of the U.S. Policy toward
Russia are to offer its best judgments on American national interests and priorities in the
U.S.-Russian relationship to the President, the Congress, and the interested public; to explain
why constructive management of this critical relationship is difficult given recent history,
differing interests, and sometimes competing narratives; and to present broad policy
recommendations for a new administration to advance American national interests effectively
to implement in relations with Russia.

1
Robert Owen Keohane and Joseph Nye, Power and Interdependence. Longman, 2001.
2
Office of the United States Trade Representative, 2011 Trade Policy Agenda and 2010 Annual Report .of the
President of the United States and the Trade Agreements Program, Chapter I, p. 6

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Research Question

How does the impact of Russia’s accession join the World Trade Organization
towards the United States of America?

Explanation

After the overthrow of Soviet Union, we know that the United States has a significant
role in the global politics through a new weapon that is free trade which is covered by WTO
(World Trade Organization) to realize "world without borders" as a form of implementation
and dissemination of neo-liberalism in order to fulfill the necessities of people in the world.
This is evidenced by the "external source" through the quality of U.S. diplomacy in
negotiating toward states in the entire world, especially Russia as a form of persuasive and
invitation to join into WTO membership.

Then Russia officially became a WTO member on August 22, 2012, where it will
affect a policy of the Russian government to open its markets further related to foreign goods,
services and investments; reduce trade barriers and other trade-distorting practices; and
promote transparency, accountability, and the rule of law as a consequence to join into the
WTO itself.3 On December 21, 2012, US President Obama signed an approved and
legislation through a very long bureaucratic process that is the U.S. Congress to terminate the
application of a Jackson-Vanik amendment and the extension of normal trade relations to
Russia. It is meant a trade status is used to denote the nondiscriminatory treatment of a
trading partner compared to that of other countries.4

In this case, this thing is influenced by "societal source" in which U.S. society,
especially businessman trying to interact directly or indirectly with the U.S. government as a
form of aspiration in designing and formulating the U.S. foreign policy because, in the
government system of democratic country such as the U.S., the decision does not depend on
one actor "superman" but "superteam" in which the demands of public opinion is always

3
Gorodissky, “Russia becomes a full member of the WTO On August 22, 2012”, accessed on
http://www.gorodissky.com/publications/law_news/russia-becomes-a-full-member-of-the-wto-on-august-22-
2012/, on Tuesday, April 26, 2016.
4
MFN has been used in international agreements and at one time was used in U.S. law to denote the
fundamental trade principle of nondiscriminatory treatment. However, “MFN” was replaced in U.S. law, on
July 22, 1998, by the term “normal trade relations.” (P.L. 105-206). MFN is still used in international trade
agreements. The terms are used interchangeably in this report.

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taken into consideration for the creation of a collective decision. Thus, the WTO agreement is
started officially between the United States and Russia.

In addition, the U.S. government based on “governmental source” both presidency

and congress assume that Russian membership in the WTO has the potential to create
opportunities for U.S. exports and investment. It is characterized by demand for U.S. goods
in Russia, including agriculture, services, capital, and information technology. However, the
U.S. ensures that Russia's entry into the WTO membership will directly benefit based on the
U.S. economic interests by granting new market access for U.S. goods and services
produced.5 Therefore, it will probably facilitate the integration of Russia into the community
of democratic states and enhance its role as a partner of strategic anti-terrorism in the future.

Actually, Russia’s accession to the WTO could have some qualitative and quantitative
effects on the relationship in absolute terms. As a number of observers have pointed out,
WTO accession would likely bring more stability and predictability to the relationship,
reducing the opportunities for unilateral actions. For example, Russia would be limited to
how high it could raise its tariffs, as it did on car imports during the recession. It would also
be obligated to adhere to WTO agreements on implementing SPS measures, safety and
certification procedures, and other trade-related measures.

In addition to these qualitative effects, Russia’s WTO accession could have some
quantitative effects. One study forecasts that U.S. exports of agricultural products, including
meats, grapes, apples, and processed foods, would increase two or three times as a result of
the reduction in Russian tariffs.6 The United States could also realize an increase in exports of
civil aircraft and aircraft parts, telecommunications equipment, and pharmaceuticals as a
result of lower Russian tariffs. Furthermore, improvements in Russia’s enforcement of
intellectual property rights and concessions on foreign investment could raise the level of
investor confidence and increase the level of U.S. business investment in Russia, including
investment and trade in services.7

5
Daniel Griswold and Douglas Petersen, “Trading with the Bear: Why Russia’s Entry into the WTO Is in
America’s Interest”, Accessed on http://www.cato.org/publications/free-trade-bulletin/trading-bear-why-
russias-entry-wto-is-americas-interest, on Tuesday, April 26, 2016
6
Aslund, Anders and Gary Clyde Hufbauer, Why It’s in the U.S. Interest to Establish Normal Trade Relations
with Russia, Peterson Institute for International Economics, 2011, p. 5. (Draft)
7
Ibid.

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 Therefore, Russia’s Accession to the World Trade Organization (WTO) has given
opportunities for U.S. Companies, Farms, and Workers.8 Namely:

1. Strengthening Bilateral Trade and Investment

In 2010, Russia imported $10.7 billion in goods from the United States. The United
States was Russia’s fourth-largest source of imports in 2010. U.S. exports to Russia have
grown significantly over the past decade. In particular, Russian purchases of U.S-produced
goods doubled between 2005 and 2010. The top U.S. goods exports to Russia in 2010
included: machinery, aerospace (aircraft), optical and medical instruments, automotive and
other transportation vehicles, electrical machinery, meat, and pharmaceutical products.

Russia is an important goods export market for many states. In 2010, Texas,
California, Illinois, New York, Washington, Georgia, Oklahoma, North Carolina, Virginia,
and New Jersey each exported over $150 million in goods to Russia. A total of 6,358 U.S.
companies exported goods to Russia in 2008. Eighty-four percent (5,333) of those companies
were small and medium-sized enterprises (SMEs), with fewer than 500 employees.

In addition, the United States is working to expand bilateral investment and economic
cooperation that can benefit both Americans and Russians. Over the period from 2004 to
2011, U.S. exports to Russia rose an average of 16 percent per year; in 2011 U.S. exports to
Russia rose by 40 percent. U.S. companies reported numerous major business deals in Russia,
including Boeing’s sale of 50 aircraft to Aeroflot and 40 planes to Russian airline, a joint
venture between Exxon-Mobil and Rosneft to explore for oil and gas in the Arctic.9 However,
the U.S. government should encourage the Russian government to create a more favorable
environment for trade associa-tions by establishing a tax-exempt regime for nongovernmental
organizations and work with the Russian government to enhance dialogue between state
agencies and trade associations on issues concerning bilateral economic ties.

8
U.S. Department of Commerce, “Fact Sheet on Benefits of Russia’s Accession to WTO”, accessed on http:
//iipdigital.usembassy.gov/st/english/texttrans/2011/11/20111110164552su0.620931.html#axzz46yb6YFmD,
on Tuesday, April 26, 2016.
9
U.S. Department of State, “U.S.-Russia Economic Cooperation”, accessed on
http://www.state.gov/p/eur/rls/fs/193103.htm, on Tuesday, April 26, 2016.

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2. Expanding International Market for the United States

The WTO provides a forum for enforcing U.S. rights under the WTO Agreements to
ensure that Americans receive the many benefits of the United States’ WTO membership.
The expansion of the WTO to include new members strengthens the global trading system
and opens new and more secure markets to American exporters. Russia’s membership in the
WTO will benefit U.S. economic interests directly by integrating Russia into a rule-based
system governing trade, and by providing the means to enforce those rules and Russia’s
market access commitments. Furthermore, Russia’s membership in the WTO will give
American companies greater and more predictable access to Russia’s growing markets,
expanding both U.S. exports and employment.

Russia’s accession to the WTO will create new market access opportunities for U.S.
exporters in one of the world’s fastest-growing markets. Russian tariffs on industrial products
will be bound at an average of 7 percent. The concessions obtained on these exports to Russia
are most significant in the information technology, civil aircraft, chemicals, and capital goods
and equipment sectors:

a. Information Technology and Telecommunications Equipment: Russia has committed to

join the Information Technology Agreement (ITA), providing duty-free treatment on all
ITA products within three years.
b. Civil Aircraft: Russia’s tariff concessions will yield significant market access
opportunities for the U.S. civil aircraft industry. Tariffs on wide-body aircraft will be
reduced from 20 percent to 7.5 percent.
c. Chemicals: Russia has agreed to harmonize tariffs on chemical products along the
processing chain in a manner generally consistent with the rates agreed under the
Chemical Tariff Harmonization Agreement.
d. Capital Goods and Equipment: Russia has agreed to substantial tariff reductions on
construction and agricultural equipment, scientific equipment, and medical devices.

As part of its WTO accession, Russia will bind its tariffs on all agricultural products,
thereby providing more predictability on its tariff rates once Russia joins the WTO. U.S.
farmers, ranchers, and food processors of wheat, corn, barley, apples, pears, grapes, raisins,
almonds, walnuts, pistachio nuts, dairy, soybeans, soybean meal, soybean oil, pet food, wine,
poultry, pork, and beef, among others, will benefit from the market access provisions. Russia
has undertaken market access and national treatment commitments in a wide array of

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commercially significant services sectors. U.S service suppliers will benefit, in particular,
from more open access in infrastructure services sectors such as telecommunications
(including satellite services), computer and related services, express delivery, distribution,
financial services, and audio-visual services.

The process of WTO accession has already shown benefits for intellectual property
rights (IPR) protection, as Russia has passed long-awaited legislation. Furthermore, Russian
accession will provide it, through WTO trade policy monitoring and dispute settlement, an
ongoing mechanism to promote effective Russian protection and enforcement of IPR.

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Conclusion

Russia’s WTO accession would be yet another important step forward in our reset of
relations with Russia, which has been based upon the belief that the United States and Russia
share many common interests, even as we disagree on some issues. Whether cooperating to
supply our forces in Afghanistan, securing nuclear materials, or achieving the new start
treaty, the United States and Russia have demonstrated the ability to produce “win-win”
outcomes on security issues. Russia’s dramatic step today towards joining the WTO
underscores our ability to cooperate also on economic issues of mutual interest.

From day one of its membership in the WTO, Russia will be required to comply with
WTO rules on the protection and enforcement of intellectual property rights, including with
respect to key rights relied on by U.S. creative and innovative industries. Russia’s
membership in the WTO also will benefit American companies and their workers by
integrating Russia into a system of rules governing legal transparency and trade behavior and
providing the means to enforce those rules. Upon Russia’s accession, the United States will
be able to use WTO mechanisms, including dispute settlement, to challenge Russia’s actions
that are inconsistent with WTO rules.

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References

Robert Owen Keohane and Joseph Nye, Power and Interdependence. Longman, 2001.

Office of the United States Trade Representative, 2011 Trade Policy Agenda and
2010 Annual Report of the President of the United States and the Trade Agreements
Program, Chapter I, p. 6

Gorodissky, “Russia becomes a full member of the WTO on August 22, 2012”,
accessed on http://www.gorodissky.com/publications/law_news/russia-becomes-a-full-
member-of-the-wto-on-august-22-2012/, on Tuesday, April 26, 2016.

Daniel Griswold and Douglas Petersen, “Trading with the Bear: Why Russia’s Entry
into the WTO Is in America’s Interest”, Accessed on http://www.cato.org/publications/free-
trade-bulletin/trading-bear-why-russias-entry-wto-is-americas-interest, on Tuesday, April 26,
2016.

Aslund, Anders and Gary Clyde Hufbauer, Why It’s in the U.S. Interest to Establish
Normal Trade Relations with Russia, Peterson Institute for International Economics, 2011, p.
5. (Draft).

U.S. Department of Commerce, “Fact Sheet on Benefits of Russia’s Accession to

WTO”, accessed on
http://iipdigital.usembassy.gov/st/english/texttrans/2011/11/20111110164552su0.620931.htm
l#axzz46yb6YFmD, on Tuesday, April 26, 2016.

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