from The Water's Edge

An Embrace and a Slap: Congress Votes to Normalize Trade With Russia—and Slap It on the Wrist

December 06, 2012

Russian president Vladimir Putin shakes hands with U.S. president Barack Obama during the G20 summit in June 2012 (Jason Reed/Courtesy Reuters).
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The U.S. Senate today approved a bill to normalize trade relations with Russia. The House voted overwhelmingly for it last month, and President Obama is expected to sign it into law. The move will allow U.S. companies to benefit from Russia’s recent entry into the World Trade Organization (WTO). However, the bill also includes a provision that penalizes Russian human rights violators—a move that infuriates Moscow, which has promised to strike back. I asked my colleague Anya Schmemann, who follows Russian issues, to explain the double-edged bill. Here’s what she had to say:

Congressional approval to grant permanent normal trade relations (PNTR) with Russia and lift a dated Cold War-era restriction on trade is a positive step in U.S.-Russian relations. It has been warmly applauded by U.S. companies, who are eager to reap benefits from Russia’s recent entry into the WTO.

But the good news—an embrace of improved trade relations—comes with a slap, since the bill also includes a “name and shame” provision to penalize human rights abusers in Russia.

In a show of bipartisanship, the House voted 365-43 and the Senate voted 94-2 for the combined legislation, which ends the four-decade-old Jackson-Vanik amendment that linked trade to the Soviet Union’s restrictions on Jewish emigration. Those limits were lifted even before the Soviet Union collapsed, but Congress let the amendment stay on the books for two more decades.

But lawmakers are wary of delinking trade from human rights with Russia precisely at a time when the Putin regime has pursued anti-democratic policiesso the Magnitsky provision was tacked on to send Moscow a stern message.

Named after lawyer Sergei Magnitsky, who died in a Russian jail in 2009 after severe mistreatment, the Magnitsky law requires that the names of those involved in his death be made public, that they be denied visas, and that their U.S.-based assets be frozen. The law could also be applied to future human rights violators.

Moscow has strenuously objected to the Magnitsky provision and has threatened retaliation, warning darkly of “a tough response.” Russian officials say the law interferes with their internal affairs, singles out Russia unfairly, and will harm U.S.-Russia relations.

U.S. businesses hope the benefits of trade normalization will outweigh any negative fallout.

Business groups had been pushing hard for the bill, arguing that U.S. companies were at a disadvantage compared to European and Asian countries that enjoyed full WTO relations with Russia. When Russia entered the WTO in August, it allowed greater access to investment and imports. But without PNTR, the United States was not able to use the WTO’s trade rules and dispute-settlement system with Russia.

Once President Obama signs the law, administration officials predict that exports to Russia, the world’s ninth largest economy, will greatly increase.

The benefits of the bill are significant, and Russia would be wise to focus on the positive aspects rather than the negative. The Magnitsky provisions are narrowly targeted and largely symbolic, since the State Department had already barred the offenders from entry into the United States. The Obama administration, seeking Russian cooperation on a range of other issues, will likely not apply the provision to human rights issues beyond the Magnitsky case.

The best way to promote Russia’s democratic development is through engagement. Increased trade, investment, and interaction will help create transparency, rule-of-law, and accountability. The repeal of the restrictive Jackson-Vanik amendment and the normalization of trade relations will both help the U.S. economy and also integrate Russia into multilateral norms, rules, and values.