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Analysis & Opinion
23.03.12 Will Russia Graduate From The Jackson-Vanik Amendment?
Introduced by Vladimir Frolov

Contributors: Vladimir Belaeff, Dale Herspring, James Jatras, Eric Kraus, Dick Krickus, Edward Lozansky

The United States Senate Finance Committee began hearings last week on abolishing controversial trade restrictions against Russia under the Soviet-era Jackson-Vanik Amendment. American lawmakers will debate granting Permanent Normal Trade Relations (PNTR) status to Moscow. Will Russia finally be graduated from the Jackson-Vanik Amendment imposed in 1974 on the now non-existent country? Will the congressional opposition succeed in imposing new trade restrictions on Russia linked to the human rights situation? What will this mean for the U.S.-Russian “reset?”

The Jackson-Vanik amendment was adopted in 1974, linking restrictions on trade with the right of Jews to emigrate from the Soviet Union. That issue has been dead since the collapse of the Soviet Union, and Russia has been deemed in compliance with the Jackson-Vanik legislation by annual presidential waivers since 1990.

During the post-Soviet period, all U.S. administrations, from Bill Clinton to George Bush, promised to graduate Russia from Jackson-Vanik, only to see little congressional support for the measure. None ventured to spend much political capital on pushing it through a reluctant Congress. In the meantime, several post-Soviet states – Ukraine, Georgia, and Kyrgyzstan – were graduated from Jackson-Vanik and granted PNTR when they joined the World Trade Organization.

Now, Russia is joining the WTO and the Barack Obama administration has jumped on this opportunity to do away with this last legacy of the Cold War in U.S.-Russian relations. This time around, it is the United States that would benefit more from Russia's graduation.

If the Jackson-Vanik Amendment is still on the books by the time Russia officially joins the WTO this summer, U.S. companies will find themselves at a disadvantage in the Russian market. Unlike competitors from other countries, they will not be protected by WTO rules and Moscow could choose to retaliate against American companies with tariffs and other barriers.

Senate Finance Committee Chairman Max Baucus, who traveled to Russia last month, is leading the drive in the Senate to repeal the law. "We must pass permanent normal trade relations, or PNTR, to ensure that our exporters can access the growing Russian market," Baucus said. "If the United States passes PNTR with Russia, U.S. exports to Russia are projected to double within five years. If Congress doesn't pass PNTR, Russia will join the WTO anyway and U.S. exporters will lose out to their Chinese and European competitors."

The Obama administration is solidly behind the effort to graduate Russia from the provisions of Jackson-Vanik, and has launched an aggressive effort in Congress and inside the U.S. business community. Last week, during a meeting with U.S. business leaders, President Barack Obama emphasized that granting PNTR to Russia is necessary for American companies to benefit from Russia's entry into the WTO. Senior officials, such as Secretary of State Hillary Clinton and U.S. Trade Representative Ron Kirk, sent a similar message to Capitol Hill.

But there is still serious opposition in Congress to lifting all trade restrictions on Russia. Some republican and democratic lawmakers want to link the trade issue and issues of human rights and corruption in Russia, arguing that Russia's graduation from Jackson-Vanik should be linked to the passage of the Sergei Magnitsky Rule of Law Accountability Act of 2011, named for the anti-corruption lawyer who died in a Russian prison more than two years ago. This position has gotten support from the democracy promotion camp.

David Kramer, head of the Freedom House think tank, said last week at an event sponsored by the Foreign Policy Initiative: "Politically, in light of the environment in Russia, which has been deteriorating, to simply lift Jackson-Vanik without some replacement would be viewed by Russian leadership as a sign of weakness on the part of the United States – again, that we need this relationship more than they do. And if we don't replace it, then we would, in their minds, be rewarding them despite their bad behavior by not going after them. To me, this has to be a package deal."

U.S. Ambassador to Russia Mike McFaul and Assistant Secretary of State Phillip Gordon told Congress that the administration does not see the need for new human rights legislation on Russia, while the State Department has the authority to implement visa restrictions against foreign citizens suspected of human rights violations. McFaul said last week that the administration no longer believes any such "weird linkage" is necessary to accompany the repeal of Jackson-Vanik.

Leading Russian opposition figures – Vladimir Milov, Boris Nemtsov, Garry Kasparov, Ilya Ponomarev and Alexei Navalny – signed a letter to Congress arguing that repealing Jackson-Vanik would be good for Russian democracy.

Will Russia finally be graduated from the Jackson-Vanik Amendment imposed in 1974 on the now non-existent country? Will the Obama administration win this battle in Congress during the U.S. presidential campaign? Will the congressional opposition succeed in imposing new trade restrictions on Russia linked to the human rights situation? What will this mean for the U.S.-Russian “reset?”

Dale Herspring, University Distinguished Professor, Kansas State University, KS

Only if Putin goes privately to Obama and makes a very big deal of it. Even then, I think it will be delayed. Obama doesn't oppose ending it. However, we are now in a political “funny season.” Obama does not want to do anything to give voters another reason not to vote for him – and I think if he did, the McCains on the hill would beat him over the head with it.

If he wins in November, I think it would make sense to have the Russians raise it (privately, without publicity). But in the meantime, I think it is a non-starter until after the election.

Eric Kraus, Private Fund Manager, Moscow

The fact that these questions could still be asked suggests that American foreign policy is increasingly divorced from reality. Those who would continue to believe in America's destiny as a world leader and a shinning model aspired to by all have great difficulty in coming to terms with their sharply reduced prestige and status.

While the justification for the amendment – if there ever was one – fell away 20 years ago, illogic was never a hard constraint in Washington.

More to the point: while American democracy has unarguably deteriorated very badly in the last 20 years, with elections now being won or lost largely depending upon the ability to raise vast sums of money from wealthy and self-interested donors, this is a problem for the Americans. It is not one for Russia, which must be content to observe the political situation across the Atlantic, hoping for the best but unable to influence it in any substantial way.

Washington apparently struggles to come to terms with the reality that it is equally unable to influence Russian domestic affairs – regarding which its view has not been solicited. It may approve, disapprove or (hopefully) be indifferent, but it has no means to influence the process – at least not in a fashion favorable to its own interests.

Regarding the amendment, the U.S. Senate would actually be doing Russia a small favor if it fails to cancel it; this would simply allow Russia to discriminate against American exports, in particular in the agricultural sector. Since Russia exports little of value to the United States (and to cut off Russian exports of semi-finished products would throw tens of thousands of Americans out of work), Russia is not susceptible to American retaliation.

Given that this is an electoral season in the United States, it is most likely that some fig leaf will be found to cover up the impotence – most probably a travel ban for a number of Russians who have no conceivable intention of travelling to the United States. Russia will doubtlessly react by barring the same number of Americans from doing something they equally had no intention of doing. More to the point, however, as the largest and most liquid market in Europe, and with a weak domestic manufacturing base, access to the Russian market is a valuable prize for Western exporters. Russia should continue to favor the companies of those countries which maintain respectful diplomatic relations – notably Germany and Italy – as well as further developing economic relations with the rising global economic powerhouse – the People's Republic of China – which is now Russia's top trading partner.

Vladimir Belaeff, Global Society Institute, San Francisco, CA

The Jackson-Vanik Amendment (JVA) is indeed a curious artifact. It was legislated 38 years ago, addressing a long-defunct emigration issue regarding a country that no longer exists. Of all the constituent republics of the Soviet Union, only Russia has been burdened with this legacy, giving grounds to a perception that the current survival of the JVA is now Russia-specific.

On the other hand, the practice of annual presidential waivers of the JVA application to Russia has blunted the effect of this law, and its negative impact on current Russian-U.S. trade is slight, if any at all. As a footnote, one should observe that the presidential waiver practice is an example of violation of the democratic principle of separation of powers: the U.S. executive branch is acting in a de facto legislative role.

Given that for Russia, the volume of bilateral trade with the United States is currently lower than with its other primary markets. Even with the repeated annual JVA waivers, it is far from clear how a permanent removal of the JVA by itself might increase this trade volume. Symmetrically with Russia, the United States has other, higher priority trade partners.

It seems that for Russians, the legislative abrogation of the JVA is more of a psychological than an economic need.

In the current election year, Obama’s opponents in Congress may not be interested to give him a political victory in this area, especially considering the strong anti-Russian convictions of some leading members of Congress. Some horse-trading is possible, but then the question arises: what is the White House prepared to concede to the opposition for the removal of legislation that can be waived by the president in any case?

Of course, the Kremlin may make concessions of its own in order to earn U.S. Congressional removal of the JVA, but it is not clear what level of Russian compliance will be sufficient to satisfy the Kremlin’s opponents on Capitol Hill.

Therefore, it is highly probable that Obama’s JVA initiative will languish until after the November 2012 elections and (depending on who becomes the president-elect) may be undertaken after the inauguration in January 2013 – but by then the domestic political need to eliminate the JVA will be weaker. And the JVA can be retained in its current state, as a mostly psychological weapon against the Kremlin, even though the substance of this law is now mostly obsolete.

The current economic impact of the JVA is not high, the domestic price to the White House for congressional approval may be too high, and possible reinstallation of legislation after it has been abrogated is more difficult than retaining it in suspended animation. These factors will influence the fate of the present initiative.

Edward Lozansky, President, American University in Moscow and Professor of World Politics at Moscow State University

The more I watch the goings-on in Washington regarding graduating Russia from the Jackson-Vanik Amendment (JVA), the more it reminds me of the deal struck almost 400 years ago by a certain Peter Minuit. On May 24, 1626, the guy purchased the island of Manhattan from some Native Americans for goods to the value of 60 Dutch guilders, estimated to be the equivalent of $24.

Not that I am against this graduation, even if it’s become a bit of rigmarole by now. In fact, in April 2011 my good friend Anthony Salvia of the American Institute in Ukraine and I filed a lawsuit against Obama. We demanded that he should graduate Russia from JVA without seeking congressional approval.

According to a careful reading of the statute, the president has constitutional authority to do just that. Significantly, this view is shared by none other than Richard Perle, Senator Henry Jackson’s former chief of staff, the man who actually wrote the text of the amendment and who, I should add, is not at all an admirer of Putin’s Russia.

Nevertheless, Obama’s lawyers fought hard to dismiss this lawsuit. Their argument was based on technical rather than substantive grounds. As it happened, Tony and I could prove only our moral but not material injury from JVA. More importantly, though, the administration basically admitted that, in strict legal terms, we as plaintiffs were absolutely right.

While three administrations have successively claimed the need for congressional action to “graduate” Russia from JVA trade restrictions, it is highly indicative of the soundness of our case that the Department of Justice did not make that claim in its brief to the court! They know that under the law as it is written, permanent removal of trade restrictions does not require any congressional sanction.

As things stand now, the big irony is that with Russia’s accession to the WTO, the amendment, which was supposed to rightly punish the Soviet Union, will now be damaging to U.S. business interests.

Proof? The U.S. Chamber of Commerce, along with 173 U.S. companies, including such giants as General Electric, Deere, Boeing, Ford, GM and Chrysler, sent letters to Congress demanding the normalization of trade with Russia by lifting JVA. One wonders why they did that. Have they suddenly switched from business to charity or human rights activities? Doubtfully, very doubtfully indeed.

The reason is obvious: plenty of U.S. companies are eager to see this JVA graduation because it directly serves their interests. For Russia this is just a moral issue, while for America, it’s more a matter of dollars and cents. If the republicans are stupid enough to kill this graduation I’d like to see their faces when they meet U.S. business lobbyists the morning after.

Realistically speaking, the amendment is sure to be lifted, and sooner rather than later. But when Congress eventually does what it is supposed to have done 20 years ago, after the collapse of communism and the Soviet Union, this will most likely be hyped as a great big gift to Russia, very much like Minuit’s offer of $24 to the Indians.

That’s not the end of the story, though. To show Congress that he was not too soft on Putin, Obama declared the establishment of a new $50 million fund to support “Russian non-governmental organizations that are committed to a more pluralistic and open society.”

In view of Russia’s concern over American meddling in its internal affairs, it is hard to imagine a more dubious move. In fact, even some potential Russian grant recipients have been soured by this idea. Surely, in these difficult economic times, U.S. taxpayers might certainly find better ways to spend these “democracy promotion funds” on the domestic front – just ask any resident of the towns and counties across America that are now close to bankruptcy.

James George Jatras, Principal, Squire Sanders Public Advocacy, Washington, DC

Until very recently, I would have said the chances of getting a Jackson-Vanik “graduation” bill for Russia through Congress this year were next to zero. The deck still is stacked against it, but the possibility exists – if it is accompanied by anti-Russian measures even more insulting than continued Jackson-Vanik application.

Enacted in 1974, Jackson-Vanik barred normal U.S. trade ties with communist (“non-market economy”) countries unless they permitted free emigration of their citizens. During the 20-plus years since the end of communism, most countries formerly impacted by Jackson-Vanik have been permanently “graduated” from its provisions. But due to unrelated political issues, Russia has not. This is despite the fact that for years Russia has been in full compliance with the amendment’s emigration requirements. Moreover, in 2002 the U.S. Department of Commerce determined Russia was no longer a “non-market economy,” itself sufficient grounds to “graduate” Russia.

The misuse of Jackson-Vanik sends a dangerous, negative message about U.S. intentions toward Russia and the future of the “reset” between what remain the world’s two greatest nuclear powers. Singling out Russia for trade discrimination signals that the United States still refuses full normalization of relations with Moscow – more than 20 years after the end of the Soviet Union! Do political concerns lead to trade barriers with such paragons of democracy and human rights as China (graduated from the amendment in 2000) or Saudi Arabia (never subject to the amendment)? No. But Russia remains locked in a time warp from the 1970s, still branded as the communist adversary that no longer exists.

The Obama Administration, like the Bush and Clinton administrations before it, pays lip service to getting rid of Jackson-Vanik – but with one important procedural twist. Like its predecessors, the Obama White House insists that Congress must pass legislation “graduating” Russia, which in the misguided anti-Russia and anti-Putin climate that dominates Congress – not to mention demagogy in an election year – has virtually guaranteed that even a few anti-Russian senators or congressmen (and sadly, there are more than a few) can continue to block it.

Ironically, president Obama can get rid of the problem with a stroke of his pen. While other formerly communist countries were indeed “graduated” from Jackson-Vanik by congressional action, nothing in the plain language of the Jackson-Vanik law itself requires Congress to take any action at all to achieve that end. Instead, as clarified in a federal lawsuit this year, the plain language of the law gives that authority solely to the president (indeed, for obvious reasons “the Russian Federation” was not even on this list of applicable countries in 1974. It was placed on the Jackson-Vanik list by Clinton’s unilateral executive action – and just as obviously could be removed by presidential action at any time).

The Obama administration’s continued pretense that congressional action is needed not only bottles up U.S.-Russian trade ties, but also invites treatment of Russia as a political punching bag for congressional critics (and for most of the Republican presidential candidates). Instead, if president Obama were serious about taking advantage of the “no-brainer” (as Senate Finance Committee Chairman Max Baucus called it), trade and job opportunities for American WTO access to Russia, he could break the congressional roadblock by coming to the legal conclusion that he can act on his own – and is prepared to do so unless Congress moves without further delay or irrelevant strings attached. But then, as he well knows, the GOP would cite his “rewarding Putin” as further evidence of his “weakness” on foreign policy, “failure to lead,” and similar standard cliches.

Still, the possibility exists that a Jackson-Vanik “graduation” bill could be passed, but only if it comes with measures to make sure the Mark of Cain stays firmly branded onto Russia’s and Putin’s figurative foreheads: the Magnitsky sanction bill, tens of millions of dollars for promoting “democracy” (i.e., geopolitical subservience to Washington), and perhaps other horrors yet to be finalized. Unlike Jackson-Vanik, these would be carefully drafted to be non-trade provisions so they would not trigger Russian retaliatory response under the WTO.

Dick Krickus, distinguished professor emeritus at the University of Mary Washington, former H.L. Oppenheimer Chair for Warfighting Strategy at the U.S. Marine Corps University, Washington, DC

The Obama administration wants to scrap the Jackson-Vanik amendment, a Cold War relic that could compromise American economic interests after Russia enters the World Trade Organization (WTO). U.S. firms could be denied access to the Russian market and those operating in it would not be protected by WTO rules. But there are members of Congress in both parties who oppose granting Permanent Normal Trade Relations (PNTR) status to Moscow without a trade-off; namely in return for scrapping the amendment, the Obama administration will endorse passage of the Sergei Magnitsky Rule of Law Accountability Act – named after the human rights lawyer who died under government custody. It is designed to punish Russian officials who engage in human rights violations, illegally seize property, and falsify elections. Among other things, they will be subjected to visa and financial sanctions.

Some supporters of this tradeoff are doing so out of principle. They believe that it will offer the Russian people protections against human rights violations. This is not the view of the Obama administration. Michael McFaul, the U.S. ambassador to Russia, opposes linking wider commercial relations between Moscow and Washington to human rights. He argues that it will not advance Russia’s march toward democracy.

Instead he urges Congress to provide $50 million to Russian NGOs to enhance their capacity to build a civil society, and notes as well that visa bans have already been issued against some Russian officials.

To complicate matters, democratic activists like Alexei Navalny, the blogger who helped energize recent public protest demonstrations, and Lyudmila Alexeyeva, who heads Moscow’s Human Rights Group, favor Jackson-Vanik’s repeal. They made this known – along with a number of their colleagues – in a letter to the U.S. Congress. Since then, they have supplemented their request by supporting the Magnitsky Act as well.

Of course, there are others in Washington who oppose Jackson-Vanik’s repeal for partisan political reasons that have nothing to do with the substance of the matter. Their position on the amendment – and opposition to the “reset” in American-Russian relations – is a calculated campaign to portray Obama’s foreign policy record as flawed and his stewardship of U.S. national security policy as weak. They have done so because any objective assessment of his record on this score compares favorably with his republican predecessor, George W. Bush (this behavior is in keeping with the practice of republican hardliners during the Cold War, when attacks on “Soviet communism” were closely aligned with assaults on the New Deal. In short, diminish the appeal of the liberals at home by associating them with the Reds abroad). To be sure, Obama’s foreign policy performance is deserving of criticism, but it should be driven by serious discourse, not partisan sound bites.

Meanwhile, many Russians resent being lectured about human rights. America is the world’s richest country, yet millions of its citizens are denied the most basic human right – universal healthcare. About 50 million Americans do not have any healthcare insurance and this accounts for some appalling statistics: to wit, life expectancy in the United States ranks 29th, just behind Slovenia, and infant mortality ranks 30th – twice that of Sweden. Furthermore, the Republican Party has introduced a budget that requires a $770 billion reduction in healthcare for the poor, while taxes for the rich will be cut by a figure that far exceeds that amount.

Of course, the Russian government resents the Magnitsky Act, and given the turbulence of the American presidential election, a repeal of Jackson-Vanik is uncertain. That prospect is not enhanced by reports from Russia that democratic activists and businessmen fighting corruption face arrest for their courageous protests.
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