Jackson Vanik amendment

A Policy Brief for the Peterson Institute of Economic Affairs in November 2011  by Anders Aslund and Gary Clyde Hufbauer titled " The United States should establish normal trade relations with Russia"  has brought back into focus the Jackson Vanik amendment in the context of Russia about to join the WTO family.


The brief has argued for strengthening the trade ties between the US and Russia and seeks to impress upon the benefits of according permanent normal trade status (PNTR) to Russia by repealing the application of the Jackson Vanik amendment to Russia. The advantages both to the US and Russia of according of PNTR to Russia has been discussed. 


While the repeal of the application of the amendment is one issue, the larger issue is whether the continuance of the amendment is in itself against the rules of the WTO multilateral system? Since domestic laws are subject to WTO rules and would have to be amended in conformity with WTO decisions, is the Jackson Vanik amendment in itself a violation of the WTO Agreement. The applicability of the amendment to a particular country is one issue but the issue whether the existence of a law that seeks to impose trade restrictions on a country due to "non-trade" issues is prima facie a violation of the WTO Agreement remains to be settled.

Benefits of trade

The Office of the United States Trade Representative's website (in the Executive Office of the President of the United States) has an interesting link on State-specific benefits of international trade. This outlines the benefits international trade has in terms of jobs, exports and investment in the various States of the US. While literature on the impact of international trade on countries is common, this link is interesting since it is taking the analysis to the state level. This is very relevant since it contextualises the high-level benefits of international trade from the national level to the sub-national level. Normally local and state governments are not impressed by the positing of reduction in trade barriers in international trade as necessarily good as they lead to loss of local jobs and industry. This analysis helps in addressing some of those concerns by highlighting the benefits that actually accrue to the State's local population.


I tried to search for similar analysis in the Indian context but failed to find any, unless I have missed it. It would be useful to have this analysis for the Indian states which would show how States are doing in terms of exports and imports as well as ways they could benefit from the system.

Russia joining the WTO - Benefits

The benefits for Russia in joining the WTO are often cited as reasons for Russia to push for their membership in the international organisation. The US sees it as huge potential market for their industries wherein transparent and rule based trading would be possible under the WTO regime. Russia views it in terms of a legitimacy of entering an open, mlutilateral system benefitting its participation in the global economy. To what extent Russia would be able to use the WTO mechanism to further its domestic interests would be an interesting study. Following China's example of effectively improving its position in the international trade status under WTO, Russia would need to make an assessment of how to effectively utilise it's position. This article weighs the pros and cons of Russia's entry into the WTO. However the Jackson Vanik amendment still remains a contentious issue.

Russia to be number 154!

Russia's accession to the WTO would be the 154th country coming onto the WTO juggernaut! It is obvious that Russia sees a benefit in being part of the multilateral trading system rather than being out of it. It would seem to benefit their producers by giving them market access. For the outside world, it be an opportunity to take part in international trade with Russia based on rules and the WTO system. The rise in China's trade since it became a member of the WTO seems to be another reason that propelled the Russians to push hard for their inclusion as explained by the Russian trade negotiator. It would be interesting to see the impact of the membership on Russia's exports and accessing foreign markets as well as impact on the domestic industry.


It is also a shot in the arm for the WTO as  according to Pascal Lamy in an interview, Director General of WTO, "One way to reinforce the rules is to extend the perimeter of rules on this planet."


While Russia has amended many of it's domestic legislations to be accepted as a player in the multi-lateral system, it remains to be seen whether the Jackson-Vanik amendment in the US would stand the test of time. The amendment restricts trade, amongst others, with non-market economies which do not have free immigration policies. That Russia is getting a Presidential waiver from the amendment is another matter. The issue is whether the mere existence of the amendment due to Russia's entry into the WTO will make the domestic legislation subject to challenge in the WTO. Though not challenged in the Dispute Settlement Panel, the amendment has come in for a challenge domestically in the United States by the Russia House, a group that espouses better Russia-US trade relations.

Russia's accession to the WTO

News of Russia becoming the latest member of the WTO, since it first applied in 1993, is abound. The WTO website made a formal announcement in this regard listing out the various commitments that the large economy would have to make in order to fulfil it's obligations as a member of the WTO.


In an extremely warm letter to the Chairman of the Working party on Russia's accession to the WTO, the US Ambassador to the Permanent Mission of the United States to the United Nations and other International Organisations welcomed the final stages of accession of Russia and opined that "the package that we have approved today is good for the United States, good for Russia, and good for the WTO."


US lawmakers think otherwise or are not yet convinced. The lawmakers, both Democrats and Republicans stated in a letter that Russia must take  "transparent, substantive and prompt actions to battle rampant intellectual property theft before it can join the World Trade Organization". The thrust of the letter seemed to suggest that Russia's enforcement of intellectual property rights was weak and mandated strengthening.


Can the US continue with domestic legislation that discriminates against Russia once Russia has become a WTO member? The impact of  Russia's accession on the Jackson Vanik amendment needs to be studied further. A CRS Report for Congress on impact of Russia's accession to the WTO does throw light on this matter.

Brazil goes protectionist

The WTO website stated that at the Council for Trade in Goods meeting, inter alia, the following issue was raised :


"Korea said that Brazil’s 30% tax on imported automobiles and requirements to use domestic components are against the WTO national treatment principle and the WTO Agreements on Subsidies and on Trade-Related Measures. Japan, EU, US, Canada, Colombia, Chinese Taipei, Australia and Hong Kong, China supported Korea’s statement. Japan added that Brazil’s action was contrary to the G-20 declaration against protectionism.  Brazil said that its rising currency had led to a substantial increase in imports of automobiles. It said that the measure in question was provisional in nature, and would expire next year. Instead of using trade remedies like anti-dumping  duties, Brazil said it had chosen to establish positive incentives to encourage investment and research."


Time would tell if this goes all the way to the Dispute Settlement panel. The argument of Brazil depicted here is interesting. It is justifying its action by saying that it could have imposed trade remedies like anti-dumping duties but preferred "positive incentives"!


“Brazilian consumption has been appropriated by imports,” said the Brazilian Finance Minister, according to the Economist,while imposing the tax. Issues of national treatment (treating imports the same as domestic products) vis a vis dumping due to currency devaluation could be the legal issues before the Settlement panel, if the dispute is not negotiated or Brazil withdraws its measures.


In the meantime, the Supreme Court of Brazil seems to have stayed the imposition of the  tax on "technical grounds" of not giving 90 days notice. The jury is still out on this!

China and US trade ties

An interesting debate about US and China trade ties. China is a "relatively" new member to the WTO. Russia is all set to become one. I wonder if all the issues raised in the debate can be resolved by the WTO Dispute Settlement mechanism. Atleast the one on artificially pricing one's good may fall under the scanner of the anti-dumping regulations.