ECONOMICS AND TRADE | Achieving growth through open markets
08 April 2008
United States Seeks to Advance Economic Partnership with Russia
Russian WTO membership seen as 2008 goal
Washington -- With U.S. exports to Russia on the upswing and the bilateral trade imbalance narrowing, Bush administration officials are optimistic that an improved U.S.-Russian economic relationship is in the offing.
“We acknowledge the great potential for expanding bilateral trade and investment and the significant benefits this would bring to both our economies,” says the U.S.-Russian Strategic Framework Agreement, issued April 6 following meetings between President Bush and Russian President Vladimir Putin in Sochi, Russia.
U.S. exports of merchandise goods to Russia jumped nearly 57 percent in 2007 and the bilateral deficit fell $3.1 billion to $12 billion, according to the Office of the U.S. Trade Representative (USTR). Meanwhile, U.S. direct investment in that country rose from $8.6 billion in 2005 to $10.1 billion in 2006, the latest year for which data are available.
The two countries pledged to make “a major effort” between now and June of this year to work toward Russia’s accession to the World Trade Organization (WTO).
But more work needs to be done by Russia in further lowering its barriers to trade and investment before WTO membership can be achieved, U.S. officials say.
In a report issued March 28, USTR outlined a number of unresolved issues in such areas as agricultural support, intellectual property rights (IPR) violations, unfair subsidies to state-owned trading enterprises and onerous regulations that make it difficult for U.S. goods to enter Russian markets.
The 2008 National Trade Estimate Report on significant barriers to U.S. trade and investment, issued annually, said that while Russia has reduced tariffs on a number of food products, such products as alcoholic beverages, pharmaceuticals and goods containing encryption capabilities are kept out by extra charges, fees and licensing and registration requirements.
Import tariffs, taxes and custom handling fees make it “virtually impossible for Russian airlines to afford to purchase foreign planes,” USTR said. And duties and taxes increase the prices of larger U.S. passenger cars and sport utility vehicles by 70 percent.
USTR said that alcohol trade in Russia “is governed by a burdensome array of no fewer than 105 laws, decrees and regulations.”
One major area for needed reform, USTR says, is intellectual property protection. According to U.S. industry groups, copyright losses in 2007 in Russia were nearly $1.5 billion from piracy of motion pictures, records, computer software and books.
“The U.S. copyright industries estimate that approximately 65 percent of sound recordings, 70 percent of business software and 89 percent of information software on the Russian market are pirated,” the report said. U.S. firms also report counterfeiting of trademarked goods including wine, agricultural chemicals, biotechnology products and pharmaceuticals.
New IPR legislation has been passed by the Russian Duma, but pharmaceutical products are not covered, enforcement of existing IPR laws is poor and prosecution of IPR infringers is ineffective, USTR says.
The report said Russia has passed legislation to bring its customs regulations into WTO conformity. But the report also expressed concern that frequent changes in regulations, failure to publish all regulations and administrative customs rulings and enforcement that varies by region have added to business costs and delays at the border.
It further reported that food products that are sold legally in the United States and the European Union are subject to an expensive certification process that can take three to five months and may be subject to a further technical review that could take up to a year.
Imports of products deemed “sensitive” for food safety reasons often are blocked “without a scientific basis for the measure,” USTR said. Since December 2006, for example, Russia has imposed a ban on rice from all countries, citing a variety of health concerns.
The report said the service sector -- banking, insurance, distribution -- is relatively open to U.S. suppliers, although specific problems remain in such areas as satellite telecommunications.
At their recent bilateral meetings, the United States and Russia pledged to expand both business-to-business and government-to-government dialogues over the next few months to help identify legislative impediments on trade and investment that stand in the way of expanded economic relations.
