Daily Israel Report

Despite Growing Authoritarianism West Is Gung Ho On Russia Trade

Russia's entry into the WTO has kindled hopes that increased trade could help solve the world economic crisis.
By Amiel Ungar
First Publish: 8/22/2012, 7:07 PM

Clinton with Erdogan
Clinton with Erdogan
Reuters

In 1933, when the Roosevelt administration established full diplomatic relations with the Soviet Union of Joseph Stalin, the justification invoked was that normal relations with Moscow meant increased trade and more jobs in a United States reeling under the Great Depression.

The Roosevelt administration had another covert rationale; namely, the hope that the Soviet Union could help contain Imperial Japan.

Now, the great hope of a Russian market providing a solution for the global economic crisis has been revived, with Russia's acceptance into the World Trade Organization after an 18 year wait.

The European Union has hailed Russia's entry as a boost to European companies. It means that Russia will lower its tariffs to other WTO members and these in turn will lower tariffs on Russian goods.

As the main Russian exports are raw materials and energy products, Western countries expect that the new tariff arrangements will work more to their benefit and will not be a re-run of what occurred when China joined the World Trade Organization. China was able to turn its relative advantage in cheap skilled labor into an export bonanza, running up huge trade surpluses.

As Russian labor costs are high and the Russian manufacturing sector has not proven itself competitive, Russia is not in the position of China. Western countries drool at the prospects of a unsaturated Russian market for automobiles, although there will be a transition period till Russia has to lower its tariffs on auto imports.

The Obama administration is increasing pressure on Congress to remove the Jackson Vanik Amendment, passed during the 1970s with the object of putting on pressure on the Soviet Union to allow the free emigration of Soviet Jews.

The Obama administration has claimed that there is no contradiction between pressing for free trade with Russia and strong disagreement and condemnation for increasing Russian authoritarianism. An editorial in the Los Angeles times captured the administration mood:

"We see no contradiction here. The Pussy Riot sentences — and other examples of Russian intolerance, such as a ban in Moscow on gay pride parades — are troubling. But normal trade relations shouldn't be conditioned on a requirement that a trading partner replicate the political system of the United States."

US Secretary of State Hillary Clinton is also repeating, with regards to Russia, the argument made by the Clinton administration when it supported trade normalization with China - namely, that increased trade relations would actually help ameliorate human rights conditions

"By extending those trading relations, we can create new markets for our people and support the political and economic changes that Russia's people are demanding,"  she said.

During the period of the debate on China, Bill Clinton optimistically advanced the idea that by introducing fax machines to China, the triumph of democratic values would be assured. It has not quite worked out that way.

Business leaders are also applying pressure on Congress. Now that Russia has entered the WTO, warn the business leaders, a failure to normalize Russian-US trade relations would put US firms at a disadvantage against European and Asian competitors.