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US trade with Russia: Time to come in from the cold
Nearly 18 years of negotiations culminated on August 22 with Russia’s formal accession to the World Trade Organization. Despite this, American companies and workers are still prevented by a Cold-War era provision in U.S. law from accessing the benefits of lower tariffs and more predictability in the U.S.-Russia commercial relationship as a result of Russia’s WTO concessions. The U.S. House and Senate have a critical opportunity in September to remove this barrier.
As an early witness to the emergence of Russia’s new economy, I can speak personally to the remarkable changes over the past twodecades. P&G established operations in Russia in 1991, as a pioneer in a tumultuous time of new Russia emergingfrom the former Soviet Union. Today P&G Russia provides more than 70 consumer product brands to 140 millionRussian consumers who like the high quality goods and services that the company provides.
The power of trade and investment in shaping a country’s economy and its people can’t be discounted. I saw the many positive ways in which Procter & Gamble’s investments brought entrepreneurial values and leadership skills to our Russian employees and partners, and responsible corporate governance to the Russian economy. We forged strong working relationships with Russian policymakers and helped to establish the St. Petersburg University’s Graduate School of Management that today trains 1200 up and coming Russian business leaders.
Jackson-Vanik is a 1974 law that prevents the US from extending permanent normal trading relations, known as PNTR, to Russia. The provision was meant to deal with the Soviet Union’s restrictions on Jewish emigration, an issue that was addressed long ago. In fact, every year since 1992 the U.S. government has either waived Jackson-Vanik or declared Russia to be in compliance. Yet because this law is still on the books, until Congress repeals it and extends PNTR, the U.S. will be the only WTO member whose companies andworkers don’t benefit from lower tariffs and increased market access in Russia. For American companies like P&G, this is a significant issue of global competitiveness.
Some critics argue that PNTR provides the U.S. with leverage to influence Russia’s behavior outside the economic space. The U.S. is not giving trade preferences to Russia and the Jackson-Vanik provision only prevents our companies from taking full advantage of its market-opening commitments. Yes, corruption is still pervasive and human rights violations occur. Russia’s foreign policy agenda is sometimes at odds with the U.S. and our allies, including its ongoing support of the current Syrian regime. While Russia’s democratic system is far from perfect, there are critical issues on which our two countries have and mustcontinue to work on together, including combating nuclear proliferation andterrorism. We must not fail to recognize that. I am impressed and encouraged by the progress that has been made and I believe that further integration into the global trading system will help keep Russia moving in the right direction. The U.S. will be more influential as an economic partner than if we allow the barrier of Jackson-Vanik to remain in place.
The Russian people are better off than they were 30 years ago when I first visited the Soviet Union. And so are we because of the dramatic change in the relationship of our two nations. There is no doubt that Russia’s entry into the global trading system with its rules-based framework for resolving trade disputes will lead to more trade and investment that will further contribute to the pace of positive change.
P&G was privileged to play a role in the early days of Russia’s economic formation. Now it’s time to create the conditions for more American companies and workers to take part in Russia’s growth. Congress needs to act swiftly to repeal Jackson-Vanik and extend PNTR before our foreign competitors seize an irreversible advantage.
Pepper is former chairman, president and CEO of Procter & Gamble. He oversaw P&G’s entry into Russia in 1991 and recently published “Russian Tide: Building a Leadership Business in the Midst of Unprecedented Change”.
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