U.S. traders eager to cash in on Russia pact, but it’s stalled in Congress
10/18/2012 4:04 PM
10/19/2012 1:46 PM
When Russia formally joined the World Trade Organization as its newest member in August, more than 150 countries began expanding trade with the ninth-largest economy in the world.
One big country did not: the United States.
Much to the consternation of business and trade officials around the nation, Congress has refused to approve a permanent trade pact with Russia, even though it has won broad bipartisan backing. As yet another sign of the deadlock in Washington, House and Senate leaders so far have not allowed the deal to come up for a final vote.
With time running out in the current Congress, pro-trade groups want the agreement high on the agenda when members return to work for a lame-duck session after Election Day. If the deal is not approved soon, they warn, the United States will miss a chance to export more products to 140 million consumers in Russia.
The stalled pact is partly the result of election-year politics and worries that Russia has not done enough to improve its record on human rights. Earlier this year, Republican presidential candidate Mitt Romney called Russia the nation’s top geopolitical foe, but he supports the deal as long as the U.S. agrees to do more to crack down on human-rights violations.
But backers of the deal remain upbeat.
“It’s a tough time right now – people are feeling vulnerable in lots of ways, and so it’s not easy for us to talk about the benefits from these free-trade agreements,” said Jean Davis, director of international trade with the North Carolina Department of Commerce. “But we really try to push for these things. We’re patient, and this is just another natural progression, so we understand people’s hesitation.”
In North Carolina, the nation’s third-largest poultry exporter, turkey growers would benefit from lower tariffs, while the state’s financial services industry would be helped by new rules that would make it easier for U.S. firms to conduct business in Russia.
With tariffs on chemicals set to fall from 20 percent to 5 percent, Davis said the chemical industry – which already leads the state in exports – would be the biggest winner. The state exported $261 million worth of products to Russia in 2011, she said, with chemicals, mineral products and electrical equipment leading the way.
Texas exported the most products to Russia in 2011, followed by Illinois, California, New York and Washington, according to the Coalition for U.S.-Russia Trade.
In Texas, exports to Russia grew 32 percent from 2010 to 2011, hitting $1.6 billion, the trade coalition said. Machinery exports topped the list, followed by chemicals, transportation equipment, computer and electronic products and fabricated metal products. And it meant big business for individual firms: Atlas Copco Drilling Solutions, in Garland, Texas, exported more than $4.1 million worth of heavy drilling equipment, while ExxonMobil Corp. partnered with a Russian company to develop oil in the Arctic, the Black Sea and Siberia.
“It would be good for Texas, it would be good for the United States, and it’s good for Russia,” said Joe Barnes, a research fellow at the James A. Baker III Institute for Public Policy at Rice University.
He said concerns over Russia’s human-rights record should not stop the trade pact.
“There are a lot of human-rights problems in Russia, but we manage to have normal trade relations with a lot of countries that have poor or ambiguous human-rights records,” Barnes said. “China is a major case in point. And by any standard that I know of, Russia – for all of its faults – is an altogether more democratic country than China.”
In some states, there’s little interest in the deal.
“No one is going to get excited in Florida about trade with Russia,” with that nation accounting for less than 2 percent of all U.S. trade and ranking 44th as a destination for the state’s exports, said Jerry Haar, associate dean and director of the Pino Global Entrepreneurship Center at Florida International University’s College of Business in Miami.
“As for congressional inaction on the bill, is there any wonder given the fact that Russia continues to supply arms to Syria to perpetuate that nation’s genocide on its population and enjoys a thriving trade relationship with the terrorist state of Iran?” Haar asked. “Give me a break.”
The environmental group Friends of the Earth opposes the deal, saying the regime of Russian President Vladimir Putin “must not be rewarded” for its record on the environment, trade and human rights. And U.S. steelworkers say the pact would do nothing to open the Russian market to more U.S. cars but instead would make it easier for U.S. automakers to move assembly facilities to Russia.
Backers of the deal had pushed hard to get a final vote in Congress before Russia formally joined the WTO this summer.
The pact has won support from many diverse interests, including the Obama administration and the U.S. Chamber of Commerce, normally at odds on many issues. Both are touting the trade pact as a critical jobs bill.
It has cleared two trade-friendly panels on Capitol Hill: the Senate Finance Committee, controlled by Democrats, and the Republican-dominated House Ways and Means Committee.
And a bipartisan group of 15 governors – including Democrats Jerry Brown of California and Chris Gregoire of Washington and Republicans Nikki Haley of South Carolina, Nathan Deal of Georgia and Phil Bryant of Mississippi – is pushing the president and Congress to quickly approve the pact, saying it could double U.S. exports to Russia from $11 billion in 2011 to $22 billion in 2017.
Supporters say the agreement could prompt immediate payoffs in a wide swath of the U.S. economy, mainly by cutting tariffs on goods going into Russia.
In California, U.S. trade officials say, the pact would increase exports for agricultural products from grapes to almonds and lead to more foreign sales for the state’s large communications and technologies industry.
In Washington, the winners could include the state’s fruit producers, who already rank second in the nation in fruit exports, and Boeing, one of the state’s largest employers. Tariffs on pears and cherries would be cut in half by 2015. And duties on commercial airlines also would be slashed by 50 percent, providing a big help to Boeing, which predicts that Russian carriers will need 1,000 new passenger airplanes in the next two decades.
Russia is one of the fastest-growing markets for Washington state, where a report released earlier this month found that 40 percent of all jobs are now linked to international trade. And the state’s exports to Russia jumped 80 percent from 2010 to 2011 alone. In July, the Sakhalin Shipping Co. began service from the Port of Everett to help support the mining industry in the Russian Arctic.
“We forget that, other than Alaska, Washington is the nearest state to Russia,” said Sam Kaplan, president of the Trade Development Alliance of Greater Seattle. “There are some 200,000 Russian speakers in Washington. No matter what Congress decides, it will have an impact on Washington state trade and our economy.”
Mark Powers, vice president with the Northwest Horticultural Council, based in Yakima, Wash., said Russia has great potential for fruit producers in all of the Pacific Northwest, representing a $20 million market for apples, pears and cherries in the three states of Washington, Oregon and Idaho. He said he’s disappointed with the inaction by Congress.
“Honestly, a lot of work went into the negotiations over many years,” Powers said. And now with Russia in the WTO, he said, “the rest of the world is benefitting.”
“We’re entering into a new harvest season,” he said. “We’d like to benefit.”
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