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Letter regarding Permanent Normal Trade Relations (PNTR) with Russia and Moldova (S. 3285)

Monday, July 16, 2012 - 8:00pm

The Honorable Max Baucus
Chairman
Committee on Finance
United States Senate
Washington, DC 20510

The Honorable Orrin Hatch
Ranking Member
Committee on Finance
United States Senate
Washington, DC 20510

Dear Chairman Baucus and Ranking Member Hatch:

As the Senate Committee on Finance prepares to mark up important trade legislation, the U.S. Chamber of Commerce, the world’s largest business federation representing the interests of more than three million businesses and organizations of every size, sector, and region, urges you to favorably report legislation to approve Permanent Normal Trade Relations (PNTR) with Russia and Moldova (S. 3285), to renew the AGOA Third Country Fabric provision, and enact CAFTA-DR technical corrections (S. 3326), and avoid any amendment that would weaken these important bills.

In a welcome development for American workers, farmers, and companies, Russia will join the World Trade Organization (WTO) in August. S. 3285 would require Russia to implement a host of economic reforms, including further opening its market to U.S. goods, services, and investment; ensuring greater respect for the rule of law; and protecting intellectual property.

U.S. companies see huge potential in Russia, which boasts the ninth largest economy in the world and a growing middle class. Of the top 15 U.S. trading partners, Russia was the market where American companies enjoyed the fastest export growth last year at 38 percent.

However, the United States will not get the full benefit of Russia’s market-opening reforms unless Congress approves legislation extending PNTR and graduating Russia from the Jackson-Vanik amendment. This legislation is the Chamber’s top trade priority before the Congress this year.

The Jackson-Vanik amendment to the Trade Act of 1974 was devised to press the Soviet Union to allow emigration of Soviet Jews, prisoners of conscience, and victims of religious persecution. With respect to Russia, Jackson-Vanik has fully accomplished its objective. With the collapse of the Soviet Union two decades ago, Russia established freedom of emigration for all citizens. Since 1992, U.S. presidents of both parties have issued annual certifications of Russia’s full compliance with the Jackson-Vanik amendment.

Because no other WTO member has a law similar to Jackson-Vanik, all of Russia’s trading partners except the United States will immediately benefit when Russia joins the WTO next month. Failure to approve PNTR and repeal Jackson-Vanik with regard to Russia would allow Moscow to discriminate against U.S. companies and the workers they employ as well as deny them the full benefits of Russia’s market-opening reforms. Meanwhile, European and Asian companies will be able to build on their already significant head start in tapping the growing Russian market.

PNTR does not extend any “trade preferences” to Russia. Rather, it exclusively benefits U.S. workers, farmers, ranchers, and companies selling their goods and services in the Russian market. The United States gives up nothing— not a single tariff— in approving PNTR.

The President’s Export Council estimates that U.S. exports of goods and services to Russia—which, according to estimates, topped $11 billion in 2011—could double or triple once Russia joins the WTO. Business opportunities in Russia are expected to grow substantially after Russia finalizes its accession to the WTO.

One often-posed question is: What happens if Russia fails to meet its commitments? In the area of intellectual property protection, for example, Russia continues to present significant challenges to U.S. innovators and creative artists. The Chamber will continue to urge the U.S. government to remain vigilant in ensuring that Russia implements its intellectual property commitments in full, including by making greater progress combating online piracy.

However, addressing these challenges would be easier once Russia joins the WTO. If Congress approves PNTR with Russia, the United States will for the first time be able to use the WTO dispute settlement process to hold the Russian authorities accountable should they fail to fulfill their commitments as a new member of the organization.

Russia’s accession to the WTO has been a bipartisan American foreign policy goal for many years. In 1993, Russia applied to join General Agreement on Tariffs and Trade, the precursor to the WTO. After years of talks, the Bush Administration took a major step forward in 2006 when it signed a bilateral agreement with Russia to address uniquely bilateral trade concerns. The Obama Administration concluded the multilateral negotiations for Russia’s accession in December 2011.

Many of these arguments are also true in the case of Moldova, which joined the WTO in 2001. In fact, Moldova offers a cautionary tale of what the absence of PNTR can mean for U.S. exports, which have stagnated at less than $50 million annually in recent years. As Anders Aslund of the Peterson Institute for International Economics wrote after a recent visit, “the absence of PNTR leaves Moldova in a legal limbo, and businessmen report that it is difficult to receive U.S. credits for export to Moldova.” It is past time to also approve PNTR with Moldova.

Separately, the Third Country Fabric provision of the African Growth and Opportunity Act (AGOA) expires September 30, 2012. In addition, the technical fixes approved by the U.S.- Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) trade ministers more than a year ago have yet to be enacted. Given the broad bipartisan support for both of these measures, the Chamber recently joined with 13 other business organizations to urge approval of legislation to renew the AGOA Third Country Fabric provision and enact the CAFTA-DR technical fixes without further delay.

The negative consequences of the looming expiration of AGOA’s Third Country Fabric provision could be devastating for numerous African countries. Moreover, the impact is by no means limited to sub-Saharan Africa. In fact, the delay in renewing this non-controversial measure, which is at the core of AGOA apparel provisions, has already forced many U.S. companies to shift their 3rd and 4th quarter 2012 orders to other countries to avoid uncertainties.

Inaction is difficult to justify given that the Third Country Fabric provision has proven beneficial to U.S. businesses and non-controversial in Congress and in the U.S. business community. Regardless, as uncertainty grows over renewal, African apparel-producing countries have already experienced a 30% drop in apparel orders since January 2012. This decline in orders has already led to the loss of thousands of jobs in Africa, with hundreds of thousands more hanging in the balance.

Many of our member companies, including many unrelated to the apparel sector, have repeatedly expressed grave concern over the fallout from further delay. A perception among African governments that Congress is abandoning Africa is worrisome to many U.S. investors, who must rely on the goodwill of these governments as American companies seeking market access in Africa and competing against companies from other regions.

Similarly, in March 2011, the CAFTA-DR trade ministers met in El Salvador and approved several changes related to CAFTA-DR rules of origin that will benefit the Western Hemisphere textile and apparel supply chain. This move to correct technical errors in the agreement is a job-preserving measure that will allow U.S. producers to recapture market share in the important CAFTA-DR market.

All our CAFTA-DR partners have already completed the domestic procedures necessary to make these changes take effect. Only the United States has yet to take action. Continued uncertainty prompted by this delay will undermine the trade benefits that we have already seen under the CAFTA-DR. Such action is essential to supporting the hundreds of thousands of U.S., Central American, and Dominican workers whose jobs depend on a vibrant Western Hemisphere textile and apparel supply chain.

The Chamber greatly appreciates the leadership of the Committee to advance a trade agenda that supports American jobs and economic growth. The Chamber urges you to approve PNTR with Russia and Moldova as well as legislation to renew the AGOA Third Country Fabric provision and enact the CAFTA-DR technical corrections while avoiding any amendments that would weaken these important bills.

Sincerely,

R. Bruce Josten

cc: The Members of the Senate Committee on Finance