????On Capitol Hill last week, senators debated the merits of lifting Cold War-era trade sanctions against Mother Russia. Plenty of U.S. companies are eager to see this happen.
????The trade barriers are widely expected to fall this year, and when they do it will be a net positive for U.S. trade. Russia's creaky and inefficient economy -- from its sad agriculture collectives to its rusty automotive industry -- won't likely be able to compete against the larger and more efficient U.S. industrial and retail firms. Meanwhile, Wall Street could benefit from coaxing U.S. investors to take a second look at Russia, while at the same time convincing Russian firms to consider New York as the place to raise capital or go public.
????Before any of this can happen, however, the two countries will have to work through the numerous barriers and prejudices that have existed between them for nearly a century.
????Russia's ascension into the World Trade Organization took 18 years. It first applied in 1993 after the nation shrugged off its communist past and moved to capitalism and it was invited to join the WTO late last year. The transition from a centrally-planned economy to the free market has not been easy. Corruption and backroom dealings have become the norm as the nation's billionaire oligarchs violently protect their turf by any means necessary. From a debt default in 1998 to the invasion of Georgia in 2008, there was always a solid reason for U.S. investors to hold back from the Russian market.
????The losers in all of this mess have been the Russian people. Russia's economy has not progressed or modernized as it should have and is still highly dependent on energy and mineral exports to keep the nation afloat (Russia is the world's largest oil exporter). High tariffs are imposed to protect certain large and inefficient industries, especially the automotive industry. Doing business in Russia is also difficult given the nation's notoriously corrupt political and judicial structure. Things got so bad that in the last few years, Russia's foreign direct investment was actually negative – unheard of for an emerging market economy.
????While Russia was accepted into the club in December, the United States still has in place Cold War-era trade sanctions against Russia. The U.S. Senate met last Thursday to discuss dropping these laws so that they could normalize trade relations before Russia formally joins the WTO this summer. The main argument against lifting the so-called Jackson-Vanik amendment derives from Russia's abominable human rights record and its questionable commitment to democracy. Republicans tried to voice their concerns but it was the Democrats that shut them down. President Obama has made the lifting of the amendment a key pillar of his trade policy. So while the Republicans are raising some noise in the Senate, the amendment will almost surely be lifted on Russia, leading to a normalization of trade relations between the two countries.
????U.S. and European companies will likely benefit the most from an open Russia. The reduction in tariffs on certain goods, especially in the service industry, is expected to benefit U.S. companies hoping to tap the burgeoning Russian middle class. Major interest groups, like the U.S. Chamber of Commerce, along with 173 US companies, have sent letters to Congress demanding the normalization of trade with Russia.
