Darren Srebnick | Free trade with Russia means jobs for Kentucky

Courier - Journal - Louisville, Ky.

Author: Darren Srebnick

Later this summer, Russia will officially join the World Trade Organization, becoming the globe's last major economy to link up with the group of 154 nations. But whether the United States will be in a position to fully benefit from this historic economic moment is up to us.

Unless Congress passes a bill establishing permanent normal trade relations (PNTR) with Russia, the United States will find itself on the sidelines as foreign competitors take advantage of the growing Russian marketplace.

With the world's ninth-largest economy and more than 140 million consumers, Russia represents a once-in-a-generation opportunity for the overseas expansion of American commerce. In 2011, American businesses exported goods and services worth more than $10 billion to Russia. With the benefits that come from WTO membership and PNTR, that number could double or even triple.

The stakes are particularly high for Kentucky, which has long enjoyed a robust trading relationship with Russia. Our state's exports to Russia in 2011 reached nearly $40 million. Those exports helped create hundreds of jobs for Kentuckians, not only at local companies like Holmberg Forest Products in Louisville and Cincinnati Machine, but at locally based national brands like Papa John's.

If Congress doesn't establish PNTR with Russia -- automatically requiring Russia to extend the same benefits and protections to the U.S. -- Kentucky businesses will quickly lose their foothold in Russia to foreign competitors.

Particularly hard hit would be our machinery sector: Kentucky sold $17.1 million worth of machinery to Russia last year, and our sales of $5.4 million worth of machine tools to Russia accounted for nearly half of that sector's exports.

Meanwhile, Russia's entry into the WTO requires it to reduce tariffs on such products by up to 25 percent. When Kentucky's machinery sector is able to take advantage of more favorable trade terms, a surge in profits and hiring will follow, even before the new orders start rolling in.

This comes at a time when Russia's spending on its crumbling Soviet-era infrastructure is expected to top $500 billion over the next five years. As a state that provides precisely the sort of machinery and equipment needed for this work, Kentucky should be leading the call to welcome Russia as an equal trading partner.

Of course, trade works both ways. Global pipe producer TMK IPSCO, a subsidiary of the Russian TMK Group, maintains a plant just across the river in Cincinnati. It employs 300 people, all of whom could find their jobs in jeopardy in the absence of trade legislation from Congress.

So what's preventing Congress from acting? A 38-year-old trade clause known as the Jackson-Vanik Amendment that both Democrats and Republicans agree has long outlived its usefulness.

Passed at the height of the Cold War in 1974, the Jackson-Vanik Amendment places strict restrictions on trade between America and countries that don't allow their citizens to emigrate freely. It was originally intended to pressure the Soviet Union to allow oppressed Jews to leave the country. With the Soviet Union a distant memory and daily flights running from Moscow to Tel Aviv, this amendment does not serve any constructive purpose in U.S. foreign policy.

In effect, Jackson-Vanik is already moot. Since 1992, every U.S. president has issued an annual certification of Russia's compliance with its emigration provisions. Yet it remains on the books as a persistent thorn in the side of U.S.-Russian relations. Repealing it now would remove the irritant and save future presidents the trouble of having to override it every year.

There are those who say the amendment is still needed as a symbol of America's opposition to religious oppression. Actually, even pro-democracy forces in Russia are pushing for the repeal of Jackson-Vanik, saying it would be a step forward for human rights in their country.

Businesses from Europe and Asia already have a significant head start in their dealings with Russia -- businesses that operate in the same industries as those from Kentucky. If Congress fails to pass a short, simple bill to repeal Jackson-Vanik and grant full PNTR with Russia, those Kentucky businesses will be missing out on a historic opportunity.

With our country still suffering from the lingering effects of a global recession, now is not the time to let obsolete laws rob us of jobs and prosperity.

The writer is an international trade specialist for the Louisville Office of the World Trade Center Kentucky.

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