WORLD / Wall Street Journal Exclusive

US, Russia approach finish line on trade deal
(WJS)
Updated: 2006-04-12 11:59

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After years of contentious negotiations, Russia and the U.S. are closing in on a deal that would clear one of the last major obstacles to Moscow joining the World Trade Organization.

Both sides hope to wrap up final compromises by midyear. Once a deal is done, though, an even more daunting task looms: convincing an increasingly skeptical Congress to go along.

President Bush has long promised support for Russian WTO membership as a way to ease the former communist country's integration into the world economy. But the climate in Congress for a trade agreement with Moscow has chilled markedly the past few years, and could get even worse as Mr. Bush heads into the final years of his presidency -- especially if control of either chamber of Congress shifts this fall.

In Washington, politicians of all stripes are turning inward, reflecting public angst about opening further to the increasingly integrated world economy. Last month, Mr. Bush was steamrolled by lawmakers worried about a company controlled by Dubai's government buying several U.S. ports.

Views of Russian President Vladimir Putin, on Capitol Hill and in the White House, also have grown sharply more skeptical the past few years as Mr. Putin has taken steps to roll back democratic institutions and pressure private businesses and foreign investors, while favoring big state-owned companies. Moscow's resistance to U.S. calls for tough measures against Iran's nuclear program has raised questions as to whether the Kremlin is a reliable partner for the White House.

Against that backdrop, discussion of a Russian trade deal, which has come down to basic issues such as market access for U.S. financial institutions and protection of intellectual property, is likely to evolve into a broader debate.

"It's a test case of not just the U.S. relationship with Russia, but the developed world's relationship with Russia," said Coit "Chip" Blacker, who was a top Russia expert in the Clinton administration. "There's very deep and fundamental concern about Russia's trajectory."

Assuming trade negotiators resolve their sticking points, the issue for U.S. lawmakers won't technically be whether Russia should join the WTO, but whether they are prepared to end Cold War-era economic restrictions -- imposed under the so-called Jackson-Vanik amendments -- and establish permanent normal trade relations with Russia. As a practical matter, the vote is certain to become a referendum on Moscow, since failure to extend normal trade relations with the U.S. would deny Russia a big benefit of joining the WTO.

On a trip to Moscow this week, where WTO discussions were a major topic, Senate Majority Leader Bill Frist said debate on any WTO deal would go well beyond economic issues. Russia's progress on reversing antidemocratic moves and cooperating on Iran "will affect how Congress handles lifting the current Jackson-Vanik restrictions," the Tennessee Republican said.

That kind of talk from the U.S. has raised hackles in Moscow, where Mr. Putin bristles in response to criticism of his record on democracy and has complained for months about slow progress on the WTO front. Russian officials have accused Washington of politicizing the talks. They point to the quick approval granted early this year for a WTO deal for Ukraine, which has many of the same trade issues as Russia but whose pro-Western government enjoys strong support in Washington.

U.S. officials deny any political motivations for the delay.

The U.S. is the last major Russian trading partner that hasn't concluded a deal on WTO entry with Moscow. Once Russia's slate of bilateral pacts is wrapped up, a final round of multilateral negotiations that usually takes six months or so begins.

In recent days, Russian officials have begun to dig in their heels publicly. "The WTO isn't a goal in itself for us," Boris Gryzlov, speaker of the lower house of Parliament, told Russian news agencies yesterday, warning that Russia would agree only to terms favorable to its economy. "Otherwise, [accession] will be put off for a long period."

Analysts say the blunt language is more histrionics than evidence of a change of heart in the Kremlin, which has long set WTO accession as a goal. Instead, analysts and diplomats say the intensity of the public statements is an indication the talks have reached the toughest issues.

Among the most important for the U.S. is protection of intellectual property; American industries accuse Russia of being one of the world's largest producers of pirated music, movies and software. Russian officials insist they are doing their best to crack down on what they admit is a widespread problem, but complain that they are being unfairly singled out.

Congress is in no mood to give Moscow the benefit of the doubt, however. Many lawmakers still feel they were too easy on China when it joined the WTO in 2001, promising lots of improvements in areas -- including intellectual-property protection -- that ultimately didn't happen.

"I've been one of those who have pushed for trade, and have been burned by China," said Sen. Gordon Smith. The Oregon Republican says he isn't excited about rewarding Moscow with WTO membership, adding, "It's just simply untenable."

U.S. officials also are worried Russia may be backsliding on its commitments to intellectual-property protection, citing proposed changes in Russian law that would undermine safeguards. Russia has cracked down on some producers and conducted more raids on pirate-disk plants, but only in the past few months.

"There have been some encouraging signs, but we must have much more aggressive enforcement," said Dan Glickman, head of the Motion Picture Association of America.

U.S. negotiators are seeking commitments by Moscow to lower barriers that limit access to foreign financial institutions, as well as assurances that Russia will sign on to international standards for its sanitation and veterinary rules in the agriculture arena. Trade partners have accused Russia of using arbitrary food-safety rules as effective barriers to limit imports. Such changes would strengthen the White House in the coming fight on Capitol Hill, where geopolitical concerns will be balanced against pragmatic questions about how any deal benefits U.S. businesses and workers.