13 November 2006
A Guide to the WTO and PNTR Processes
Russia’s WTO Accession:
A Guide to the WTO and PNTR Processes
USRBC and AmCham Russia
What are the WTO Procedures for Russia’s Accession?
There are five main stages for WTO Accession: (1) Gathering information on the acceding member's trade policy regime; (2) Bilateral negotiations between Russia and interested WTO members on market access for goods and services; (3) Formulation of the Working Party Report, which summarizes the terms agreed in all the individual bilateral negotiations and the conditions of Russia's WTO entry; (4) Approval by the WTO General Council or the Ministerial Conference* of the accession package (the Working Party Report; the Protocol of Accession, which details the acceding member's terms of membership; and the Schedule of Russia’s market access commitments); and (5) Ratification of the accession package by Russia. (The WTO does not set out specific timelines for WTO accessions; these are done case-by-case in conjunction with the acceding country.) Russia must ratify the accession package in accordance with its national procedures, and then notify the accession package to the WTO Secretariat. Thirty days after Russia signs the Protocol and notifies the WTO Secretariat of its ratification, the Protocol enters into force, at which point Russia is a member of the WTO, and Russia and all WTO members stand to benefit from the terms of the accession.
Russia and Normal Trade Relations (NTR) with the U.S.
A basic tenet of the WTO (GATT Article I) is that members shall accord one another unconditional most-favored nation (MFN) (more recently known in U.S. trade law as "normal trade relations" or "NTR")** treatment of each others' goods and services. This principle requires that any concessions regarding duties or other import restrictions in any trade agreement be granted to products of all member countries, except as otherwise provided by law. Russia, however, enjoys merely conditional (non-permanent) NTR treatment in the United States. This is because Russia's NTR status, granted in 1992 under the U.S.-Soviet bilateral trade agreement of 1990, is conditioned upon the President certifying by June 30 and December 31 of each year that Russia is in compliance with the freedom of emigration provisions in Section 402 of Title IV of the Trade Act of 1974, more commonly known as the Jackson-Vanik amendment, which indeed the President has done since 1994. The statute specifies that free emigration is necessary for (a) NTR treatment with the U.S.; (b) access to U.S. government financial facilities; and (c) the ability to conclude a bilateral trade agreement with the United States. On an annual basis, the U.S. Congress has the opportunity to pass a joint resolution of disapproval of the President's December 31 determination of Russia's compliance. Such a resolution, which would be subject to fast-track procedures, has never been attempted by the U.S. Congress.
Because Russia currently has "conditional" normal trade relations with the U.S., when Russia accedes to the WTO the U.S. must grant Russia "Permanent Normal Trade Relations," or PNTR. According to WTO rules, upon a new member's accession, existing WTO members must grant unconditional MFN (PNTR) to the new member or invoke the "non-application" clause – Article XIII of the Marrakech Agreement, the consequences of which are addressed after the following section below.
PNTR and the U.S. Congress
As noted above, in order for the U.S. to grant Russia PNTR, Congress must pass relatively straightforward legislation that (1) authorizes the President to determine that Title IV of the Trade Act of 1974 should no longer apply to Russia; (2) authorizes the President to proclaim that Russia's products will receive nondiscriminatory treatment (NTR); and (3) terminates the application of Title IV of the Trade Act of 1974 in connection with the President's NTR proclamation. In the past, such legislation has moved through Congress as a stand-alone measure or as part of a larger trade bill (Georgia's PNTR bill was included in a miscellaneous tariff bill, for example).
Importantly, this legislation is not subject to the fast-track rules that limit debate time or restrict amendments. Congressional consideration of PNTR for China, for example, resulted in the creation of mechanisms to monitor the delicate issues of human rights and rule of law, a special safeguard mechanism to guard against import surges and other provisions.*** In terms of the key players on Capitol Hill who will be involved in PNTR approval, the legislation is under the jurisdictions of the House Ways and Means and Senate Finance Committees and will be considered by these committees before moving to the floors of the House and the Senate for a full vote.
The President must sign the legislation into law, and once enacted, the President would implement PNTR for Russia by Presidential Proclamation.
Russia's WTO Accession and the "Non-Application" Scenario
If the U.S. fails to grant Russia PNTR, Russia is entitled, as a full member of the WTO, to withhold from the United States the benefits of the terms of its accession. Simply put, all the benefits the U.S. succeeds in negotiating on behalf of U.S. companies and workers during bilateral discussions with Russia and all the terms negotiated by other countries in their bilateral discussions with Russia would be enjoyed by all U.S. competitors operating in the Russian market, but not by U.S. companies and their workers. Further, under the rules of nonapplication, the United States would not have recourse to WTO dispute settlement proceedings against Russia for violations of WTO rules during the period that non-application is in force.
Should the U.S. not grant Russia PNTR by the time of its WTO accession (and decide to invoke the non-application clause), USTR must notify the House Ways and Means and Senate Finance Committees as to when the U.S. intends to invoke Article XIII's non-application clause, and it must consult afterward with these committees.****
The U.S. Congress needs to be fully apprised and educated as to the negative implications of Russia's accession to the WTO if the U.S. were to follow the path of non-application. This will require the active leadership of the Administration and an organized advocacy effort by the U.S. business community.
* Either the Ministerial Council or the General Council may formally approve a new member’s accession by voting on the Working Party Report and the Protocols of Accession. Normally, it is the General Council that approves the accession agreement, but, the formal process laid out in Article XII:2 of the Marrakech Agreement specifies that the Ministerial Council has the final prerogative in approving the accession. Article XII also states that a two-thirds majority of existing WTO members is required for approval of the accession, but WTO practice has been that new members are accepted by a consensus vote. These votes are usually not considered controversial since there has already been a vetting process through the Working Party's review and adoption of the Protocols of Accession and the draft Working Party Report. According to Section 122 of the U.S. implementing legislation for the Uruguay Round, USTR must consult with the House Ways and Means and Senate Finance Committees prior to the WTO Ministerial Conference vote on Russia's accession, but there is no provision for these committees to take any action with respect to the WTO vote.
** Please note that the U.S. statute establishing the terminology (P.L. 105-206) refers to "normal trade relations," not "permanent normal trade relations." The usage of PNTR has arisen only because the U.S. has made NTR conditional in certain circumstances.
*** To date there have been six special safeguard investigations by the U.S. International Trade Commission (ITC) against distinct products from China, but none has resulted in the imposition of safeguard measures. The ITC made affirmativedeterminations in four of these investigations, but, similar to global safeguard investigations, the ITC's determination is subject to consideration by the President. The decision whether to impose measures lies with the President.
**** Six countries (Mongolia, Kyrgyz Republic, Georgia, Moldova, Romania and Armenia) subject to the freedom of emigration provisions of Jackson-Vanik have acceded to the WTO without having previously secured PNTR from the U.S. In these cases, the U.S. invoked the non-application clause, and subsequently granted these countries PNTR. However, these countries arguably pale in comparison with Russia in terms of existing and potential trade and investment opportunities for U.S. firms.