What should the United States do about Russia’s longstanding application to become a member of the World Trade Organization, after the crude Aug. 7 Russian invasion of Georgia? The next US president will have to decide whether to use the proverbial carrot or stick. The carrot approach would seek to bring Russia into the WTO’s rules-based multilateral trading system, as an inducement to settle economic differences peacefully. But current emotions in Washington, D.C. are strongly in favor of using the stick: continue blocking Russia’s WTO accession as punishment for its bad behavior in Georgia. How long will the punishment last? Well, China didn’t get into the WTO until December 2001, twelve years after the 1989 massacre in Tiananmen Square.
The bottom line question that isn’t presently being asked in Washington, D.C. is: who stands to benefit, the longer the world’s 10th largest economy is excluded from the WTO? So far, thoughtful answers aren’t coming from either of the two American presidential candidates. When Russian tanks roll across the borders of small neighboring democracies, American voters don’t look for nuanced responses — they mainly want to know how tough the next commander in chief would be prepared to be. The candidate who promises to pick up the stick today will always beat down any candidate who would dare to suggest that the carrot approach might be wiser tomorrow or the next day. And on the 2008 campaign trail, the only difference between Republican John McCain and Democrat Barack Obama is over who would pick up the bigger anti-Russian stick.
Does continuing to frustrate Russia’s hopes to join the WTO help encourage the bear to behave more responsibly? There is a history here that suggests otherwise. Let’s take a look, both from the perspective of the American eagle and the Russian bear.
Baiting the bear
Vladimir Putin’s power play in Georgia has locked in both US presidential candidates, who are using rhetoric that hasn’t been heard since the end of the Cold War. McCain, speaking to the Veterans of Foreign Wars on Aug. 18, said that he would work with US allies to “make it clear to Russia’s rulers that acts of violence and intimidation come at a heavy cost.” There will be “no place…in the WTO for a modern Russia that acts at times like the old Soviet Union, McCain declared. McCain, who would also throw Russia out of the G-8 group of leading industrial democracies, supports Georgia’s membership in the Nato military alliance.
Democrat Barack Obama, after some initial wavering, is also talking tough. “Russia must halt its violation of Georgian airspace and withdraw its ground forces from Georgia, with international monitors to verify that these obligations are met,” Obama declared on Aug. 12. Obama also supports bringing Georgia into Nato, and has basically agreed with McCain that until the bear behaves better in the Caucasus, its aspirations to get the economic privileges that come with WTO membership should be put in the deep freeze.
Both candidates would continue to provide Georgia — pop. 4.6 million, a country smaller than South Carolina — with military assistance designed to counter the Russian army.
Continuity in US foreign policy
Whatever either man would actually do once in the Oval Office, there isn’t much difference between the campaign rhetoric of McCain, the candidate of foreign policy “experience,” and that of Obama, the candidate for “change.” Moreover, the policy of Nato expansion after the collapse of the Soviet Union dates to President Bill Clinton (with the enthusiastic support during the 1990s of Obama’s vice-presidential running mate, Sen. Joe Biden). President George W. Bush has continued Nato expansion. One thing that Clinton, Bush, McCain, Obama and Biden have in common: none of them have displayed much eagerness to bring Russia into the WTO. Despite all the talk of change, US foreign policy has a continuity to it.
What the bear sees
National political campaigns, of course, are not policy seminars. But at some point, the next president will have to take a look at how the continuity might look from the bear’s perspective, and ask whether continuing to frustrate Russian ambitions to join the WTO is in America’s best interests, as well as those of the world’s trading system.
Russia first applied to join the General Agreement on Tariffs and Trade in 1993, two years before the GATT evolved into the WTO. Today, Russia remains only an “observer” to the WTO. Moscow’s application for the privileges of full membership — equal most-favored-nation treatment governing the terms of trade that each of the WTO’s 153 member countries pledge to offer all others — has been stalled for years.
The last official WTO working party that took up various issues related to Russia’s accession was held on March 23, 2006, according to the WTO’s website. By that time, Georgia was into its sixth year as a WTO member. Ukraine also applied to join the GATT in 1993, and was welcomed into the WTO on May 16, 2008.
Some of the concerns expressed by WTO members about Russia’s accession are based on legitimate trade issues. Finland in particular has raised objections. Finnish paper makers are hard-pressed to obtain timber, their essential raw material, from their neighbor Russia. “Moscow has been ratcheting up its duties on timber since 2006, squeezing Finnish paper makers who have for years been dependent on cheap Russian wood to keep their mills running,” according to a recent report by Terhi Kinnunen of Agency France Presse. “It [Russia] has vowed to hike its wood export tax next year to 50 euros ($78.4) per cubic meter from the current 15 euros.” Finland’s imports of Russian timber fell 23 percent last year, and “are expected to grind to a halt altogether,” the AFP report noted.
But Russia’s WTO accession seems to be held hostage mainly to non-trade politics, not economics. The main obstacles have been thrown up by Georgia and the US. Georgian and Russian trade negotiators met in Geneva two years ago, but failed to reach a common position on Russia’s WTO accession. While Georgia raised some trade issues, the former Soviet republic’s main demands were focused on the long-festering secessionist conflicts in South Ossetia and Abkhazia.
Non-trade issues are also the problem for Moscow in Washington, D.C., in the form of the hoary Jackson-Vanik amendment. First passed by Congress in 1975 during the Cold War, Jackson-Vanik denies most-favored-nation treatment — again, the WTO’s core principle — to communist countries that restrict emigration rights. The measure was aimed at helping Soviet Jews. But on Capitol Hill, suggestions that Jackson-Vanik is a bit long in the tooth are not very welcome.
From the bear’s perspective, how would this look to Vladimir Putin? The US has been willing to waive Jackson-Vanik to allow China and Vietnam into the WTO, but not Russia. On Aug. 14, an angry Russian Foreign Minister Sergei Lavrov told Echo Moskvy radio that Russia was becoming increasingly frustrated, and believed it would never get into the WTO. “sorry for a rude expression but every time they are just fooling us around,” Lavrov fumed.
Meanwhile, Washington gives a greater priority to “encircling” Russia militarily — again, as Vladimir Putin’s Russia sees it — by expanding Nato. On July 21, Georgia’s president, Mikheil Saakashvilli beamed as he took a firsthand look at joint war-games exercises conducted in Vaziani, Georgia. The Operation Immediate Response maneuvers involved 1,000 American soldiers and troops from Georgia, Azerbaijan, Armenia, and Ukraine — key countries in the various rivalries with Russia over gas- and oil pipelines to Europe and China. “Operation Immediate Response is an annual, bilateral security cooperation exercise conducted between U.S. And NATO and coalition partners,” explained a press release from the U.S. Embassy.
As the whole world now knows, shortly after the war games, Saakashvilli sent troops into South Ossetia, and Putin (who had been holding his own war games near the Russian border north of South Ossetia) responded by sending in his army and air force. “Saakashvilli played his America card and found it to be a deuce,” as H.D.S. Greenway observed in the International Herald Tribune. If the Georgian president expected (or perhaps was encouraged to believe) that Washington would come to his rescue, perhaps he might have reflected more deeply on the lessons of Hungary in 1956, and Prague in 1968, where the US and its Nato allies stood by helplessly as the Soviet Union displayed its willingness to use raw power in its own backyard.
The great game
To be sure, the exercise of trying to understand Russian perceptions doesn’t mean that the bear’s own policies and conduct are justified. Russia has had historical ambitions to dominate its small neighbors in the Caucasus region, often brutally. These days, the great game is even more complicated, due to the high-stakes geopolitical rivalry with the Americans, Europeans, and Chinese over access to various oil- and natural-gas pipelines crossing parts of the former Soviet client states in the area. The angry reactions from Europe and the US are hardly surprising.
As Sen. Biden, returning from a visit to Georgia, said in a press release on Aug. 18, “Russia’s actions in Georgia will have consequences. Russia’s actions have already erased the possibility of advancing legislative efforts to promote US-Russian partnership in the current Congress, including an agreement to allow for increased collaboration with Russia on nuclear energy production and the repeal of the Jackson-Vanik Amendment, which currently blocks the country’s integration into the World Trade Organization.”
That’s basically the situation that the next occupant of the Oval Office will inherit: a dangerous, historically rooted geopolitical rivalry involving great powers over the terms of international trade involving crucial energy supplies in an unstable region of the world. Both the Russian bear and the American eagle seem to perceive the reality that drives each other’s ambitions differently, and are talking past each other. This is the classic stuff of wars.
Trade as an inducement for peace
Renowned trade theorist Jagdish Bhagwati suggests that the next US president give a high priority to encourage more trade with the Russians, not less. WTO membership and responsibilities go hand in hand with a policy aimed at encouraging the Russians to follow the rule of law, Bhagwati points out. Bhagwati points out that nations that trade peacefully with other nations have powerful incentives not to launch military adventures. Not for the first time in his long career, Bhagwati’s vision is ahead of current political realities. “The Russians should be admitted to the WTO,” he concludes. Nobody in official Washington is yet listening.
Baiting the bear sounds great on the campaign trail. But Bhagwati says that if the goal is to encourage the beast to behave better, engagement is a more powerful policy tool than continuing to fuel Russian frustrations by using WTO membership as a political lever.
What about the question of who benefits by keeping Russia outside the international trade tent? Consider some of the countries that are presently not in the WTO. Afghanistan, Iraq, Iran, Somalia, Ethiopia, Sudan — each and every one a flash point for military conflict. And then look at China, which has agreed to work out its international trade conflicts peacefully, inside the WTO.
Last month, for example, China was held accountable in the WTO, where a dispute resolution panel ruled that Beijing had been subjecting imported auto parts from the US, Europe and Canada to charges greater than those applied to the Chinese domestic auto industry. China is legally obligated to comply. “In the case of China, there is little doubt that China’s entry into the rules-based system of the WTO, where the rules are enforced through an effective dispute settlement mechanism, has been a major contributing factor to China’s stunning economic success in recent years,” noted WTO Director-General Pascal Lamy on July 9.
Considering the dangerous rivalries between the great powers over access to crucial energy supplies involving the volatile Caucasus region, the case for continuing to frustrate Russia’s aspirations to participate in the global trading system by keeping Moscow outside the WTO does not seem to be in anyone’s best interests.