3 ways the US can start an economic 'reset' with Russia
Tensions between Russia and the United States are running high. Russian President Vladimir Putin canceled his trip to Camp David for the G8 summit this weekend and Moscow threatened preemptive strikes against a US missile defense shield should it be deployed in Europe as planned. The US must design a new relationship with this often difficult leader and his country.
Simply continuing the “Russian reset” of President Obama’s first term is a dead end. Washington needs a new reset that seeks to integrate Russia more fully into the international economy and community. By giving Russia – and Mr. Putin – a greater stake in strong relations with the West, the reset can also create incentives for better behavior, both domestically and internationally, by the Kremlin.
This new approach should include these three key components:
1. Economic integration and incentives
In December, Russia reached agreement with the World Trade Organization and its members – including the United States and European governments – on the terms of its accession. All that remains is for the Duma, or parliament, to ratify the accord. While Putin has been somewhat skeptical of WTO accession, there is no other choice for Russia if the new government wishes to modernize an economy that’s overly dependent on oil and gas exports.
The US and Europe should push Russia to complete its entry into the WTO and then begin close monitoring of its implementation of trade rules. As with China, the process of adopting and enforcing those rules is likely to be slow. Just as the US and European Union pushed together for Chinese adherence to WTO rules on protection of intellectual property, so they must cooperate closely to gain Russian adherence to those rules and others.
WTO membership presents a valuable opportunity to strengthen rule-of-law in that country – including laws on contracts, property ownership, and investment protection. The US and EU should also support Russian organizations, including business associations, that seek to make WTO membership an effective and practical reality.
If the US is to have any credibility in this effort, it must finally repeal the Jackson Vanik amendment of 1974. This relic of the cold war no longer serves any real purpose, as the Soviet Jews it sought to protect have long since emigrated. But by keeping US barriers to Russian trade abnormally high, Jackson Vanik ensures that the US – and US-based companies – will be at a serious disadvantage as Russia expands its global trade.
Repealing Jackson Vanik should not be seen as a favor to the new Russian government. Opening markets to Russia is essential to convince the Russian public and business leaders that their future is with the West. In return, US business will have better access to a growing economy and consumer market.