[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
TO EXPLORE PERMANENT NORMAL TRADE RELATIONS FOR RUSSIA
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TRADE
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
APRIL 11, 2002
__________
Serial No. 107-64
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
79-629 WASHINGTON : 2002
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001
COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, Georgia
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania XAVIER BECERRA, California
WES WATKINS, Oklahoma KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona LLOYD DOGGETT, Texas
JERRY WELLER, Illinois EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
Allison Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Trade
PHILIP M. CRANE, Illinois, Chairman
E. CLAY SHAW, Jr., Florida SANDER M. LEVIN, Michigan
AMO HOUGHTON, New York CHARLES B. RANGEL, New York
DAVE CAMP, Michigan RICHARD E. NEAL, Massachusetts
JIM RAMSTAD, Minnesota WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington XAVIER BECERRA, California
WALLY HERGER, California JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania
JIM NUSSLE, Iowa
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
Page______
Advisory of March 21, 2002, announcing the hearing............... 2
WITNESSES
United States Trade Representative, Hon. Peter Allgeier, Deputy
United States Trade Representative............................. 26
U.S. Department of State, Hon. Alan P. Larson, Under Secretary
for Economic, Business, and Agricultural Affairs............... 30
----------
Ad Hoc Committee of Domestic Nitrogen Producers, and CF
Industries, Robert Liuzzi...................................... 50
American Farm Bureau Federation, and Michigan Farm Bureau, Wayne
Wood........................................................... 57
Cox, Hon. Christopher, a Representative in Congress from the
State of California............................................ 18
Lantos, Hon. Tom, a Representative in Congress from the State of
California..................................................... 13
NCSJ: Advocates on behalf of Jews in Russia, Ukraine, the Baltic
States & Eurasia, Harold Paul Luks............................. 61
SPI Spirits, Ltd., and Greenberg Traurig, LLP, Richard A. Edlin.. 70
U.S.-Russia Business Council, and Boeing Company, Hon. Thomas R.
Pickering...................................................... 44
SUBMISSIONS FOR THE RECORD
Bethlehem Steel Corporation, Bethlehem, PA; National Steel
Corporation, Mishawaka, IN; and United States Steel
Corporation, Pittsburgh, PA, joint statement................... 85
International Paper, Lyn M. Withey, letter....................... 87
National Cattlemen's Beef Association, statement................. 87
Russian Federation to the United States of America, His
Excellency Yuri V. Ushakov, Ambassador, statement.............. 5
U.S. Chamber of Commerce, R. Bruce Josten, letter................ 89
UCSJ: Union of Councils for Jews in the Former Soviet Union,
Micah H. Naftalin, statement and attachment.................... 90
TO EXPLORE PERMANENT NORMAL TRADE RELATIONS FOR RUSSIA
----------
THURSDAY, APRIL 11, 2002
House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:05 a.m., in
room 1100 Longworth House Office Building, Hon. Philip M. Crane
(Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON TRADE
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
March 21, 2002
No. TR-8
Crane Announces Hearing on Trade to Explore
Permanent Normal Trade Relations for Russia
Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade
of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing to explore whether to graduate Russia
from the Jackson-Vanik provisions, and extend Permanent Normal Trade
Relations (PNTR), and to assess U.S.-Russian trade relations. The
hearing will take place on Thursday, April 11, 2002, in the main
Committee hearing room, 1100 Longworth House Office Building, beginning
at 10:00 a.m.
Oral testimony at this hearing will be from both invited and public
witnesses. Invited witnesses will include representatives from the U.S.
Department of State and the Office of the United States Trade
Representative. Also, any individual or organization not scheduled for
an oral appearance may submit a written statement for consideration by
the Committee or for inclusion in the printed record of the hearing.
BACKGROUND:
Russia's trade status remains subject to Title IV of the Trade Act
of 1974, including the Jackson-Vanik freedom of emigration provisions.
Russia was first extended normal trade relations in 1992 under a waiver
from the Jackson-Vanik emigration requirements. Since 1994, the
President has found Russia to be in full compliance with the emigration
criteria; however, the country's trade status remains conditioned upon
annual compliance determinations by the President. The compliance
determinations are vulnerable to a resolution of disapproval by
Congress. There has not been an annual vote in Congress on Russia's
trade status because no Member of Congress has introduced a disapproval
resolution. On December 20, 2001, Ways and Means Committee Chairman
Bill Thomas, Subcommittee Chairman Phil Crane, and Rules Committee
Chairman David Dreier introduced H.R. 3553 to terminate the application
of Jackson-Vanik to Russia and thus grant PNTR to Russia.
In announcing the hearing, Chairman Crane stated: ``The
Administration has placed a priority on forging a new relationship with
Russia. As part of that effort, President Bush has personally indicated
his interest in seeing Congress end trade restrictions on Russia. At
this hearing, the Subcommittee will examine the impact that such action
would have on U.S. interests.''
FOCUS OF THE HEARING:
The hearing will explore the prospects and implications of granting
PNTR to Russia at this time, the status of U.S.-Russian trade
relations, the status of Russia's World Trade Organization accession,
and Russia's record in complying with the statutory requirements of the
Jackson-Vanik provisions.
DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:
Requests to be heard at the hearing must be made by telephone to
Traci Altman or Bill Covey at (202) 225-1721 no later than the close of
business, Thursday, March 28, 2002 The telephone request should be
followed by a formal written request faxed to Allison Giles, Chief of
Staff, Committee on Ways and Means, U.S. House of Representatives, 1102
Longworth House Office Building, Washington, D.C. 20515, at (202) 225-
2610. The staff of the Subcommittee on Trade will notify by telephone
those scheduled to appear as soon as possible after the filing
deadline. Any questions concerning a scheduled appearance should be
directed to the Subcommittee on Trade staff at (202) 225-6649.
Witnesses scheduled to present oral testimony are required to
summarize briefly their written statements in no more than five
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full
written statement of each witness will be included in the printed
record, in accordance with House Rules.
In view of the limited time available to hear witnesses, the
Subcommittee may not be able to accommodate all requests to be heard.
Those persons and organizations not scheduled for an oral appearance
are encouraged to submit written statements for the record of the
hearing. All persons requesting to be heard, whether they are scheduled
for oral testimony or not, will be notified as soon as possible after
the filing deadline.
In order to assure the most productive use of the limited amount of
time available to question witnesses, all witnesses scheduled to appear
before the Committee are required to submit 200 copies, along with an
IBM compatible 3.5-inch diskette in WordPerfect or MS Word format, of
their prepared statement for review by Members prior to the hearing.
Testimony should arrive at the Subcommittee on Trade office, room 1104
Longworth House Office Building, no later than 12:00 p.m. on Monday,
April 8, 2002, in an open and searchable package. The U.S. Capitol
Police will refuse unopened and unsearchable deliveries to all House
Office Buildings. Failure to do so may result in the witness being
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WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:
Please Note: Due to the change in House mail policy, any person or
organization wishing to submit a written statement for the printed
record of the hearing should send it electronically to
[email protected], along with a fax copy to
(202) 225-2610 by the close of business, Wednesday, April 24, 2002.
Those filing written statements who wish to have their statements
distributed to the press and interested public at the hearing should
deliver their 200 copies to the Subcommittee on Trade in room 1104
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hours before the hearing. The U.S. Capitol Police will refuse unopened
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Note: All Committee advisories and news releases are available on
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Committee as noted above.
Chairman Crane. Good morning. This is a hearing of the Ways
and Means Trade Subcommittee to consider granting permanent
normal trade relations, or PNTR, to Russia and to assess U.S.-
Russian trade relations. We are at a unique crossroad in the
overall U.S.-Russian relationship, and I find this topic quite
timely. As a Cold warrior, I supported President Reagan's
policies toward the Soviet Union. Reagan led both of our
countries down a path that altered the course of history, and
freedom and democracy triumphed.
As a result of those policies, today we face a very
different Russia from the nation that existed when the Jackson-
Vanik provisions were passed in 1974. Since the fall of the
Soviet Union over a decade ago, Russia has taken tremendous
steps toward increased political and economic freedom. Today
Russia has a maturing democracy. Russian citizens have
successfully participated in three democratic elections for
President and the Duma, and another Duma election will be held
next year.
Russia has also undertaken significant economic reforms.
The process has had some problems along the way, but President
Putin and his administration have made economic reform a
priority. And I look forward to seeing private property rights
and the rule of law firmly take roots in Russian society.
I also expect our U.S. trade negotiators to bring back the
best possible World Trade Organization (WTO) accession package
with Russia that addresses Congress' concerns, particularly
with respect to the U.S. agriculture and fertilizer industries.
I intend to follow this issue closely and consult with the
Administration on the terms of Russia's accession.
In the meantime, I am extremely disappointed that Russia
hasn't lifted its ban on U.S. poultry exports and has extended
the ban at least an additional couple of days. I believe it
will be very difficult for some Members to support PNTR for
Russia unless this dispute is resolved in a way that is based
on sound science. I note that in the written statement that
Russian Ambassador Ushakov provided for the record of this
hearing, he stated that we need to create--and, incidentally,
the Ambassador, I understand, is here. Mr. Ambassador, would
you stand for a second and just be recognized?
[Applause.]
[The statement follows:]
[By permission of the Chairman.]
Statement of His Excellency Yuri V. Ushakov, Ambassador, Russian
Federation to the United States of America
Mr. Chairman and Members of the Subcommittee:
With regard to the hearing on legislation making normal trade
relations with Russia permanent, I would like to submit the following
statement reflecting our position on this subject.
We welcome the U.S. Administration decision to seek the full and
final exemption of the Russian Federation from the Jackson-Vanik
amendment to the Trade Act 1974. It will effectively remove one of the
last vestiges of the Cold War in Russia-US relationship. It is our firm
belief that the 28-year old amendment has outlived its purpose in view
of changes of historic proportions that have taken place in Russia and
in our bilateral ties. Moreover, at this critical juncture, when Russia
and the United States stand together as allies in the fight against
international terrorism, it would be more than natural to send just the
right signal by removing Jackson-Vanik restrictions from the context of
our bilateral relations. Our two countries are embarked on building a
new quality of engagement and cooperation for the benefit of the world
community. Symbols that link us to the past should no longer overshadow
joint efforts to strengthen long-term stable relationship across the
board--in the areas of strategic stability and international security,
trade and economic interaction, people-to-people communications--based
on the universal democratic and human values.
By all objective criteria modern Russia is no longer the country
that was targeted by the Title IV of the Trade Act, including the
Jackson-Vanik freedom of emigration provisions. As Presidents George
Bush and Vladimir Putin stressed in their joint statement at the
Washington/Crawford summit last November, our countries are determined
to promote better economic, trade and investment relations. The
achievement of these goals requires the removal of legislative and
administrative barriers, as well as creation of a transparent and
predictable investment climate.
Significant strides were made in building a free and democratic
society based on the rule of law, pushing forward with far-reaching
reform to radically transform Russia into a viable market-oriented
globally integrated economy. As of today, only 12 percent of the
enterprises are currently owned by the State, while the rest are
privately owned. An open investment regime has been established based
on the non-discriminatory treatment of foreign investors. They are
enjoying the right to full ownership of Russian firms and investment
guarantees, as well as a favorable tax regime under production-sharing
agreements.
Russia and the United States have expressed their commitment to
advance common values by protecting and promoting human rights,
tolerance, free speech and independent media, religious freedoms and
the rule of law. The Russian Constitution and current laws guarantee
personal freedoms, while outlawing intolerance and hate crimes,
motivated by ethnicity or religion. Our emigration legislation is based
on the principles of international law and is fully compliant with the
international standards. There are no legal restrictions for anyone who
is willing to leave the country or travel abroad.
Historically, the Jackson-Vanik amendment originated from the
concerns of the American Jewish community about human rights,
restrictions and persecutions affecting Jews and other minorities in
the former Soviet Union. Since then, the situation has changed
dramatically. Nowadays the Jewish community in Russia experiences a
renaissance, with cultural and community centers, new synagogues
established and old ones being reopened. President Vladimir Putin is
personally engaged in these efforts, and the policy of the Russian
Government is to guarantee that all nationalities, religious and ethnic
groups are not discriminated and live peacefully in their common home
of Russia. Anti-Semitism is prosecuted to the full extent of the law.
Regretfully, despite all positive changes in economic and
humanitarian spheres, the overwhelming support in the Russian-American
business community for the extension of non-discriminatory treatment,
Russia still does not enjoy the NTR status on a permanent basis. Such a
situation adds an element of instability to our trade relations. The
permanent presence of the risk that temporary waiver of Jackson-Vanik
amendment for Russia will not be granted and higher tariffs will return
does not encourage the establishment of long-term trade and investment
projects in our two countries. The capabilities imbedded in the
bilateral economic relationship have not been fully implemented.
One of the main priorities of our ongoing economic policy continues
to be integration of the Russian Federation into the world economy and
major international organizations dedicated to the promotion of free
trade and competition. Currently we are actively involved in the
negotiations on Russia's accession to the World Trade Organization. The
Russian State Duma has recently passed a huge portion of laws and
regulations reflecting WTO requirements and providing for the
enforcement mechanisms of WTO rules. At the last meeting of the Working
Party on the accession of the Russian Federation to the WTO held in
January, 2002, the legislative progress has been characterized by its
Chairman as ``very impressive and concrete''.
In accordance with our strategy for WTO accession, the Russian
Government will continue focusing on making its legislation compliant
with WTO norms and rules and intends to draft approximately fifty more
new laws and amendments to existing ones in order to attain such
compliance. We are taking necessary measures to ensure access of
foreign goods, services and investments to Russian markets and are
eager to participate as a WTO member in the new round of multilateral
trade negotiations.
On the other hand, we do believe that the negotiating process on
Russia's accession to the WTO should not be a one-way road. We consider
Russian membership in this organization as a mutually beneficial factor
for all parties involved and would like to see real steps from our
major trade partners to promote economic cooperation with Russia.
In conclusion, I would like to emphasize that after more than a
decade of dramatic transformation in Russia and our bilateral relations
it is imperative to get rid of the Cold War legacy. Normalization of
trade is an important element in building a new framework of trust and
partnership between our countries. That is why we believe the proposed
legislation that would end the application of the Jackson-Vanik
amendment to the Russian Federation merits support of the US Congress.
Chairman CRANE. Thank you.
He stated that we need to create a transparent and
predictable climate between our two countries. I agree, and
this includes a commitment not to erect trade barriers in the
name of sanitary concerns that are, in fact, based on politics.
If there are legitimate concerns with some U.S. chicken
processing facilities, then we should deal with this in a
focused way. Instead, Russia has provided no good reason to
continue a complete ban on all U.S. poultry. Russia's poultry
ban has caused serious damage to our trade relationship, and I
ask you, Mr. Ambassador, to send this message back home.
The Jackson-Vanik is fundamentally about freedom of
emigration, and it is widely recognized that Russia has done a
tremendous job with regard to the free emigration of Jews. For
8 years, Russia has been in full compliance with the freedom of
emigration provisions in the law. I have a brother-in-law who
is a Holocaust survivor, so this is something that is directly
relevant to my family. The President says he wants PNTR for
Russia to help further a new relationship with Russia. He wants
it for geopolitical reasons. Well, I want it for economic
reasons. This is good for Russia and for the United States.
With PNTR, U.S. investors and entrepreneurs will have more
confidence in doing business in Russia. This confidence will
foster more trade and investment between our two countries. It
is no surprise to me that the U.S.-Russia Business Council,
whose members are the pioneers doing business in Russia, is
strongly advocating PNTR for Russia. In a speech at the U.S.
Department of State last week, President Bush said, and I
wholeheartedly agree, that free trade creates the habits of
freedom, generates expectations of democracy, and promotes
universal values of human dignity and human rights.
With this in mind, I believe it is appropriate and timely
for the Congress to consider extending PNTR to Russia to remove
one of the final vestiges of the Cold War. I look forward to
hearing the testimony of our witnesses today, and I yield now
to the Ranking Minority Member of the Subcommittee, Mr. Levin,
for any remarks he would like to make. Mr. Levin.
[The opening statement of Chairman Crane follows:]
Opening Statement of the Hon. Philip M. Crane, a Representative in
Congress from the State of Illinois, and Chairman, Subcommittee on
Trade
Good Morning. This is a hearing of the Ways and Means Trade
Subcommittee to consider granting Permanent Normal Trade Relations, or
PNTR, to Russia and to assess U.S.-Russia trade relations.
We are at a unique crossroads in the overall U.S.-Russian
relationship, and I find this topic quite timely. As a Cold Warrior, I
supported President Reagan's policies toward the Soviet Union. Reagan
led both of our countries down a path that altered the course of
history, and freedom and democracy triumphed. As a result of those
policies, today we face a very different Russia from the nation that
existed when the Jackson-Vanik provisions were passed in 1974. Since
the fall of the Soviet Union over a decade ago, Russia has taken
tremendous steps toward increased political and economic freedom. Today
Russia has a maturing democracy. Russian citizens have successfully
participated in three democratic elections for President and the Duma,
and another Duma election will be held next year.
Russia has also undertaken significant economic reforms. The
process has had some problems along the way but President Putin and his
administration have made economic reform a priority, and I look forward
to seeing private property rights and rule of law firmly take root in
Russian governance.
I also expect our U.S. trade negotiators to bring back the best
possible WTO accession package with Russia that addresses Congress'
concerns, particularly with respect to the U.S. agriculture and
fertilizer industries. I intend to follow this issue closely and
consult with the Administration on the terms of Russia's accession.
In the meantime, I am extremely disappointed that Russia has not
lifted its ban on U.S. poultry exports and has extended the ban at
least an additional two days. I believe it will be very difficult for
some Members to support PNTR for Russia unless this dispute is resolved
in a way that is based on sound science. I note that in the written
statement that Russian Ambassador Ushakov provided for the record of
this hearing, he stated that we need to create a ``transparent and
predictable'' climate between our two countries. I agree, and this
includes a commitment not to erect trade barriers in the name of
sanitary concerns that are in fact based on politics. If there are
legitimate concerns with some U.S. chicken processing facilities, then
we should deal with this in a focused way. Instead, Russia has provided
no good reason to continue a complete ban on all U.S. poultry. Russia's
poultry ban has caused serious damage to our trade relationship, and I
ask the Ambassador to send this message back to Moscow.
Jackson-Vanik is fundamentally about freedom of emigration, and it
is widely recognized that Russia has done a tremendous job with regard
to the free emigration of Jews. For eight years, Russia has been in
full compliance with the freedom of emigration provisions in the law.
My brother-in-law is the son of holocaust survivors, so this is
something that is directly relevant to my family.
The President says he wants PNTR for Russia to help further a new
relationship with Russia. He wants it for geopolitical reasons. Well, I
want it for economic reasons. This is good for Russia and for the
United States. With PNTR, U.S. investors and entrepreneurs will have
more confidence in doing business in Russia. This confidence will
foster more trade and investment between our two countries. It's no
surprise to me that the U.S.-Russia Business Council--whose members are
the pioneers doing business in Russia--is strongly advocating PNTR for
Russia.
In a speech at the State Department last week, President Bush
said--and I wholeheartedly agree--that free trade creates the habits of
freedom, generates expectations of democracy, and promotes universal
values of human dignity and human rights. With this in mind, I believe
it is appropriate and timely for the Congress to consider extending
PNTR to Russia to remove one of the final vestiges of the Cold War.
I look forward to hearing the testimony of our witnesses today, and
I yield to the Ranking Minority Member of the Subcommittee, Mr. Levin,
for any remarks he would like to make.
Today we will hear from a number of distinguished witnesses. In the
interest of time, I ask that you keep your oral testimony to five
minutes. We will include longer, written statements in the record. And
now I welcome my colleagues Mr. Lantos and Mr. Cox to hear their
testimony.
Mr. Levin. Thank you, Mr. Chairman. And welcome Mr. Lantos
and to all those who are going to testify, the distinguished
Secretary, Mr. Larson, the Ambassador, and everybody else.
Today, as Mr. Crane has mentioned, the Subcommittee
considers whether to, we use the term, ``graduate'' Russia from
the Jackson-Vanik amendment and whether to grant permanent
normal trade relations. The question arises as to what factors
we should base those decisions on.
Additionally, since both the Jackson-Vanik amendment and
the conditional grants of normal trade relations (NTR) involve
issues of leverage, we must determine whether and how to
replace that leverage.
There are indeed legitimate foreign policy reasons
prompting the Administration's request, especially given that
Russia has been an important ally in the war against terrorism,
and other developments within Russia. That said, human rights,
religious freedoms, and economic commercial concerns do remain.
At the outset--and I think this needs to be kept in mind--
it is important to realize that Jackson-Vanik graduation and
granting PNTR are really two different actions, each with
different policy implications. Although we often speak of the
Jackson-Vanik amendment in Title IV of the Trade Act 1974 as if
they are one and the same, in fact, that is not correct. It is
important as we embark on what may be the first of many
Jackson-Vanik moves for former Soviet countries to understand
this point, because it helps to identify all the issues that
are at stake.
So when we talk about granting PNTR and moving the country
out of Jackson-Vanik, we should consider both the Jackson-Vanik
issues and the trade policy issues.
As to Jackson-Vanik issues, we must consider what we might
call the traditional Jackson-Vanik issues. That amendment was a
historic piece of legislation, and Mr. Lantos is going to
speak, as he always does, eloquently on that subject. It set
forth important criteria related to freedom of emigration
necessary for certain countries to obtain normal trade
relations.
Even from its inception, however, the Jackson-Vanik
amendment was not only concerned with freedom of emigration,
but also reflected the American commitment to human rights and
freedom of religion. This fact is evident not only in the
Preamble but also in the conduct of U.S. relations with the
former Soviet countries for over three decades.
It is appropriate, then, as we consider whether a country
should be graduated from the Jackson-Vanik amendment, that we
place a strong emphasis on freedom of emigration, religious
freedom, and human rights issues--issues that motivated so many
of us to go to the Soviet Union over the years of the past.
These were the issues at the core of the creation of the
Jackson-Vanik amendment and should be at its core as we
consider countries moving from out of it.
So as I said, toward that end I very much look forward to
hearing from my colleague and dear friend Tom Lantos on these
issues as well as from other groups here today, including the
NCSJ: Advocates on behalf of Jews in Russia, Ukraine, the
Baltic States & Eurasia (NCSJ). I want to hear--and I think we
all do--about Russia's progress to date on these issues, areas
where Russia needs to do more, and Russia's commitment to
continue that progress in the future.
Separate from the Jackson-Vanik issues per se are what
might be called the trade policy issues, and just a few moments
on those. These are the issues that inevitably arise when
deciding whether to bring about a change in the status of a
trading relationship. For the most part, Congress has not
agreed to accept a major change in trade status with another
country without a mutual benefit and action on both sides. In
the context of other countries covered by the Jackson-Vanik
amendment, in recent years Congress has generally not granted
PNTR until after the country has completed its accession to the
WTO or at least completed its WTO accession negotiations with
our country.
The reason is obvious: The ultimate vote on PNTR
legislation gives Congress an important lever to ensure that
the trade negotiations with that country reflect fully our
priorities, Congress' and the administration's.
As in the recent case of China, we want to be sure of the
outcome of these negotiations. Ensuring a strong role for
Congress is appropriate given that Congress has a
constitutional mandate to regulate trade, and we have to take
that seriously. So we should not approach the granting of PNTR
lightly. We should not grant it without strong assurances, and
preferably something more than just assurances, that Congress
will continue to have a strong influence in shaping trade
relations.
For a start, if a country has not yet acceded to the WTO,
the findings and statements of policy in any PNTR bill should
reflect congressional priorities on trade issues, from
meaningful market access, to intellectual property protection,
to labor market standards, to satisfactory resolutions of
disputes. So I will be very interested in hearing from the
witnesses what mechanisms and tools they believe will ensure
continuing leverage for the United States and for Congress
should we grant PNTR for the Russian Federation.
Additionally, given that the countries falling under Title
IV of the Trade Act 1974 are in many cases non-market economies
or do not yet have well-established market systems, we need to
seriously consider what types of structures we will need to
ensure stable trade relations with those countries.
When we enacted the Trade Act 1974--and this is often not
recognized--we created a special safeguard for trade with non-
market economies. We did so out of the realization that a high
level of government interference in an economy or a lack of
market structures creates the real possibility of large and
unpredictable import surges. We recently reaffirmed that basic
logic when we established a special safeguard in the China PNTR
legislation. We need to give serious consideration to keeping a
special safeguard in place for many of these former Soviet
countries until they make substantially more progress toward
creating truly market economies.
Thank you again, Mr. Chairman.
[The opening statements of Mr. Levin and Mr. Cardin
follow:]
Opening Statement of the Hon. Sander M. Levin, a Representative in
Congress from the State of Michigan
Thank you, Chairman Crane. Today the Committee considers whether to
``graduate'' Russia from the Jackson-Vanik amendment and whether to
grant permanent normal trade relations (PNTR) to Russia. The question
arises as to what factors we should base those decisions on.
Additionally, since both the Jackson-Vanik amendment and conditional
grants of NTR involve issues of leverage, we must determine whether and
how to replace that leverage.
There are legitimate foreign policy reasons prompting the
Administration's request that Russia be graduated from Title IV, given
that Russia has been an important ally in the war against terrorism.
That said, human rights/religious freedoms, and economic/commercial
concerns remain.
At the outset, it is important to realize that Jackson-Vanik
``graduation'' and ``granting PNTR'' are two different actions, each
with different policy implications. Although we often speak of the
Jackson-Vanik Amendment and Title IV of the Trade Act of 1974 as if
they are one and the same. In fact, that is not correct. I think it is
important as we embark on what may be the first of many Jackson-Vanik
``graduations'' for former Soviet countries to understand this point,
because it helps to identify all the issues that are at stake. So, when
we talk about granting PNTR and ``graduating'' a country from Jackson-
Vanik, we should consider both the Jackson-Vanik issues and the ``trade
policy'' issues that were the underpinning of the other Title IV
provisions.
Issues to Consider
Jackson-Vanik issues
First, we must consider what we might call the ``traditional
Jackson-Vanik issues.'' The Jackson-Vanik amendment was an historic
piece of legislation. It set forth important criteria related to
freedom of emigration necessary for certain countries to obtain normal
trade relations with the United States. Even from its inception,
however, the Jackson-Vanik amendment was not only concerned with
freedom of emigration, but also reflected the American commitment to
human rights and freedom of religion. This fact is evident not only in
the preamble of the Jackson-Vanik amendment, but also in the conduct of
U.S. relations with the former Soviet countries for nearly thirty
years.
It is appropriate, then, that as we consider whether a country
should be graduated from the Jackson-Vanik amendment, that we place a
strong emphasis on freedom of emigration, religious freedom, and human
rights issues. These were the issues at the core of the creation of the
Jackson-Vanik amendment, and should be at the core of ``graduation''
from it.
Towards that end, I very much look forward to hearing from my dear
colleague and friend Tom Lantos on these issues, as well from the other
groups here today, including the NCSJ. I want to hear about Russia's
progress to date on these issues, areas where Russia needs to do more,
and Russia's commitment to continue that progress in the future on
these vital issues.
PNTR issues
Separate from the Jackson-Vanik issues, are what might be called
the trade policy issues. These are the issues that inevitably arise
when deciding whether to bring about a change in the status of a
trading relationship. For the most part, Congress has not agreed to
accept a major change in trade status with another country without
something in return.
In the context of other countries covered by the Jackson-Vanik
amendment, in recent years Congress has generally not granted PNTR
until after the country had completed its accession to the WTO or at
least completed its WTO accession negotiations with the United States.
The reason is obvious--the ultimate vote on the PNTR legislation gives
Congress an important lever to ensure that the trade negotiations with
that country fully reflect U.S. priorities--Congress' and the
Administration's. As in the recent case of China, we could be sure that
Congress was satisfied with the outcome only when those negotiations
were completed.
Ensuring a strong role for Congress is appropriate given that
Congress has a constitutional mandate to regulate trade with foreign
nations. We must take that mandate seriously. In fact, we built a
direct congressional role into our trade relations with countries
subject to Title IV of the Trade Act of 1974--in section 405(b)
Congress mandated that a number of provisions be included in bilateral
trade agreements with such countries, and section 405(c) requires
congressional approval for any such agreement.
So, we should not approach the granting of PNTR lightly. We should
not grant PNTR without very strong assurances, and preferably something
more than just assurances, that Congress will continue to have a strong
influence in shaping trade relations with a country. For a start, if a
country has not yet acceded to the WTO, the findings and statements of
policy in any PNTR bill should reflect congressional priorities on
trade issues--from meaningful market access, to intellectual property
protection, to labor market standards, to satisfactory resolution of
disputes such as the Russian poultry ban. So, I will be very interested
in hearing from the witnesses what mechanisms and tools they believe
will ensure continuing leverage for the United States and for Congress
should we grant PNTR for the Russian Federation.
Additionally, given that the countries falling under Title IV of
the Trade Act of 1974 are in many cases non-market economies or do not
have well-established market systems, we need to seriously consider
what types of structures we will need to ensure stable trade
relationships with those countries. When we enacted the Trade Act of
1974, we created a special safeguard for trade with non-market economy
countries. We did so out of the realization that a high level of
government interference in an economy, and/or a lack of market
structures, creates the real possibility of large and unpredictable
import surges. We recently re-affirmed that basic logic when we
established a special safeguard in the China PNTR legislation. We need
to give serious consideration to keeping the special safeguard in place
for many of these former Soviet countries until they make substantially
more progress toward creating market economies.
Thank you again, Mr. Chairman.
Opening Statement of the Hon. Benjamin L. Cardin, a Representative in
Congress from the State of Maryland
Mr. Chairman, thank you for holding this hearing today on the
Administration's proposal to graduate Russia from the provisions of
Jackson-Vanik and to extend Permanent Normal Trade Relations (PNTR) to
Russia. I hope the subcommittee will take this opportunity to carefully
examine the human rights and religious freedom record of Russia.
I am privileged to serve as a Commissioner on the Commission on
Security and Cooperation in Europe, commonly known as the Helsinki
Commission. The Commission is an independent U.S. Government agency
created in 1976 to monitor and encourage compliance with the Helsinki
Final Act and other Organization for Security and Cooperation in Europe
(OSCE) commitments. The Helsinki Commission consists of both
Representatives and Senators, as well as liaisons from the Departments
of State, Defense, and Commerce.
When the Helsinki Final Act (HFA) was signed in Helsinki, Finland
in 1975, it enshrined among its ten Principles Guiding Relations
between participating States (the decalogue), a commitment to ``respect
human rights and fundamental freedoms, including the freedom of
thought, conscience religion or belief, for all without distinction as
to race, sex, language or religion'' (Principle VII). The former Soviet
Union was a signatory to the Helsinki Final Act, and Russia acceded to
the Soviet Union's obligations as an OSCE member under the Act upon the
collapse of the U.S. S. R.
In June 2001 the Helsinki Commission held a hearing on ongoing
human rights concerns and religious freedom issues in Russia. Mr.
Chairman, at the outset let me state that Russia has made significant
progress over the last decade in terms of emigration of Soviet Jews,
religious freedom, and human rights. I have also reviewed the reports
issued by the United States Commission on International Religious
Freedom, as well as the United States Department of State reports on
both human rights and religious freedom in Russia. Mr. Chairman, I have
grave concerns about the human rights and religious freedom record in
Russia.
Bearings these extensive hearings and reports in mind, I turn to
the legislation introduced by the distinguished Chairman and
subcommittee Chairman of the Committee, H.R. 3553. The bill states in
part that Russia:
(6) has committed itself, including through exchanges of
letters, to ensuring freedom of religion and preventing
intolerance;
(7) has committed itself, including through exchanges of
letters, to continuing its efforts to return religious property
to religious organizations in accordance with existing Russian
laws.
Mr. Chairman, in my view these letters are inadequate guarantees
that purport to safeguard human rights and religious freedom in the
future. I strongly encourage the Administration--at an absolute
minimum--to engage in a specific dialogue with Russia on human rights
and religious freedom. The Administration should also support an
amendment to the pending legislation to include specific findings and
sense of Congress provisions that would firmly and unequivocally commit
the United States and Russia to continue to engage in dialogue on these
critical issues.
Let me raise a few examples of concerns that I have regarding
Russia's graduation, and I hope that the members of the panels will
address today.
In 1997 Russia passed a comprehensive Religion Law which required,
in part, the registration of religious organizations in Russia. The
U.S. State Department has reported, along with religious groups and
other nongovernmental organizations, that over 2,000 religious groups
face liquidation for failure to re-register under the 1997 law. Dozens
of groups have already been liquidated including several that
apparently are actively functioning. The U.S. State Department has
reported that the Religion Law ``seriously disadvantages religious
groups that are new to the country,'' and also ``provide[s] regional
officials with pretexts to restrict the activities of religious
minorities.''
The U.S. Commission on International Religious Freedom has
expressed its concern about discriminatory laws, policies, and
practices at the local and provincial level. In the Commission's view
local officials have harassed and interfered with the activities of
religious communities, preventing them from constructing, renovating,
or renting suitable places for worship; distributing religious
publications; and conducting religious education. Protestant, Catholic,
and Muslim indigenous believers and foreign missionaries have been
harassed by security officials, denied re-entry visas, and even
expelled, for propagating their faith. One-third of Russia's
constituent regions have enacted legal regulations on religious
activities that are more restrictive than the 1997 Religion Law and
that the Russian federal government believes may violate the
Constitution.
The U.S. State Department reported in 2001 that ``[a]lthough the
Government respected the human rights of its citizens in some areas,
serious problems remain in many areas.'' The report stated that:
Its record was poor regarding the independence and freedom of
the media. Its record was poor in Chechnya, where the federal
security forces demonstrated little respect for basic human
rights and there were credible reports of serious violations,
including numerous reports of extrajudicial killings by both
the Government and Chechen fighters. Hazing in the armed forces
resulted in a number of deaths. There were reports of
government involvement in politically motivated disappearances
in Chechnya. There were credible reports that law enforcement
personnel regularly tortured, beat, and otherwise abuse
detainees and suspects. Arbitrary arrest and detention and
police corruption remained problems. The Government prosecuted
some perpetrators of abuses, but many officials were not held
accountable for their actions. . . . The Government made some
progress during the year with implementation of constitutional
provisions for due process and fair and timely trial; however,
the judiciary continued to lack resources, suffered from
corruption, and remained subject to some influence from other
branches of the Government.
I would again ask our panel witnesses to address these issues
specifically: the Religion Law and its implementation, press freedom,
Chechnya, abuse of detainees and suspects, police corruption, and due
process and rule of law provisions in Russia. On the issue of Chechnya,
for example, the OSCE Parliamentary Assembly has regularly adopted
resolutions that I have authored which have condemned the ongoing human
rights violations in that region by the Russian Government.
Mr. Chairman, I have other concerns about the graduation of Russia
as it relates to the treatment of Jews in Russia. As we will hear from
Jewish organizations today, there has been a marked increase in the
severity and frequency of anti-Semitic incidents. We have witnessed
arson attacks, synagogue and cemetery desecrations, and direct assaults
into Jewish institutions. There is very spotty investigation and
prosecution--at both the local and federal levels--of these hate crimes
against Jews in Russia.
We have also seen that the Russian Government may insert and
involve itself in Jewish intra-communal affairs, such as efforts to
dictate the leadership of particular Jewish organizations. In certain
cases Jewish worshippers and organizations have been subject to illegal
search and seizure and unreasonable and confiscatory taxes. I would
again ask our panel witnesses today to address these concerns.
Let me also briefly comment on the graduation of other former
Soviet republics. I do sincerely hope that the Administration will seek
future approvals from Congress on a country by country basis, so that
Congress can exercise its constitutional authority over trade and
carefully examine the human rights and religious freedom records of the
former Soviet Republics.
Thank you, Mr. Chairman.
Chairman Crane. Thank you.
Today we will hear from a number of distinguished
witnesses, and in the interest of time, I would ask that you
keep your oral testimony to 5 minutes, and we will include
longer written statements in the record.
Now I welcome my colleague, Mr. Lantos. Mr. Lantos, will
you proceed?
STATEMENT OF THE HON. TOM LANTOS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF CALIFORNIA
Mr. Lantos. Thank you very much, Mr. Chairman,
distinguished Members of the Subcommittee. I am honored to have
this opportunity, Mr. Chairman, to testify today on graduating
the Russian Federation from the provisions of the Jackson-Vanik
amendment and granting it permanent normal trade relations.
I request respectfully that my written statement be
included in total in the record.
Chairman Crane. Without objection, so ordered.
Mr. Lantos. Mr. Chairman, let me put my testimony in
perspective. When President Bush returned from his summit
meeting in Shanghai, I was asked by the White House, as the
only survivor of the Holocaust ever elected to Congress, and as
the Democratic founding Chairman of the Congressional Human
Rights Caucus, to lead the effort to repeal Jackson-Vanik. I
agreed to do that because I felt the President needed all the
support we could give him on a bipartisan basis in the post-
September 11 environment. And I very much hope that as we move
along in perfecting this legislation, we will be able to
achieve the President's goal prior to his meeting with Mr.
Putin in Moscow in late May.
Mr. Chairman, the tragic events of September 11 have
presented the United States with a strategic opportunity to
reassess our relations with Russia. We all know the history and
the legacy of Jackson-Vanik. It succeeded in prying open the
iron gates of the Soviet Union. Thousands of persecuted Soviet
citizens were permitted to emigrate during the seventies and
eighties under the pressure of this legislation. But, Mr.
Chairman, Jackson-Vanik has taken on a much greater
significance than simply encouraging free emigration.
This legislation was the first case in which Congress
imposed economic sanctions in order to achieve a human rights
objective, and Jackson-Vanik has come to symbolize our Nation's
commitment to ensuring that human rights in the broadest sense
are a fundamental principle of our foreign policy.
Since the end of the Cold War, the Russian Government has
opened its borders, legal restrictions on emigration have been
lifted, and Russian citizens now migrate and travel freely.
Important progress has also been made in many other aspects of
human rights. Although some human rights issues remain, the
progress on human rights in Russia relative to the Soviet era
has been enormous.
As a result of these developments, the President since 1994
has found Russia to be in compliance with the provisions of
Jackson-Vanik, and waivers have been issued, as provided by
law, so that these sanctions have not been applied to Russia
for almost a decade.
Now the world has been transformed again. President Putin
joined the United States in the struggle against international
terrorism, despite strong domestic opposition, and I want to
pay tribute to the President for his courage. I believe that
the permanent removal of Jackson-Vanik and its Cold War stigma,
a symbolic gesture by the United States, would permit President
Putin to reassure the Russian public, which is wary of his new
pro-Western approach.
At the same time, Mr. Chairman, we must reaffirm to the
Russian Government and to the governments of all other
countries to whom these restrictions still apply that
observance of human rights is an essential element in their
relationship with the United States of America. For this
reason, it is essential that legislation to graduate Russia
from Jackson-Vanik reaffirm our commitment to human rights.
Mr. Chairman, in November 2001, Secretary Powell and
Russian Foreign Minister Ivanov exchanged letters to address
some of the concerns of Members of Congress, religious
organizations, and human rights groups regarding human rights
issues in Russia. In the exchange Foreign Minister Ivanov gave
assurances that the Russian Federation will continue to permit
unfettered emigration, safeguard religious liberties, and
enforce Russian laws against religious intolerance. Although
this exchange of letters is an important step forward, many of
my colleagues, and I must see stronger and more precise
language on restitution of communal property, which includes
religious, cultural, and educational property, nationalized by
the Soviet Union in the twenties and thirties. The Russian
Federation must agree to rescind legislation and procedures for
registering religious organizations or at least give assurances
that it will not be used to obstruct the activities of
internationally recognized religious organizations, including
the Roman Catholic Church, Baptists, Mormons, and others.
Mr. Chairman, I believe that the Russian Federation has
passed good laws against hate crimes, but enforcement of these
laws has been extremely uneven. I was very pleased to hear
President Putin speak out against instances of anti-Semitism
and hate crimes, but, clearly, more needs to be done.
Regional and local officials in Russia must strengthen
enforcement of existing laws and publicly condemn egregious
abuses of human rights and anti-Semitic incidents. Similarly,
local authorities have obstructed or prevented the return to
religious and ethnic minorities of communal property, including
houses of worship. The government in Moscow should indicate a
willingness to help deal with these problems with local
government officials.
It is essential, Mr. Chairman, that the United States
express its intention to pursue human rights issues as part of
our ongoing foreign policy approach to Russia. As part of an
effort to make this point, an informal U.S.-Russian forum to
discuss these issues on a regular basis must be established.
This forum may include, in addition to United States and
Russian Government officials, representatives of private
organizations in both countries with an interest in human
rights and religious issues. This is an important way to
involve American religious and human rights organizations such
as the National Council for Soviet Jews or the U.S. Commission
for International Religious Freedom in dealing with the end of
Jackson-Vanik for Russia.
Russia has experienced greater centralization of authority
and strengthening of the state at the expense of civil society.
This trend has extended to all facets of Russian society,
including the rights of independent trade unions and labor. In
fact, recent Russian legislation seriously diminished workers'
rights. I urge the administration and the Congress to continue
to raise these concerns. Conducting a consistent U.S. policy
toward Russia includes all aspects of human rights, religious
freedoms, and they would honor the legacy of Jackson-Vanik.
I also urge our Administration, Mr. Chairman, to work with
Members on this Subcommittee that have been in the vanguard in
dealing with trade issues, including Mr. Rangel and Mr. Levin,
to ensure that appropriate attention is paid to the economic
aspects of graduation.
Sunsetting Jackson-Vanik sanctions for Russia could be a
rare win-win-win proposition. Russia would benefit from the
lifting of a Cold War stigma. There is nothing Mr. Putin wants
more earnestly than to leave behind this stigma of the Soviet
era. The United States would benefit from closer relations with
Russia as a crucial partner in our global war against
terrorism. And religious and ethnic minority groups
historically targeted for persecution in Russia would benefit
from the reaffirming of a commitment to human rights, religious
freedom, and labor rights.
The Jackson-Vanik, Mr. Chairman, represented one of
America's signal victories in the Cold War, and it marked the
historic milestone in the field of human rights. With the end
of the Cold War and with the prospect of a new strategic
partnership between Russia and the West in our fight against
terrorism, it is only appropriate for Jackson-Vanik
restrictions on Russia to end as well.
Mr. Chairman, I hope that we can work together to modify
the text of H.R. 3553 or introduce new legislation that will
include appropriate language regarding U.S. policy with respect
to the matters I raise today, including an appropriate
reporting requirement so that Congress can be kept abreast of
developments regarding these matters.
Unless we can develop legislation with language reflecting
these human rights concerns, I cannot in good conscience
support the graduation of the Russian Federation from Jackson-
Vanik. I have raised my concern with Dr. Rice, the President's
National Security Adviser, and with Deputy Secretary of State
Armitage. I believe that they understand and fully share my
concerns, and I do believe we can find satisfactory legislative
language. But I repeat, Mr. Chairman, that unless we can reach
such an agreement, I will not support this legislation and will
have to oppose it actively.
Mr. Chairman, I believe this is the only approach to honor
the legacy of our late colleague Senator Henry Jackson and our
former colleague Congressman Charles Vanik and to ensure
continuing progress in Russia on these most crucial matters.
Thank you, Mr. Chairman, for the opportunity to present my
views before your Subcommittee, and I am pleased to answer any
questions you or your colleagues may have.
[The prepared statement of Mr. Lantos follows:]
Statement of the Hon. Tom Lantos, a Representative in Congress from the
State of California
Mr. Chairman, I am deeply honored for the opportunity to testify
today on graduating the Russia Federation from the provisions of the
Jackson-Vanik Amendment and granting it Permanent Normal Trade
Relations (PNTR).
Since the Administration first approached me last fall about
supporting this effort in Congress, I have consulted with my colleagues
in the Congress and with leaders of a number of religious and human
rights organizations about what is needed to move legislation that
would permanently exempt Russia from the provision of the Jackson-Vanik
Amendment. When the Chairman of the Ways and Means Committee, Mr.
Thomas, together with Mr. Dreier and you, Mr. Chairman, introduced H.R.
3553, a bill to extend PNTR to the Russian Federation, I instructed my
staff to work with your staff to ensure that we could draft mutually
acceptable legislation which could be approved by the Congress in time
for the President's summit in Moscow with President Putin in May.
This testimony outlines what I think has been accomplished so far,
and what our next steps should be in order to successfully win
congressional approval for this landmark legislation. I hope that we
can work together to modify the text of H.R. 3553 or introduce new
legislation that would include statements of U.S. policy with respect
to the matters I will be raising today and that would add appropriate
reporting requirements so that Congress can be kept abreast of
developments regarding these matters. I believe this is the best
approach to honor the legacy of Senator Henry Jackson and Congressman
Charles Vanik and to help ensure continuing progress in Russia on these
crucial questions.
The tragic events of September 11th have presented the United
States with a strategic opportunity to reassess our relations with many
of our former adversaries, including Russia. President Putin wisely
sided with the United States in our struggle against international
terrorism, despite strong domestic opposition. The Congress should
explore ways to bolster President Putin's position by revisiting the
need to continue to apply the Jackson-Vanik Amendment to Russia.
This landmark 1974 law was one of the first attempts to link human
rights and trade. Title IV of the Trade Act of 1974 was initially
conceived to establish a framework for U.S. trade relations with
communist countries. However, a key amendment was included that
fundamentally altered the thrust of Title IV from a purely trade focus,
to include consideration of human rights and respect for religious
freedoms. Designed to assist Soviet Jews and other minorities escape
Communist persecution, Jackson-Vanik prohibited normal trade relations
with the Soviet Union and other non-market economies unless they
permitted free emigration.
Jackson-Vanik succeeded in prying open the Soviet Union's iron
gates. Thousands of persecuted Soviet citizens were permitted to
emigrate during the 1970's and 1980's under the pressure of this
legislation. The amendment, however, has taken on a much greater
significance than simply encouraging free emigration. This was the
first case in which the Congress imposed economic sanctions in order to
achieve a human rights objective, and Jackson-Vanik has come to
symbolize our nation's commitment to ensuring that human rights in its
broadest understanding is a fundamental principle of our foreign
policy.
Since the end of the Cold War, however, Jackson-Vanik has lost its
relevance in Russia. The Russian Government has opened its borders,
legal restrictions on emigration have been lifted, and Russian citizens
now migrate and travel freely. In that regard, Jackson-Vanik has been a
resounding and an unqualified success. Important progress has also been
made in many aspects of respect for human rights. Although many serious
human rights issues remain, the progress on human rights relative to
the Soviet era has been substantial.
As a result of these developments, the President since 1994 has
found Russia to be in compliance with the provisions of Jackson-Vanik
and have issued waivers, as provided by law, so that these sanctions
are not applied to Russia.
Last year President Putin has indicated his desire to see Jackson-
Vanik lifted and its Cold War stigma removed. Such a symbolic gesture
would permit President Putin to reassure a Russian public wary of his
new pro-Western approach. In a recent poll, only 48% of Russians
expressed sympathy with the United States and 50% said that the
terrorist attacks ``served Americans right.'' To help Putin overcome
this anti-American sentiment, the Congress should graduate Russia from
Jackson-Vanik.
At the same time, however, since Russia is the state for which
Jackson-Vanik was originally enacted, it is important that as we
graduate Russia from Jackson-Vanik, we reaffirm our commitment to the
human rights provisions that are the foundation of this legislation. We
should reaffirm to the Russian Government--and to the governments of
all other countries to whom these restrictions still apply--that
observance of human rights is an essential element in the relationship
with the United States. For this reason, it is essential that
legislation to graduate Russia from Jackson-Vanik reaffirm our
commitment to human rights.
In November of 2001, Secretary Powell and Foreign Minister Ivanov
executed an exchange of letters to address some of the concerns of
Members of Congress, Jewish organizations, religious organizations, and
human rights groups regarding human rights issues in Russia. In the
exchange Foreign Minister Ivanov gave assurances that the Russian
Federation will continue to permit unfettered emigration, safeguard
religious liberties and enforce Russian laws against religious
intolerance. Although this exchange of letters is an important step
forward, I and my colleagues would have liked to see stronger and more
precise language on restitution of communal property, which includes
religious, cultural, and educational property nationalized by the
Soviet Union in the 1920's and 1930's. We also would have liked to have
the Russian Federation agree to rescind the legislation and procedures
for registering religious organizations or at least give assurances
that it will not be used to prevent the activities of internationally
recognized religious organizations.
Mr. Chairman, I believe that the Russian Federation has passed good
laws against hate crimes, but it has enforced these laws unevenly. I
was very pleased to hear President Putin speak out against instances of
anti-Semitism and hate crimes, but, clearly, more needs to be done.
Regional and local officials in Russia must strengthen enforcement of
existing laws and publicly condemn egregious abuses and anti-Semitic
incidents. Similarly, religious and ethnic minorities have faced
obstacles in reclaiming houses of worship from local authorities. The
government in Moscow should indicate a willingness to help deal with
these problems with local government officials. The U.S. government can
also play a role in this effort. One of the most successful programs
funded by the Freedom Support Act is the Climate of Trust program
designed to enable Russian law enforcement to combat ethnic and
religious intolerance and xenophobia in Russia by providing a sustained
and supported relationship between U.S. and Russian communities, law
enforcement professionals, city administrators, prosecutors, human
rights activists, educators and local media representatives.
It would also be helpful to have the United States express its
intention to pursue human rights issues as part of our ongoing foreign
policy approach to Russia. . As part of an effort to make this point,
an informal U.S.-Russian forum to discuss these issues on a regular
basis could be established. This forum may include, in addition to U.S.
and Russian Government officials, representatives of private
organizations in both countries with an interest in human rights and
Jewish community issues. This is an important way to involve American
religious and human rights organizations, such as the National Council
for Soviet Jews (NCSJ) or U.S. Commission for International Religious
Freedom in dealing with the end of Jackson-Vanik for Russia.
As you may know, in the past two years Russia has experienced what
some would describe as greater centralization of authority and
strengthening of the state at the expense of the civil society. This
trend has extended to all facets of the Russian society, including the
rights of independent trade unions and labor. Recent legislation
enacted by the Duma, at the urging of President Putin, seriously
diminishes workers' rights. I understand that this new law places
restrictions on the ability of independent unions to form and operate,
management involvement in union activities, restrictions on the ability
of unions to address nonpay issues, and complicated and onerous
procedural requirements for strikes. The U.S. embassy in Moscow has
raised concerns about the new law, as well as pre-existing legal and de
facto restrictions on the operation of independent unions, with the
Putin Administration. I urge the Bush Administration, and the Congress
to continue to raise these concerns, including as part of reviews of
Russia's GSP eligibility. Conducting a consistent U.S. policy towards
Russia, that includes all aspects of human rights and religious
freedoms, would honor the legacy of Jackson-Vanik.
I am mindful of the President's proposed visit to Moscow in May,
and I am prepared to do everything in my power to assure that
satisfactory legislation is completed in time to meet the needs for
that summit. I have focused my remarks on the human rights and
religious freedoms issues raised by graduation of Russia from the
Jackson-Vanik amendment. As I said at the outset, Title IV, which
contains the Jackson-Vanik amendment, was of course established to
govern our trade relations with non-market economy countries. I urge
the Administration to work with Members on this Committee that have
been in the vanguard in dealing with trade issues, including Mr. Rangel
and Mr. Levin, to ensure that appropriate attention is paid to the
economic aspects of graduation.
I anticipate that agreement can be reached on these issues, and
when it is, I believe it would be appropriate to celebrate the
graduation of Russia from Jackson-Vanik provisions at a festive event
in Moscow in connection with the summit. I would hope that the official
delegation would include my dear friend and former colleague
Congressman Charles Vanik and the widow of Senator Henry Jackson, who
should be recognized for their outstanding contribution to human rights
and religious freedom. Such an event would help demonstrate that the
Jackson-Vanik legislation, one of the most important pieces of human
rights legislation of the last century, has achieved its purpose.
Sunsetting Jackson-Vanik sanctions for Russia would be a rare win-
win-win proposition. Russia would benefit from the lifting of a Cold
War stigma. The United States would benefit from closer relations with
Russia, a crucial partner in our war on terrorism. And religious and
ethnic minority groups historically targeted for persecution in Russia
would benefit from reaffirmation of human rights, including labor
rights, safeguards.
Jackson-Vanik represented one of America's signal victories in the
Cold War and marked an historic milestone for the human rights
movement. With the end of the Cold War, and with the prospect of a new
strategic partnership between Russia and the West in our fight against
terrorism, it is only appropriate for Jackson-Vanik restrictions on
Russia to end as well.
Thank you, Mr. Chairman, for the opportunity to present my views in
front of your subcommittee today. I would be pleased to answer any
questions from the Members.
Chairman Crane. Thank you, Mr. Lantos.
Now we welcome to the Subcommittee our distinguished
colleague from California, another colleague from California,
Mr. Cox, and any written statements will be made a part of the
permanent record.
STATEMENT OF THE HON. CHRISTOPHER COX, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Cox. Thank you, Mr. Chairman. I thank the Chairman and
the other Members of the Subcommittee for convening this
hearing today.
We are here this morning because, a decade after Russia's
victory over the Soviet Union in the Cold War, Russia remains
subject to Title IV of the Trade Act 1974, including the
Jackson-Vanik freedom of emigration provisions. These
provisions were focused very specifically on Communist systems,
prototypically the Soviet Union itself. And their purpose was
to deny normal trade relations and other economic incentives to
countries that denied their citizens the right to emigrate.
That purpose is today totally opposite from our policy toward
Russia.
Russia's continuing coverage under Jackson-Vanik requires
an annual Presidential determination and a report to Congress
that Russia is not violating freedom of emigration criteria.
Since the collapse of the Soviet empire, these have become
routine because, of course, today Russia's citizens enjoy
complete freedom of emigration.
In 1992, following the collapse of the Soviet Union, Russia
was first for 2 years extended waivers under this law, and
subsequently the President has found Russia repeatedly in full
compliance with the Jackson-Vanik emigration criteria. In
recent months, the Bush administration has repeatedly expressed
its desire, therefore, to repeal this Soviet-era restriction on
our relations with Russia.
Today, Russia's long record of Jackson-Vanik compliance,
the perfect string of Jackson-Vanik compliance findings and
reports since 1994, indicates to me, and I think to the Members
of this Subcommittee that it is high time that the application
of Jackson-Vanik to Russia be terminated.
As you know, Mr. Chairman, I chaired the Speaker's Advisory
Group on Russia, which was tasked with focusing on Russia's
development since the collapse of the Soviet empire,
essentially the period of the Yeltsin administration. The
Speaker formally tasked the leadership of six Committees of the
House to assess the results of U.S. policy toward Russia during
the Yeltsin years.
Along with our colleagues, Representative Ben Gilman, then
Chairman of the International Relations Committee, Porter Goss,
then and now Chairman of the Intelligence Committee, Banking
Chairman Jim Leach, the late Floyd Spence, Chairman of the
Armed Services Committee, and Appropriations Committee Chairman
Bill Young, as well as six other Subcommittee chairmen, we
spent 6 months examining the past decade of U.S.-Russian
relations. And in September of 2000, we released our findings
and our recommendations.
The Advisory Group recommended that the U.S. government
repeal Cold War-era laws that impede relations with Russia. We
recommended that the Committees of jurisdiction, specifically
including the Ways and Means Committee, carefully examine all
aspects of the current statutory framework governing U.S.
relations with Russia, with the intention of removing Cold War-
era restrictions on full and normal U.S.-Russian relations. It
was evident to us then in September of 2000, as it is now, that
a great deal of work has already been accomplished,
particularly with the 1993 Friendship Act, which sought to
remove many of the legal impediments to normal relations
between the United States and Russia. But we found that
Congress had not completed the job. We had not completed the
process of amending the remaining statutory leftovers of the
Cold War.
The Advisory Group also recommended the promotion of
Russia's integration into the world economy. Even today, in
2002, many Russian policies directly or indirectly discourage
foreign investment and international trade. The United States
should encourage Russia to adopt and enforce laws and policies
that will allow her to enjoy the benefits of participation in
the international marketplace. The United States should work
with Russia for the adoption and enforcement of laws and
policies that would enable Russia to accede to the World Trade
Organization under appropriate commercial terms.
The legislation that you are considering today, which will
repeal Jackson-Vanik for Russia, is a direct response to these
recommendations of the Speaker's Advisory Group on Russia.
As you know, the Bush administration has strongly
encouraged your action today. Since taking office, President
Bush has made the improvement of bilateral economic relations
with Russia an important tenet of his Administration's foreign
policy. During last November's meeting with Russian Vladimir
Putin, Bush stated that the United States is committed to
``creating the conditions that will enhance our trade and
investment relations and help Russia reach its economic
potential.'' He added that ``we will work together to build
confidence in the climate for trade and investment between our
two countries, including working together in an effort to
accelerate Russia's WTO accession negotiations.''
To accomplish these goals, the President has asked for the
immediate repeal of Jackson-Vanik for Russia. In November 2001,
the White House released a fact sheet announcing that the
administration had begun consultations with Congress and other
interested groups on the possibility of graduating Russia from
the Jackson-Vanik requirements. The result was the introduction
by the Chairman of this full Committee of the legislation that
we are considering today.
In a House leadership meeting with President Bush
yesterday, he repeated to me and to the others present his hope
that Congress would now remove this Cold War vestige and allow
U.S.-Russian relations to move forward on a new path, as well
as reduce the barriers for Russia's inclusion in international
organizations.
I couldn't agree more with my colleague Mr. Lantos that
during the past 28 years, the Jackson-Vanik has proven to be a
valuable and successful tool in ensuring that human rights,
specifically freedom of emigration but certainly not limited to
freedom of emigration, have been respected. The law was an
extraordinary success in this case in ensuring freedom of
emigration in the former Soviet Union. Since 1975, 573,000
refugees, many of them Jews, evangelical Christians, and
Catholics, from areas of the former Soviet Union have been
resettled in the United States alone. The Russian Jewish
community in the United States today numbers between 750,000
and 1 million, and some estimates run twice as high. An
estimated 1 million more Jews emigrated to Israel during that
time. In today's Russia, the complete freedom of emigration is
unquestioned. For fiscal year 2001, 3,875 refugees from Russia
were resettled.
This legislation is important both for its impact on the
future development of U.S.-Russian relations and on the
development of democracy in Russia. If sanctions are
appropriate when the right to emigrate freely is curtailed,
then it is equally true that there should be recognition for
the consistent respect of that right.
As we have seen throughout Latin America, Eastern Europe,
and Asia, a growing respect for human rights has empowered
citizens to demand their governments be accountable to the rule
of law. Repeal of Jackson-Vanik for Russia is a important step
to signaling U.S. support for Russia's democratic and free
market institutions.
Thank you, Mr. Chairman, for the opportunity to express my
views on this important issue. I understand that Ambassador
Ushakov is also present today, and I join you in welcoming him.
[The prepared statement of Mr. Cox follows:]
Statement of the Hon. Christopher Cox, a Representative in Congress
from the State of California
Introduction
Thank you, Mr. Chairman. I am honored to testify before the
Committee on improving relations between the United States and Russia.
As the members of the Committee are aware, Russia remains subject
to Title IV of the Trade Act of 1974, including the Jackson-Vanik
freedom of emigration provisions. These provisions focused specifically
on Communist systems, prototypically the Soviet Union, and their
purpose was to deny normal trade relations and other economic
incentives to countries that denied its citizens the right of
emigration.
Russia's continuing coverage under Jackson Vanik requires an annual
presidential determination and report to Congress that Russia is not
violating freedom of emigration criteria. Since the collapse of the
Soviet Union, these have become routine, because Russia today enjoys
freedom of emigration.
In 1992, following the collapse of the Soviet Union, Russia was
first extended normal trade relations under a waiver from the Jackson-
Vanik emigration requirements. A waiver was again extended to Russia in
1993. Since 1994, the President has repeatedly found Russia in full
compliance with the Jackson-Vanik emigration criteria. In recent
months, the Bush Administration has repeatedly expressed its desire to
repeal this Soviet-era restriction on our relations with Russia.
Today, Russia's long record of compliance with the emigration
provisions and perfect string of Jackson-Vanik waivers since the
collapse of the Soviet Union indicates that it is time to terminate the
application of Jackson-Vanik.
The Speaker's Advisory Group on Russia
As you know, I had the honor of chairing the Speaker's Advisory
Group on Russia. In March 2000, as Russia prepared for the presidential
election that would formally establish the successor to the Yeltsin
Administration, the Speaker of the House tasked the leadership of six
committees of the House of Representatives to assess the results of
U.S. policy toward Russia during the Yeltsin years.
Along with my colleagues, International Relations Committee
Chairman Ben Gilman, Intelligence Committee Chairman Porter Goss,
Banking Committee Chairman Jim Leach, the late Armed Services Committee
Chairman Floyd Spence, Appropriations Committee Chairman Bill Young,
Conference Vice Chair Tillie Fowler, Joint Economic Committee Vice
Chairman Jim Saxton, Monetary Policy Subcommittee Chairman Spencer
Bachus, Foreign Operations Subcommittee Chairman Sonny Callahan,
Military Research and Development Subcommittee Chairman Curt Weldon,
and House Russian Leadership Program Co-Chairman Roger Wicker, we spent
six months examining the past decade of U.S.-Russian relations. In
September 2000, we released our findings and recommendations.
The Advisory Group recommended that the U.S. government repeal Cold
War-era laws that impede relations with Russia. We recommended that the
committees of jurisdiction in the U.S. Congress carefully examine all
aspects of the current statutory framework governing U.S. relations
with Russia, with the intention of removing outdated Cold War-era
restrictions on full and normal U.S.-Russian relations. Although work
in this area has been accomplished by the 1993 Friendship Act, which
sought to remove many of the legal impediments to normal relations with
Russia, we found that Congress had not completed the process of
amending the remaining statutory leftovers of the Cold War.
The Advisory Group also recommended the promotion of Russia's
integration into the world economy. Today, many Russian policies
directly or indirectly discourage foreign investment and international
trade. The United States should encourage Russia to adopt and enforce
laws and policies that will allow her to enjoy the benefits of
participation in the international marketplace. The United States
should work with Russia for the adoption and enforcement of laws and
policies that would enable Russia to accede to the World Trade
Organization under appropriate commercial terms.
The legislation before you today, which will repeal Jackson-Vanik
for Russia, is a direct response to those recommendations of the
Speaker's Advisory Group on Russia.
Bush Administration Support
Since taking office, President Bush has made the improvement of
bilateral economic relations with Russia an important tenet of his
administration's foreign policy. During last November's meeting with
Russian President Vladimir Putin, President Bush stated that the U.S.
is committed to ``creating the conditions that will enhance our trade
and investment relations and help Russia reach its economic
potential.'' He added that ``we will work together to build confidence
in the climate for trade and investment between our two countries,''
including ``working together in an effort to accelerate Russia's WTO
accession negotiations.''
To accomplish the President's goals, he has asked for the immediate
repeal of Jackson-Vanik for Russia. In November 2001, the White House
released a fact sheet announcing that the Administration had begun
consultations with Congress and other interested groups on the
possibility of graduating Russia from Jackson-Vanik. The result was
your introduction, Mr. Chairman, of the legislation we are considering
today.
In a House Leadership meeting with the President yesterday, he
repeated to me and to the others present his hope that Congress would
now remove this Cold War era law, and allow U.S.-Russia relations to
move forward on a new path as well as reduce the barriers for Russia's
inclusion in international organizations.
Success of Jackson-Vanik
During the past 28 years, Jackson-Vanik has proven to be a valuable
and successful tool in ensuring that human rights, specifically freedom
of emigration, has been respected. The law was an extraordinary success
in securing freedom of emigration in the former Soviet Union. Since
1975, 573,000 refugees--many of them Jews, evangelical Christians and
Catholics--from areas of the former Soviet Union have been resettled in
the United States alone. The Russian Jewish community in the United
States today numbers between 750,000 and one million, and some
estimates are twice as high. An estimated one million more Jews
emigrated to Israel during that time. In today's Russia, the complete
freedom of emigration is unquestioned. For fiscal year 2001, 3,875
refugees from Russia were resettled.
Conclusion
This legislation is important both for its impact on the future
development of U.S.-Russian relations and on the development of
democracy in Russia. If sanctions are appropriate when the right to
emigrate freely is curtailed, then it is equally true that there should
be recognition for the consistent respect of that right.
As we have seen throughout Latin America, Eastern Europe, and Asia,
a growing respect for human rights has empowered citizens to demand
their governments be accountable to the rule of law. Repeal of Jackson-
Vanik for Russia is an important step to signaling U.S. support for
Russia's democratic and free market institutions.
Thank you, Mr. Chairman, for the opportunity to express my views on
this important issue.
Chairman Crane. Thank you, Mr. Cox.
Mr. Levin.
Mr. Levin. Thank you both for excellent testimony. Let me
just make a brief comment. I think the challenge is, in a
sense, how to put the two of your testimonies together.
Mr. Lantos. Could you speak into the mike?
Mr. Levin. I think the challenge is how to put your two
testimonies together that are similar but not identical. And in
that regard, I very much agree with the need to continue to
improve our relationship with Russia and to recognize the
changes that have occurred there. I very much agree with that.
I only suggest that we remember what the original purpose
of the 1974 Act was, and that was to begin to ease trade
relations between then the East and the West. And Jackson-Vanik
was an amendment to that. So the 1974 Act was an effort to
begin to develop economic relationships between these economies
in these countries with very different structures. And,
therefore, included within the 1974 Act as originally written
were provisions like: How do you handle trade relations with a
non-market economy (NME)? How do you handle issues like surges?
And there was a specific provision on that.
And so while Russia has moved away from the command economy
market, and in some respects substantially, there remains the
issue of how we are going to handle those trade relations with
still two quite different structures; and also, as Mr. Lantos
has pointed out so well, how we are going to keep very mindful
the need for Russia to improve, to continue to improve its
human rights approaches.
So I think those are challenges that are not identical, and
we need to find a way to address both sets of concerns. And I
am hopeful we can do that. I don't think we will do it by
ignoring either of them, but essentially by finding ways to
meaningfully address them.
So I don't think there is a difference of opinion about the
need to respond to the changes that are going on in Russia and
to encourage them and build stronger relationships. The
question is the structures within which that occurs. And in
doing so, I think we have to remember the original purposes of
the 1974 Act as well as the thrust of Jackson-Vanik, which has
had true success.
Thank you.
Chairman Crane. Thank you.
Mr. Becerra.
Mr. Becerra. Thank you, Mr. Chairman. Thank you to our two
friends and colleagues for their testimony, and I think for the
most part you are going to find that Members on this
Subcommittee agree with the central focus of the two comments
that Russia has certainly made some progress and certainly all
of us would love to see it graduate from the Jackson-Vanik
restrictions.
I would like to ask a question--oh, before I say that, Mr.
Lantos, you mentioned in your testimony, written, at least,
that perhaps Mr. Vanik and the widow of Congressman Jackson
should perhaps be invited to attend any ceremonies that might
take place when President Bush visits Russia and President
Putin. And I would also suggest that--perhaps you were a little
too modest, and I would suggest that perhaps Congressman Lantos
also be invited by President Bush to attend because, if there
has been a champion since 1974 on some of these issues,
especially for Soviet Jewry in Russia and the greater Soviet
empire at the time, it was certainly Tom Lantos. So I would
hope that you would not neglect to add the name Tom Lantos, if
you should write any letter urging the President to invite some
important Americans to visit the country with him.
I would like to touch on one particular point. Recently,
the Russian Duma passed some labor reform laws, and from what I
can tell, it appears that those changes may have actually
weakened the rights of individual workers and perhaps made it
more difficult for collectively workers to enforce their rights
and have a position, an equal bargaining or as close to an
equal bargaining position vis-`-vis the employers. And I am
wondering if either of you would like to comment on whether or
not the administration should receive legislation from this
Congress that would graduate Russia which includes some
specific language that details what we would like to see Russia
do with regard to human rights and, within that, labor rights.
Mr. Lantos. Let me first commend you, Congressman Becerra,
for raising this issue. I think the changes in what used to be
the Soviet Union and is Russia today are nothing short of
cataclysmic. And I certainly didn't expect in my lifetime to
see the implosion of the Soviet Union and to see the initially
embryonic but increasingly more and more robust development of
democratic institutions in Russia, with perhaps the single
exception of the media.
I fully agree with you. I think it is remarkable what the
Russians have done, but I think it is also important for us to
realize that, given the czarist tradition of centuries and the
Soviet tradition of 70 years, a democratic society is a long
ways from functioning in the Soviet Union. Therefore, whatever
we can do to specifically strengthen labor rights in addition
to human rights and religious freedom in this legislation and
to make it part and parcel of the monitoring process that I
suggested to Dr. Condolezza Rice, the establishment of an
informal forum on human rights should also include the
observance of labor rights. I fully agree with your comments.
Mr. Becerra. Thank you.
Mr. Cox. If I might just add, I think the main point has
been expressed by several here--Representative Levin, yourself,
Mr. Lantos, perhaps others before I arrived. It is a very
simple thing. Russia today is no longer a Communist country. It
is not a police state. It is not the ``prison of nations,'' to
use Lenin's words, that it once was. That is not, however, to
say that it doesn't have all sorts of transitional issues as it
seeks to accomplish what has never been accomplished before,
transition from such a Communist police state, an empire, into
a nation and indeed a neighborhood of nations that are free and
democratic.
The free press remains in question in Russia. Transparency
in regulation hasn't yet been achieved. Private property rights
remain in question. Labor rights remain in question and so on.
And all of these things deserve the attention of Russia's
leaders and our own.
The framework within which those attentions are paid,
however, should be a framework that is similar in every major
respect to that applied to our other friends and allies around
the world, many of whom have human rights issues. And it is
this unique distinction that Russia still labors under, which
was manufactured not for it but for the Soviet Union that we
seek to repeal here today.
Mr. Becerra. I thank you for your comments. Mr. Chairman, I
thank you for the time. I just want to make sure I add this
last caveat.
When we talk about labor rights and what we would like to
see done, certainly I think all of us recognize the progress
that Russia has made and the Russian Federation has made, and I
don't think any of us are wishing to impose upon Russia or
anyone else our standards or what we believe. But certainly
there are some core labor standards that exist internationally
that we can all agree upon that we can all try to meet, and I
think we speak in terms of what is internationally recognized
as the rights of workers and certainly work with Russia in
regards to that, and hopefully we do see something in the
legislation itself, the language of the legislation to address
those concerns.
Thank you, Mr. Chairman.
Chairman Crane. Thank you.
Mr. Cardin.
Mr. Cardin. Let me thank both of our colleagues for their
excellent testimony.
Mr. Lantos, I particularly want to thank you for bringing
out the history of Jackson-Vanik, that it is more than just the
emigration of Jews, that it is one of the finest hours in the
history of our Nation as we led the world in saying that if you
want to do normal business with the United States, there are
certain minimum human rights standards that you must adhere to.
And the United States has sometimes been alone in this battle.
There are a thousand reasons you can come up with why you
shouldn't use trade or economic issues when you are dealing
with human rights issues. It seems like that for the rest of
the world human rights has always been at the bottom on the
list of those issues that are important. And you have stood for
the importance of human rights in dealing with the United
States, and I really applaud you throughout your entire career
for making that the highest priority.
We use other mechanisms. We used in South Africa direct
sanctions, and it worked. And the rest of the world said it
wouldn't, and it did. And they finally joined us.
So I guess one issue that I want to ask you about is, as we
start to graduate nations from Jackson-Vanik and grant
permanent normal trade relations, I would hope that we would
have an affirmative policy in this country to say that there
will be other ways in which we will use U.S. economic presence
to make sure that basic human rights standards are adhered to
by nations that want to trade or do business with the United
States. And I just really wanted you to comment on that. I hope
that we don't mean by the graduation from Jackson-Vanik that
that is the end of the U.S. interest on human rights records if
you want to do normal business with the United States.
Mr. Lantos. Well, first, let me thank you for your
comments, Congressman Cardin.
I fully agree with you. I think the proposal that I made to
Dr. Rice is a modest, reasonable, and readily acceptable
proposal. I do not believe that there is any objection on
Russia's part to accepting this proposal. As a matter of fact,
the democratic forces in Russia welcome informal monitoring and
the establishment of binational commissions that deal with
these issues.
It is clearly in the best interests of the Russian people
for us to continue to observe how human rights are respected in
Russia. My feeling is that with very little good will on all
sides, the criteria and the conditions that we outlined to the
National Security Adviser can be incorporated in this
legislation.
I very much hope that President Bush and President Putin
will have a festive meeting in Moscow when Jackson-Vanik is
recognized as a great achievement which has succeeded in
accomplishing its goals. But I think it would be a very serious
oversight on our part if we would merely sweep under the rug
the need for continuing monitoring and continuing discussion
with our Russian friends on these issues.
Mr. Cardin. Well, I certainly agree with your position, and
I look forward to working with you and hopefully we can resolve
this issue in an amicable way.
Thank you, Mr. Chairman.
Mr. Lantos. Thank you very much.
Chairman Crane. I want to express appreciation to both of
our distinguished colleagues from California for making their
presentations today. And with that, you are relieved of further
duties. We thank you.
I would now like to invite our second panel: the Honorable
Peter Allgeier, Deputy U.S. Trade Representative (USTR); and
the Honorable Alan P. Larson, Under Secretary for Economic,
Business, and Agricultural Affairs, U.S. Department of State.
Gentlemen, if you will take your seats and proceed in the
order I introduced you, and try and keep your oral testimony to
5 minutes or less. Those little lights give you a green light,
yellow light, and red light. All written statements, though,
will be made a part of the permanent record.
And with that, Ambassador Allgeier, you may proceed.
STATEMENT OF THE HON. PETER ALLGEIER, DEPUTY UNITED STATES
TRADE REPRESENTATIVE
Mr. Allgeier. Thank you very much, Mr. Chairman, and thank
you, Congressman Levin and the other Members of the
Subcommittee, for inviting me to testify today on this
important subject of termination the application of Jackson-
Vanik to Russia. I will summarize my testimony and ask that the
full testimony be submitted for the record.
The United States certainly has begun a new era in its
relations with Russia. Whether in the realms of security or
foreign policy or economics, President Bush has emphasized the
need to move beyond Cold War strictures and stereotypes. As he
said in November during his meeting with President Putin,
``we're working together. . . . to establish a new spirit of
cooperation and trust'' and working together ``to make the
world more peaceful.''
As a concrete manifestation of this new relationship and
moving beyond the outdated stereotypes, the President has urged
the Congress to end Jackson-Vanik's application to Russia. In
the first instance, the amendment has served its purpose.
Russia has been in full compliance with Jackson-Vanik's
emigration provisions since 1994. Second, continued application
of Jackson-Vanik will impede our efforts to work together
because it will be an indication to Russia that they continue
to be suspect and viewed almost as a Cold War adversary.
I will focus, Mr. Chairman, on the economic front. There
the Russians have made great strides in reforming their
economy. A key part of Russia's broader economic reform program
is achieving the standards that are necessary for membership in
the World Trade Organization, and I would like to emphasize it
is not just Membership; it is achieving the standards, the
requirements, and adhering to the obligations that are
necessary for Membership.
President Putin has made WTO Membership and integration
into the global trading system a top priority. We, of course,
support Russia's efforts to promote economic reforms, to
establish the rule of law in commerce, and to adopt and enforce
the WTO commitments for a more open economy.
Let me add quickly that as we intensify our efforts to work
with Russia on WTO accession, this does not mean that we will
welcome Russia's entry into the WTO on just any terms. We are
negotiating intensively and aggressively with Russia to
increase market access for U.S. exports--manufactured goods,
agricultural products, and services--and we will work with the
other Members of the WTO and, of course, with Congress to
ensure that the Russian Government implements the many rules of
the WTO.
Recently, the WTO produced the initial text of a draft
Working Party report on Russia's accession. This is an
important step forward in Russia's WTO accession process, and
it provides the framework for recording Russia's progress in
adopting the WTO provisions and making the changes in its
domestic laws and regulations that are required to adhere to
those provisions, and for identifying the areas in which
additional work is needed, and for resolving those issues. So
this is the framework in which the countries proceed with the
accession process in the WTO.
This report was circulated April 2nd. We are reviewing it
carefully, and all the Members of the Working Party will
convene in late April to have an initial reading, a first
reading of this, and to provide an assessment, an initial
assessment of what more Russia needs to do with its laws and
its other measures to come into compliance with the WTO.
We have been consulting regularly with Congress throughout
Russia's WTO accession. This is a formula that has proven
successful in the past in other accession negotiations. We look
forward to continuing to consult closely with the Congress and,
in particular, with this Subcommittee as we go through the
accession negotiations and the process of drafting Russia's WTO
protocol and its other commitments.
Obviously there has been growing attention by the Congress
and by domestic interests, economic interests in the United
States with the accession process, particularly, I would say,
by the agricultural community, but not exclusively. As we have
conducted our consultations with the Congress and with the
domestic economic interests, we believe even more strongly that
we have a common view of the objectives for our accession
negotiations.
In agriculture, let me say that these objectives are shared
not just by the Congress but also by many of our trading
partners who are active in the accession process: Australia,
Canada, Argentina, Brazil, and New Zealand, for example.
In agriculture, we are pursuing commitments on market
access, on sanitary and phytosanitary (SPS) procedures, on
limiting agricultural support, and also ultimately eliminating
export subsidies.
Let me mention the area of food safety and SPS. It is
extremely important that these measures not be used for
protectionist purposes. We attach great importance to resolving
these issues in the course of accession and issues that we
encounter in the meantime. We have a real-life example of the
importance we attach to this. Unfortunately, Russia has failed
to date to eliminate the ban on poultry and poultry products.
We believe very strongly that we are in compliance with the
standards of food safety. We have worked very hard at extremely
high levels, at the Cabinet level, and the President has
emphasized the importance of resolving this immediately. Our
team is in Russia even today working to resolve that as quickly
as possible.
Additional negotiations in the WTO obviously involve access
for manufactured goods. Among the areas that we are working on
particularly are civil aircraft, fertilizer that you mentioned,
Mr. Chairman, in your statement, construction equipment, and
also in services, important services such as financial
services, telecommunications, and distribution. I should also
mention intellectual property is an important objective.
So we intend to obtain the highest level of commitments
from Russia with respect to the adoption of WTO rules,
guarantees of meaningful market access in goods and services,
and enforcement of the rule of law in trade.
I want to mention that the rule within the WTO is
consensus, and the Russians will need to obtain the consensus
of all the Members, including the United States, in order to
have a successful protocol of accession. That ensures that our
concerns not only will be heard, but that we have sufficient
leverage to resolve the full range of issues presented by
Russia's trade regime.
We look forward to working, as I said, with the Congress as
we move to complete this process, and we believe that ending
the application of Jackson-Vanik will provide increased
momentum to Russia's broad economic reform program and will
encourage Russia to make the changes necessary to join the
international trading community.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Allgeier follows:]
Statement of the Hon. Peter Allgeier, Deputy United States Trade
Representative
Ambassador Robert Zoellick has said in previous testimony before
this Committee, and as my colleague Under Secretary of State Alan
Larson emphasized this morning, the United States has begun a new era
in its relations with Russia. Whether in the realms of security,
foreign policy, or economics, President Bush has emphasized the need to
move beyond Cold War strictures and stereotypes. As the President said
in November during his meeting with President Putin, ``we're working
together to break the old ties, to establish a new spirit of
cooperation and trust so that we can work together to make the world
more peaceful.''
To close out the history books of the Cold War, the President has
urged the Congress to finally end Jackson-Vanik's application to
Russia. The Jackson-Vanik Amendment was drafted twenty-eight years ago
to bring about free emigration. We believe that the Amendment has
served this purpose in Russia--Russia has been in full compliance with
Jackson-Vanik's emigration provisions since 1994. Continued application
of Jackson-Vanik, however, is an indication to Russia that they
continue to be suspect and viewed as a Cold War adversary.
On the economic front, the Russians have made great strides, as
they work to significantly reform their economy. A key part of Russia's
broader economic reform program is achieving membership in the World
Trade Organization (WTO). President Putin has made WTO membership and
integration into the global trading system a top priority, seeing this
as part of Russia's economic reform program that is aimed at achieving
sustainable growth, promoting high-tech industry, attracting
international investment, and raising living standards for the Russian
people. These efforts need to include action by the Russian Duma to
establish an effective legal infrastructure for their economy as well
as commitments that establish the parameters of liberalized market
access in Russia for imported goods and services. USTR has been
actively engaged in Russia's negotiations to join the WTO. We will
continue to support Russia's efforts to promote economic reforms,
establish the rule of law, and adopt WTO commitments for a more open
economy.
Of course, intensifying our efforts to work with Russia on WTO
accession does not mean that we will welcome Russia's entry into the
WTO on any terms. We are negotiating with Russia to increase market
access for U.S. exports--in goods, services and agriculture--and we
will work with other WTO members and the Congress to ensure that the
Russian Government implements the many rules of the WTO. Russia must
follow through with its stated plans to make comprehensive changes to
its legal and regulatory system in a number of areas--standards,
customs practices, sanitary and phytosanitary measures, and protection
of intellectual property. Some of these changes are already underway,
but it is up to the Russian Government to pass new laws and ensure that
the laws in place are fully enforced in a manner consistent with the
international trading system.
Last fall, responding to Russia's efforts to adopt the rules of the
WTO and liberalize its trade regime, WTO members decided to produce an
initial text of a draft Working Party report on Russia's accession.
This is an important step forward in Russia's WTO accession process and
will provide a framework for recording Russia's progress in adopting
WTO provisions and for identifying areas in which further work is
needed. This draft report was circulated to WTO members on April 2, and
we are in the process of reviewing it very carefully. Later this month,
we and other members of the Working Party will meet at the WTO for a
``first reading'' of this draft and for an initial assessment of what
more needs to be done to bring Russia's laws and other measures into
compliance with the rules of the WTO. Over the upcoming months, we will
be working with the Russian Government--in cooperation with the EU and
our other WTO counterparts--to establish and record the areas in which
Russia has implemented WTO rules and to identify and address the
remaining outstanding issues in Russia's draft Working Party report. We
have been consulting regularly with Congress throughout Russia's WTO
accession, and we look forward to continuing to consult closely with
the Congress and this Committee in particular throughout the accession
negotiations and the process of drafting Russia's Working Party report.
Since we began work on Russia's accession, we have maintained open
communication with you and with the full range of U.S. interests. I
believe that we have a good track record in working with you in the
development of our negotiating positions on all WTO accessions. Our
experience with Russia is no exception.
Over the past few months there has been increased attention by the
Congress and certain domestic economic interests, in particular the
agricultural community, regarding Russia's WTO accession negotiations.
We have met with the agricultural community on several occasions over
the past few months to discuss the various agricultural issues involved
in these negotiations. These meetings have left us with an even
stronger conviction that we share a common view of the objectives for
agriculture in these negotiations. It is worth noting that many of the
issues of interest to our agricultural community are shared, not only
by the broader U.S. trade community, but by a number of Russia's other
trading partners as well, e.g., Australia, Canada, Argentina, Brazil
and New Zealand.
As with other WTO accession negotiations, in Russia's case we are
seeking commitments that will provide meaningful market access
improvements for U.S. agricultural and food products and that will
address the unjustified use of food safety or other non-tariff measures
as barriers to trade. These efforts support Russia's broad internal
program to reform its agricultural sector along market principles.
We have also been engaged in intensive negotiations with Russia on
tariff and non-tariff market access for industrial goods and services.
While we have made some progress in these negotiations, we continue to
consult closely with our industry advisors and Congressional staff on a
full range of issues, including in areas such as civil aircraft,
fertilizer and construction equipment. In the services area, we are
continuing to push hard for increased access in telecommunications,
distribution and financial services.
Every Administration since the inception of the WTO has had a good
track record of setting the highest standards for new entrants to the
WTO. We intend to continue to seek the highest level of commitments
from Russia with respect to the adoption of WTO rules in its trade
regime, the provision of guarantees of meaningful market access in
goods and services, the establishment of limits on agricultural
supports, and the enforcement of the rule of law in trade. The
requirement that we and other WTO members reach a consensus on the
terms for Russia's WTO accession guarantees that our concerns will be
heard.
We would like to work with you to continue to move our relationship
with Russia into a new and more cooperative era. Ending application of
Jackson-Vanik will provide increased momentum to Russia's broad
economic reform program. It will send a positive message at a moment
when Russia is poised to make changes necessary to join the
international trading community.
Chairman Crane. Thank you, Mr. Allgeier.
Mr. Larson.
STATEMENT OF THE HON. ALAN P. LARSON, UNDER SECRETARY FOR
ECONOMIC, BUSINESS, AND AGRICULTURAL AFFAIRS, U.S. DEPARTMENT
OF STATE
Mr. Larson. Mr. Chairman, Mr. Levin, and respected Members
of the Subcommittee, it is a great honor to be here. The reason
I am here today is because President Bush and Secretary Powell
strongly support ending the application of Jackson-Vanik to
Russia.
Our relations with Russia no longer can be seen as a legacy
of the Soviet Union. President Bush and President Putin are
building a new relationship based on cooperation and shared
interests. Breaking with the patterns of the past, President
Putin has taken steps that have enhanced our own security,
moved Russia closer to a market economy, and reaffirmed
Russia's commitment to respect human rights and basic freedoms.
We also need to break with the patterns of the past. We
need to demonstrate that we are ready to work with Russia as an
equal partner, and the time has come to end Jackson-Vanik's
application to Russia.
The Jackson-Vanik's original goal focused on promoting free
emigration from the Soviet Union, and Jackson-Vanik achieved
that goal, in large part because of the moral authority of our
position. Since 1973, more than half a million refugees, many
of them Jews, evangelical Christians, and Catholics, have
emigrated to the United States, and in that same period, more
than 1 million Jews have emigrated to Israel.
In the strategic and foreign policy arena, we are on the
threshold of a new relationship. For example, President Putin
has offered broad, strong, and tangible support for the war on
terrorism. President Putin has accepted our offer to reduce
operationally deployed nuclear weapons to between 1,700 and
2,200. He has opened the way to a closer, North Atlantic Treaty
Organization, NATO-Russia relationship. He has closed the
intelligence facility at Lourdes, Cuba, and the military base
at Cam Ranh Bay, Vietnam. He has been working with us to try to
quell tension in the Middle East and create lasting peace in
the Balkans. Just yesterday, the Foreign Minister of Russia
joined the Secretary-General of the United Nations and the
leaders of the European Union (EU) in expressing support for
Secretary Powell's mission in the Middle East.
President Putin has also been carrying out a series of
economic reforms, and we are actively working with the Russian
Government to accelerate and deepen them in order to bring
greater prosperity to the Russian people, open new
opportunities for American traders and investors.
Russia is committed to fulfilling the accession
requirements of the WTO, and we are committed to ensuring that
Russia does not enter the WTO until it has met these admission
requirements.
In watching Russia move away from the Soviet era, we have
witnessed a revival of religious life, marked by the
restoration of synagogues, churches, and religious schools.
President Putin has stated that Russia is a multi-ethnic state
in which the right of all must be protected, and he has
declared that while anti-Semitism may still exist, there is no
justification for it, nor can there be.
As Mr. Lantos indicated, over the last 13 years very, very
significant progress has been made on human rights. Ending
Jackson-Vanik's application to Russia will not end our ongoing
dialog on human rights. As President Bush stated, ``My
Administration is fully committed to work with Russia to bring
about progress in human rights, including safeguarding of
religious liberty, enforcement of hate crime laws, and the
restitution of religious community property.'' And I can report
that progress is being made on the return of religious and
communal property.
Among the areas where more work needs to be done is on
Russia's new labor code. While it has some positive elements,
we are pushing for further revisions that would increase the
democracy, transparency, and accountability of labor relations
in Russia.
Mr. Chairman, the Soviet era has ended. Russia has been in
compliance with Jackson-Vanik since 1994. Ending Jackson-
Vanik's application to Russia is the right thing to do, and now
is the right time to do it.
Thank you.
[The prepared statement of Mr. Larson follows:]
Statement of the Hon. Alan P. Larson, Under Secretary for Economic,
Business, and Agricultural Affairs, U.S. Department of State
Mr. Chairman, Congressman Levin, respected Committee members, I am
delighted to be here today with my colleague Peter Allgeier from USTR.
The President and Secretary Powell urge and deeply appreciate your
support for terminating the application of Jackson-Vanik amendment of
the 1974 Trade Act to Russia.
After the end of the Soviet Union, much of our relationship with
Russia was colored by the Soviet legacy. Gradually that legacy has
passed and today only a bits and pieces of it remain. This
Administration recognizes that a new relationship is taking shape: a
relationship that is expanding cooperation between our two countries,
enhancing our national security, supporting further development of the
market economy in Russia, and strengthening democracy and human rights
protection.
As Secretary Powell has said, the Administration has made
remarkable progress in developing a new relationship with Russia.
Russia has taken significant steps before and since September 11 to
strengthen ties with the West and assist the U.S. in many critical
areas. We need to affirm that President Putin has made the right
decisions in pursuing a partnership with us.
Russia has come very far forward since the fall of the Soviet
Union. It is no longer the enemy, the President reminds us. As we put
the relics of the Cold War behind us, the President strongly urges
Congress to graduate Russia now from Jackson-Vanik.
This amendment was created to bring about free emigration in the
Soviet Union and foster broader human rights reforms with Russia. That
objective has been accomplished. Jackson-Vanik also began a process
which elevated human rights to an integrated element of our foreign
policy. Graduating Russia from Jackson-Vanik now is the right thing to
do.
Terminating Jackson-Vanik's application to Russia will bolster a
new political, strategic and economic bilateral relationship.
President Bush wants to send President Putin a signal is that the
United States is a reliable partner. In Washington last fall, the
President expressed to President Putin his commitment to work with the
Congress in seeking Russia's graduation from Jackson-Vanik. We believe
now is the appropriate time to take this step, and we ask for your full
support.
Emigration
The principal goal of the Jackson-Vanik legislation in 1974 was to
promote free emigration from the Soviet Union, particularly for Soviet
Jews.
We do not forget the oppression of Soviet citizens-including
religious minorities. In the spring of 1972, the Soviet government
imposed an ``education tax'' on would-be emigrants. This tax was so
steep that few could afford to depart the Soviet Union. It was against
this background that Senator ``Scoop'' Jackson teamed up with
Congressman Charles Vanik to attach their historic amendment to the
1974 Trade Act. Jackson-Vanik has been a tremendous success.
Restrictions on emigration from Russia have ended. Today, the Russian
Constitution grants the right to Russian citizens to emigrate. This
right is readily exercised.
Since Jackson-Vanik came into effect in 1975, 573,000 refugees--
many of these Jews, evangelical Christians and Catholics--have
resettled from the Soviet Union to the United States. Since the passage
in 1989 of the Lautenberg Act, almost 235,000 Jews from the Soviet
Union and its successorstates have resettled in the United States.
Today, the Russian Jewish community in the United States numbers
between 750,000 and 1 million, though some estimates are twice as high.
Since 1975, another one million Russian Jews have immigrated to Israel.
In perhaps one of the most telling reversals of political fortune,
Natan Sharansky--once a ``refusenik'' imprisoned by Soviet
authorities--has, as one of Israel's Cabinet Ministers, met with
President Putin in Moscow. Sharansky himself now favors terminating the
application of Jackson-Vanik to Russia.
The only emigration restrictions that remain today in Russia relate
to those who have had access to state secrets. Russian legislation
permits delays of up to five years, with the possibility of a five-year
extension, on those with access to classified material. This law,
however, has been applied only in a small number of cases. Moreover,
Russian legislation provides for an appellate process; that process has
found in favor of the emigre in the large majority of cases.
Let me turn to the broader context of U.S.-Russian relations.
Strategic and Foreign Policy
We are building a new bilateral relationship with Russia. President
Putin has willingly reversed former Soviet (and early post-Soviet)
positions. He has chosen a course designed to make Russia a leading and
responsible part of the international community. The active nature of
U.S.-Russian cooperation over the past few months would have been
unthinkable at the time of the 1974 passageof the Jackson-Vanik
Amendment.
Under President Putin, Russia has:
Offered extensive support in the global campaign
against terrorism: information-sharing, overflight clearance
for U.S. aircraft, and search and rescue assistance. Contrary
to what many Western analysts would have predicted, President
Putin has posed no objections to the stationing of U.S. forces
in Central Asia or a U.S. ``Train and Equip'' program for
Georgia to fight terrorism.
Accepted our offer of parallel reductions in
operationally-deployed nuclear warheads to the lowest levels in
decades: down to between 1,700 and 2,200.
Accepted our decision to move beyond the ABM Treaty
and demonstrated more openness to our arguments on missile
defense.
Opened the way to a closer NATO-Russia working
relationship, and dropped past strident Russian objections to
NATO enlargement.
Coordinated with us and closely supported the U.S.
position on the Middle East.
Announced the closing of Russia's massive
intelligence facility at Lourdes, Cuba and withdrawal from the
Cam Ranh naval base in Vietnam.
Cooperated with us in the Balkans as we continue
efforts to promote a lasting settlement and stable, democratic
development.
Maintained dialogue with us on Iraq, opening the way
for UN Security Council agreement on a Goods Review List to
streamline and make more effective the sanctions regime.
Sustained oil production despite pressure from OPEC
to make cuts and boost prices, thus helping to sustain a
moderate global price.
Economy
In the economic sphere, we also enjoy a dynamic, productive
relationship with Russia. The relationship stands in stark contrast to
what existed during the Soviet period. But key economic reformers are
under fire from some in Russia who do not understand the wisdom of
integrating into the global economy; these reformers look for our
support.
We believe President Putin is committed to meaningful economic
reform, and we are engaged actively to help Russia to accelerate and
deepen its reforms. Those reforms will promote stability and prosperity
for the Russian people--objectives very much in the U.S. national
interest--as well as open new markets for U.S. business and create a
more attractive climate for U.S. investors.
Let me illustrate some of the changes in the economic situation in
the past decade.
President Putin has recognized that small and medium size
enterprises (SMEs) are a key source of growth and employment, and has
publicly committed to create conditions that allow SMEs to flourish,
many spurred by American training or American partners.
Russia welcomes joint ventures and other investments by non-Russian
firms. Although foreign direct investment (FDI) in Russia is
proportionately low compared to many other countries, it is beginning
to grow and American firms account for the leading share, 35 percent,
of total cumulative FDI.
Americans have invested in Russia in a range of economic sectors
throughout the regions of Russia. For example, Ford Motor Company is
investing $150 million to produce the Focus car chassis in Leningrad
oblast.
General Motors is investing $330 million dollar to build the Niva
sport utility vehicle under the Chevrolet name.
Lockheed Martin, Boeing, and United Technologies are among those
expanding cooperation and coproduction with Russia's aerospace
industry.
The Caspian Pipeline Consortium, led by Chevron Texaco and Exxon
Mobil, has built the one thousand mile-long Tengiz-Novorossiysk
pipeline investing some $2.2 billion in Russia.
Exxon Mobil has announced a $4.7 billion commitment to Phase-I
development of the Sakhalin-I offshore project which could total $12
billion.
The U.S.-Russia Business Dialogue initiated at the June 2001 Summit
and the Banking Dialogue have brought together leading American and
Russian private-sector managers to make recommendations on how to
changes laws and regulations which hamper trade and investment, and
ways to strengthen the rule of law. The recommendations developed by
these business leaders will be presented to President Bush and
President Putin for consideration and action.
WTO Accession
I defer to Ambassador Allgeier to discuss Russia's efforts and
progress on WTO accession. It is clear that Russia still has a great
deal of work to do and will not accede precipitously to the WTO.
Nevertheless, I believe that we have the ability--given Russia's
commitment to reform, our new partnership with Russia and the personal
relationship established between Presidents Bush and Putin--to work
through WTO accession issues and resolve other trade problems
effectively with Russia, to the benefit of American farmers, workers,
consumers, and investors.
Trade issues arise, as they do with all countries. With Russia, our
much stronger political relationship now strengthens our ability to
resolve them in a constructive, cooperative and businesslike fashion.
This has been the case in addressing our concerns on steel and those of
Russia on poultry.
Human Rights/Religious Minorities
Since the end of the Soviet Union, we have sought a relationship
with Russia based on shared values. Among these is a fundamental
respect for human rights. We still have significant concerns about
human rights issues in Russia, but clearly, Russia has shed the worst
features of the Soviet past.
Personal freedoms, such as freedom of religion, assembly and
speech, have expanded greatly. And reforms continue. Recently enacted
Russian legislation will--when implemented--limit the power of
prosecutors, mandate jury trials throughout the country and create a
more adversarial judicial process, as well as strengthen the
independence of the judiciary. We will remain watchful that these gains
are not rolled back. We will work with Russia--its government and its
people--so that the expansion of personal freedoms continues and the
legal mechanisms meant to protect human rights are strengthened.
While further progress is necessary, much already has been
achieved:
We have witnessed a revival of religious life and traditions
throughout Russia. Even with current problems, Russia is freer than at
any time in history.
There is a renaissance of synagogues and religious schools, whether
Hasidic, traditional Orthodox or Reform. President Putin has reached
out to the Jewish Community and spoken out against anti-Semitism,
declaring that Russia is a multiethnic state where the rights of all
must be protected. Across all faiths in Russia, there has been
progress, which we are working to expand further, in the return of
religious and communal property.
President Putin and others in his government have reaffirmed their
commitment to uphold legal and regulatory provisions throughout Russia
to safeguard religious freedoms. In his recent Rosh Hoshannah message
to the Jewish Community, President Putin wrote ``Unfortunately, we
still encounter some manifestations of anti-Semitism. There is no
justification for them, nor can there be.''
And, as Foreign Minister Ivanov wrote in his November 13th letter
last year to Secretary Powell, ``The fundamental objectives of our
policies are to ensure personal freedom, prevent intolerance based on
race, religion and ethnicity.'' Foreign Minister Ivanov reaffirmed
Russia's commitment to continuing its efforts to transfer religious
property in accordance with existing Russian laws.
Conclusion
There is no doubt that Jackson-Vanik has been a successful tool to
help Soviet citizens win the opportunity to escape from Soviet
repression.
But that Soviet era, marked by repression and denial of basic
freedoms, is over. Russia has been in compliance with the statutory
Jackson-Vanik emigration provision for almost ten years. Graduating
Russia now is the correct and logical step to take.
The communities that long sought these changes in Russia and had
previously opposed action on Jackson-Vanik now agree that it is time to
acknowledge Russia's efforts and end the application of this statute.
In 1974, Jackson-Vanik was aimed in part at pressing the Executive
Branch to address emigration and other human rights issues. Successive
U.S. Administrations have integrated human rights issues into every
aspect of our foreign policy dialogue with Russia and with other
nations. Ending Jackson-Vanik's application to Russia does not end our
dialogue on human rights issues or weaken our determination to express
our concerns about any problems. But doing so will mark the success in
reinforcing that freedom of movement, including emigration, is a
fundamental right.
President Bush has reaffirmed this Administration's commitment to
broad human rights and religious freedom principles on numerous
occasions. He has pledged that the Administration will continue to work
with Russia to help freedom and tolerance become fully protected in law
and to safeguard religious liberty.
We will continue to engage in an active dialogue with Russia on
civil liberties and religious freedom issues and we will report
regularly to the Congress on these issues. Our bilateral assistance
effort in Russia includes programs that promote democracy and promoting
civil liberties. Through the Department and our Embassy and consulates
in Russia, we are in touch with human rights advocates across Russia
and the United States to stay informed of the states of human rights in
Russia.
It is strongly in our interest to buttress the effort of reformers
in Russia and to give encouragement to President Putin as he continues
in pursuit of difficult reforms, often against domestic opposition. We
all want Russia to maintain its forward momentum.
Graduation from Jackson-Vanik offers us an opportunity to commend
the deep changes taken by Russia and to demonstrate our ongoing support
to President Putin and his reform team. We ask that you join the
President in acknowledging this new bilateral relationship we enjoy and
graduate Russia from Jackson-Vanik now.
Thank you for your attention.
Chairman Crane. Thank you, Mr. Larson.
Ambassador Larson, I would like to ask you a question about
the political motivations that are prompting the push for PNTR
for Russia now. Will that not possibly give some pressure for a
quick completion of Russia's WTO accession?
Mr. Larson. Mr. Chairman, I don't think it does create that
pressure. As Ambassador Allgeier indicated, there is a process
in the WTO that is, first of all, based on consensus.
Second, we are committed to making sure that the WTO
standards and the interests of our constituencies are upheld as
the accession process proceeds.
Third, we do believe that the Russian Government itself
understands that accepting the disciplines of the WTO will
further the reform efforts that they are trying to promote.
So I think on all three counts, there is every reason to
expect that we can be absolutely diligent in making sure that
there is not undue haste or undue pressure to do this on any
terms other than commercially appropriate terms.
Chairman Crane. Mr. Allgeier, on poultry, I want to make
clear that it will be hard to find support in Congress to
repeal Jackson-Vanik if Russia continues to play politics on
that issue. And what is the status of the poultry ban?
Mr. Allgeier. Well, Mr. Chairman, we certainly understand
very clearly the first point that you just made, and we have
conveyed that to the Russians.
We reached an agreement with Russia at the end of March on
a memorandum of understanding (MOU) that delineated what would
constitute compliance with the food safety standards of Russia.
We invited a Russian team of veterinarians here, took them
around the country to show them our plants to provide the
documentation. We believe we have complied with all elements of
that MOU, and as I mentioned, our team is in Russia now, our
embassy there, working through those documents with the Russian
authorities, and we are committed to having that ban lifted
immediately.
Chairman Crane. A second question for Ambassador Allgeier.
We will hear testimony later this morning from one of my
constituents, Bob Liuzzi. He is with CF Industries based in my
district in Palatine, Illinois. And Mr. Liuzzi is representing
the U.S. nitrogen fertilizer industry, and he will focus on
that industry's concerns with respect to U.S. imports of
nitrogen fertilizer from Russia.
Russian nitrogen fertilizer producers benefit from
government-set, low-priced natural gas that allows them to
undersell producers from other countries. Mr. Liuzzi says the
U.S. industry may go bankrupt if it has to wait until Russia's
WTO accession for the issue to be resolved.
How is the administration addressing today the legitimate
economic and trade concerns of this strategic industry?
Mr. Allgeier. Yes, we met yesterday actually with Mr.
Liuzzi. That was not the first time that we have met with the
fertilizer industry of the United States. It is a significant
and legitimate problem that they face due to the dual pricing
of energy, specifically natural gas, in Russia. And in terms of
the short term, we are working with them. There are a number of
remedies possible under either U.S. law, for example,
antidumping, but we also have a provision in our trade
agreement to deal with selective safeguards if there is market
disruption or a threat of market disruption.
We are prepared to work with the industry conscientiously
to find the most appropriate solution to the problem.
Chairman Crane. Thank you. Mr. Cardin--or, Mr. Levin, I am
sorry.
Mr. Levin. Let me yield to Mr. Cardin. He has to go on the
floor.
Mr. Cardin. Thank you, Mr. Chairman, and thank you, Mr.
Levin. I appreciate that.
Mr. Secretary, I particularly want to compliment the part
of your testimony where you indicate that, ``President Bush has
reaffirmed this administration's commitment to broad human
rights and religious freedom principles on numerous occasions.
He has pledged that the administration will continue to work
with Russia to help freedom and tolerance become fully
protected in law and to safeguard religious liberty.''
``We will continue to engage in an active dialog with
Russia on civil liberties and religious freedom issues and we
will report regularly to the Congress on these issues.''
I thank you for those statements. I think they are very
important.
Mr. Ambassador, as I was listening to you talk about
accession to WTO and the fact that it is consensus and the fact
the United States plays a critical role, and as you ticked off
all the economic issues that are going to be of concern to our
country, I didn't hear you mention human rights issues. And I
think this is an opportunity that we have with WTO accession by
Russia, not just what we do with Jackson-Vanik but how we
handle the accession issues.
There are serious problems that remain in Russia. As you
have pointed out, as the Administration has pointed out, as Mr.
Lantos has pointed out, yes, there has been tremendous progress
made. We understand that. But there is still more progress that
needs to be made. And Mr. Lantos has made certain suggestions
as to how we can achieve that in the context of the legislation
we have before us. But I would hope as we negotiate on the WTO
agenda that we would be bringing these issues up and asking our
friends in Russia to resolve these issues to make it easier for
us to support the accession to the WTO. And I appreciate your
comments on that.
Mr. Allgeier. Yes. Well, obviously, the WTO accession
negotiations and even our other trade negotiations with Russia
are only one part of our dialog with them, and we work very
closely with the State Department and the other departments to
ensure that we are reinforcing the broad message to Russia that
it is not just economic reform, but it is also continuing
attention to human rights and other values that we hold high
that is part of moving forward together.
Mr. Cardin. Just be a little bit bolder about that. That is
one of the things that I think Jackson-Vanik speaks to, the
fact that Congress intended us to link economic issues with
human rights issues, and use this opportunity to show that the
United States maintains the highest priorities on human rights
achievements. I just think that--I understand that sometimes
these are quiet discussions, but I think some of us would feel
a little more comfortable if you would highlight these issues
as we go through some of the economic changes that are
occurring in Russia.
Mr. Allgeier. OK. I understand. Thank you.
Mr. Cardin. Thank you, and I yield back to Mr. Levin, and I
thank him for yielding to me.
Chairman Crane. Mr. English.
Mr. English. Thank you, Mr. Chairman.
Secretary Larson, this is obviously a very difficult issue
and one that I think goes to the core of the administration's
trade policy in the region, which I am interested in, among
other things, as Chairman of the Congressional Steel Caucus.
And as part of the broader picture, I would like to ask you a
question having to do with our recent situation in Europe.
There have been reports regarding EU threats to retaliate
against U.S. products in response to the administration's
recent actions on behalf of the steel industry, in part
precipitated by conditions in Russia. I find these reports to
be particularly ironic, given that any retaliation at this
juncture would clearly violate the rules of the WTO by
bypassing the dispute mechanism entirely--a strange approach
coming from some of the strongest apostles of multilateral
trade policy.
It is also my understanding that the EU has drawn up a list
of very sensitive items for possible retaliation. I have
reviewed that list, and I am very concerned about the rhetoric
coming out of Europe. Frankly, I think if we are going to have
a strong trade policy, we need to have a very strong response
to this situation.
Mr. Secretary, I want to know what you are telling the
Europeans on this subject, and what we plan to do should they
retaliate against us.
Mr. Larson. First of all, Congressman, we have been working
very closely with the U.S. Trade Representative's Office to
explain the reasons for the President's decision. We recognize
that it is a decision that many in Europe did not want. But we
have pointed out that it is a decision that was taken after a
great deal of pressure on and injury to our own industry, after
following a deliberative process that is in compliance with WTO
rules, and after looking to make sure that, to the maximum
extent possible, we were not harming the interests of our
trading partners.
We have also pointed out, as you just did, that there is a
place to talk about differences of opinion of this type, and
that is in the WTO.
We agree that in the cases where we have had problems with
European actions, we have waited until the end of the WTO
process to impose any sanctions, and we have only done that
retaliation or the withdrawal of concessions at the time when
the WTO process was over and Europe had failed to comply with
any WTO decision. So we agree that if there were a move toward
retaliation, that that would be not in compliance with WTO
rules. It would be a strange, unilateral measure for Europe to
take. And we are working very hard to encourage the Europeans
to really see this in a more reasonable way and to realize that
this is an issue that, if they have concerns about it, there is
a place in which they can bring those up and a process in the--
--
Mr. English. I am gratified to hear that. I must say I have
carried the same message to Mr. Lamy when he has visited with
me. I have carried the same message to some of my counterparts
in the European Parliament. But having done all of that, there
seems to be still an extraordinary rhetoric on their part.
What I am seeking from you is a specific assurance--my
having worked with USTR, I know they are on the same song
sheet, that they are putting forward a very strong message. I
would like the same assurance that the State Department is
working with USTR and carrying the same strong message that we
are not going to tolerate the retaliation in this case. Can I
have that assurance, Mr. Secretary?
Mr. Larson. Congressman, you definitely do. We are on the
same sheet of music. I think Ambassador Allgeier and I talk
about three or four times in an average day about how to make
sure that our respective activities dovetail so that we are
sending the same strong message on this issue, as well as on
others.
Mr. English. Thank you, and I want to thank both of you for
the strong position that the administration has taken on steel.
And, Mr. Chairman, I thank you for the opportunity to have
posed this question.
Chairman Crane. Thank you. Mr. Levin.
Mr. Levin. Thank you. Thank you very much.
I wanted to start off by indicating, Mr. Larson, Secretary
Larson, I fully agree with what you have laid out under
strategic and foreign policy considerations beginning on page
three. And I hope we keep all of these in mind, including the
progress in our relations with Russia.
I do want to talk a bit about the economic issue because
you also mentioned, Mr. Secretary, that the principal goal of
the Jackson-Vanik legislation in 1974 was to promote free
emigration from the Soviet Union, particularly for Soviet Jews.
That became the main focus of the 1974 Act, though it wasn't
its original. It related to trade policy, and without in any
way diminishing the importance--I want to elevate the
importance of the Jackson-Vanik amendment--I want to go back to
some of the economic issues and ask the Ambassador, you
mentioned that there was a Working Group report that has just
been issued in draft form. Has that been discussed? Has that
been made available to Members of Congress?
Mr. Allgeier. I believe it has. If it hasn't, it should be,
and it will be. Yes, it has been. I am assured that it has
been.
Mr. Levin. The full text of it?
Mr. Allgeier. Yes, the 123 pages of it.
Mr. Levin. OK. And is there a clear delineation of the
administration's objectives in the WTO Russian negotiations,
accession negotiations? Is there an outline of what are
considered the prerequisites?
Mr. Allgeier. Yes. We have our objectives that we have
discussed, of course, with Congress and would be happy to lay
out for you in writing, if that is something that you would
like.
Mr. Levin. I am not sure they have been laid out in writing
to us, and I would appreciate it if you would do that, because
let me just say it as clearly as I can what the question in
this regard is. The way the legislation is now written,
essentially it would take out any formal role of Congress
relating to the WTO accession of Russia. That is the effect of
it. We will be consulted, but there will not be a required vote
of any kind, because we don't vote on the accession itself.
Right?
[The information is being retained in the Committee files.]
Mr. Allgeier. Right.
Mr. Levin. And when it came to the important negotiations
with China, it was the vote on PNTR that became the formal way
for Congress to be involved.
Now, one of the issues, for example, relates to section
406, the surge provision, and when that was waived under the
so-called Jackson-Vanik PNTR vote, we inserted into the
legislation, as you know, a replacement for it. So the reason
for the concern--and it has been more actively expressed on the
Senate side, but it exists here--is the role of Congress and
the impact of the elimination of an opportunity for Congress to
vote.
So let me ask you this: As you have begun to think of
Russia's accession--I will use this as just one example,
because poultry is important and fertilizer is important, but
we need to look at the overall framework of our economic
relations. So I am picking out section 406, the surge
provision, as just one example.
What would you propose to replace it?
Mr. Allgeier. OK. First of all, in terms of the role of
Congress, of course, we take very seriously the necessity, the
desirability of consulting with you, and, in fact, I believe
that in the Uruguay round implementing legislation, we are
required to consult with Congress in the course of WTO
accession. So there is in that sense----
Mr. Levin. That is to consult, but while we vote on the
ultimate agreement in a round, like Uruguay, we have to
implement it. That isn't true of a WTO accession. So I know
there is a requirement of consultation, but that has its
limits. It is different than our having the leverage of a
formal vote.
So I am asking you, regarding section 406 specifically,
what are you suggesting be its replacement with Russia still
being other than a market economy?
Mr. Allgeier. Two comments. First of all, specifically with
respect to the selective safeguard provision that section 406
provides in our domestic law, we, of course, have the trade
agreement which would be in place until we have WTO accession.
At that point we still--we will have to explore with Russia and
our other trading partners who have the similar concerns to the
ones you have raised whether it would be appropriate to have
some sort of safeguard provision as part of their accession.
Mr. Levin. You haven't explored that yet?
Mr. Allgeier. Oh, yes, we have.
Mr. Levin. And where are those explorations?
Mr. Allgeier. Well, we are still looking at what would be
most appropriate. We are in a fairly initial stage of the
negotiations with Russia in the sense that we have this first
Working Party report, and that will inform both us and the
Russians, and our trading partners, of what needs to be done
before they join the WTO. So that is one area that we and our
trading partners are concerned about and will be looking to
address appropriately in the accession.
Mr. Levin. Remember, these are bilateral agreements. Do you
expect there will be a replacement for section 406 in our
bilateral agreement with Russia?
Mr. Allgeier. Actually, section 406 is not the only basis
for dealing with the selective safeguard provision in our
bilateral agreement. section 125 of the Trade Act actually
provides that and would not require us to link it to emigration
or anything like that.
Mr. Levin. OK. Well, there is clearly a set of issues here,
and we need to move ahead with these, I think, if you expect
there to be the kind of action I think all of us would
ultimately like. And there is a lot of territory to be covered,
clearly I think in the House and, as you know, in the Senate,
you aren't going to move--you eliminate the role of Congress in
terms of a vote, that is an important change. And we need to
take that into account.
Thank you.
Chairman Crane. Thank you. Ms. Dunn.
Ms. Dunn. Thank you, Mr. Chairman.
I know that steel has been addressed, and also poultry has
been addressed. I want to ask you about a couple of industries
that are very important in my corner of the world, which is the
Puget Sound area.
I know Ambassador Pickering will be before us later on. In
his new position, I am sure he is watching very carefully over
one of my favorite companies, the Boeing Company.
But let me ask you first, on the level of trade relations
with Russia, I am concerned about the level of intellectual
privacy piracy, and I would like to have you talk to me a
little bit about the position of the USTR and the State
Department and what kind of pressure you are exerting on Russia
to enact and enforce intellectual property rights (IPR) laws to
protect piracy of American products. According to my read, the
numbers that come out of Russia are about $5 billion of company
profits over the last 5 years.
Could you tell me what is going on in that area, please?
Mr. Allgeier. Yes. Protection of intellectual property has
been a longstanding objective of the administration in its
relations with Russia, even outside of the WTO accession, first
to obtain better laws--and there still needs to be work on
that, and particularly on enforcement. We have a bilateral
intellectual property group that addresses these issues, that
takes on information and help from our private sector. We have
made it very clear in the WTO accessions that scrupulous
adherence to the obligations of the WTO, the so-called TRIPs,
Trade-Related Aspects of Intellectual Property Rights, will be
an essential part of our willingness to accept Russia's
accession. We use our domestic law, the special 301 law. Russia
is a priority watch list country. So I don't think there is any
doubt in Russia's mind that this is a very high priority for
us, and it is extremely important from an economic standpoint.
So we will continue to press that.
Ms. Dunn. And, second, let me ask you about aircraft being
sold in Russia. Washington State is the home of--we consider
still Washington State the home of the airplane manufacturing
industry. We actually do have 55 percent of that company still,
the commercial line, in Seattle.
Chairman Crane. Chicago's Boeing?
[Laughter.]
Ms. Dunn. Well, I hope you treat them as well as we treat
them, Mr. Chairman.
But we have all kinds of industry in our Northwest, and so
you have got the aircraft industry, you have got the medical
device companies. What is the position of the negotiations on
reducing and eliminating the tariffs that cost us so much as we
try to export our top-level products?
Mr. Allgeier. Well, part of any country's accession package
has to be a schedule of commitments on reducing their tariffs
and getting rid of other non-tariff barriers. That will have to
be an important part of the Russian package, and the two
industries that you mentioned--medical equipment and civil
aircraft--are two that we have been highlighting with them in
our negotiations and will continue to. And we are pressing the
Russians to join the civil aircraft code of the WTO as part of
their accession package.
Mr. Larson. If I could just add two quick points. One of
the things that we are doing in this relationship that we are
strengthening the business-to-business aspect of it. There is a
business dialog which I think provides a very good environment
in which to both push our IPR concerns, because they do affect
investment into Russia, something they want, but it also
provides an avenue to pursue cooperation in sectors like the
aircraft sector.
I do want to add that when large sales become a matter of
political jockeying, the U.S. government in the form of the
U.S. Trade Representative, the Secretary of State, and others
in the administration have always been pushing to make sure
that our suppliers get a fair opportunity to compete on the
commercial merits and that politics from other quarters doesn't
enter in.
Ms. Dunn. Good. And, you know, all of that has to do as
much with jobs in my neck of the woods where we have lost
30,000 jobs because the Boeing Co. has laid off workers. We
have had to spend a lot of time this year making sure that
those folks were well treated through Trade Adjustment
Assistance Program for Workers, TAA, and through the
unemployment pockets of money that we could bring home. So we
also think highly of the product that is made in our neck of
the woods. So we will be watching what you do with great
interest, and I am happy to hear your reply.
Thank you.
Chairman Crane. Thank you. Mr. Camp.
Mr. Camp. Thank you, Mr. Chairman.
Ambassador Allgeier, I apologize for being called out of
the room for part of your testimony, and I realize that you
have addressed the poultry issue to some extent. But I just am
very concerned that the ban isn't lifted. As you know, this is
the largest foreign destination for poultry. It is unacceptable
to me that this ban hasn't been addressed on March 31st when
the protocols were signed. And from what I understand your
testimony to be, we don't really know when the ban is going to
be lifted. This has a tremendous ripple effect throughout the
agricultural community and for support for trade in general in
this country, because I don't really see any justification.
Can you tell me specifically when you think this ban will
be lifted and exactly what steps will be taken? I realize there
are ongoing discussions, but it is critical that this be
addressed and be addressed in as expeditious a manner as
possible.
Mr. Allgeier. Yes, we certainly agree with the importance
of this issue and its ramifications for many, many States in
the country. We were told by the Russians that the ban would be
lifted by the 10th of April, and we are beyond the 10th of
April. We are determined that this ban will be lifted in the
next few days. That will obviously be for the Russians to
decide, but that is our objective. We think it should be lifted
now. We believe that we have demonstrated compliance with their
standards, compliance with our standards, and that there is not
a scientific basis for denying entry for our poultry products.
Mr. Camp. Would you agree that we complied with all issues
when we signed the protocol on March 31st?
Mr. Allgeier. Excuse me?
Mr. Camp. Would you agree that the United States provided
the Russian Government with all information and complied with
all issues necessary to resolve the ban when the protocol was
signed on March 31st?
Mr. Allgeier. Yes. Well, we felt that it was fair for them
to conduct the inspections, but the inspections are over now,
and we believe that both the inspections and the documentation
that we have provided is adequate, is more than adequate to
demonstrate that the ban should be lifted now.
Mr. Camp. So the United States has met the obligations or
conditions to lift the ban?
Mr. Allgeier. Yes, we believe we have.
Mr. Camp. All right. Thank you.
Mr. Allgeier. We believe that quite strongly.
Mr. Camp. Thank you, Mr. Chairman.
Chairman Crane. Mr. Becerra.
Mr. Becerra. Thank you, Mr. Chairman. And I thank the two
of you for being here again.
A quick question for Secretary Larson, if I may. We
recently granted Russia Generalized System of Preferences (GSP)
status, and within GSP there is a requirement that the country
observe and implement internationally recognized core labor
standards. A question to you, because I know that the State
Department and our embassy raised concerns before the Duma with
regard to their new labor law. What do you plan to do, does the
administration plan to do, to try to ensure that those GSP
requirements with regard to the internationally recognized core
labor standards are adhered to?
Mr. Larson. We will be having a very, very active process
of diplomacy and advocacy on the labor issue, as we have
continued to do on human rights and religious freedom issues.
Our embassy and our consulates have been extraordinarily active
on those issues.
Now, under the GSP program, though this isn't a direct
quote, there is a standard that you referred to of taking steps
toward the recognition of internationally recognized workers'
rights. And there is set up under law a process for reviewing
where GSP beneficiaries stand. It is a process that the U.S.
Trade Representative's Office operates, but that the other
agencies that have an interest and concern in this participate.
And my expectation would be that with Russia, as with other
countries, one would keep under review under that framework
whether the country is taking steps and whether they are moving
in the right direction.
I think there are many aspects of what Russia has done in
this and other human rights-related areas that have been
positive, but we have been very outspoken about some of the
deficiencies that we do see in this draft legislation.
Mr. Becerra. Would the administration be supportive of
including language in the legislation with regard to graduating
Russia from Jackson-Vanik that would specifically incorporate
those issues of seeing Russia taking steps toward addressing
those core labor standards?
Mr. Larson. Well, we do have a legislative framework that
the Congress has set out that I think addresses that. So, I
mean, without being definitive, my feeling is that we have a
framework that the Congress and the executive branch have
agreed on, and it is just a question of having that framework
operate in the normal way.
Mr. Becerra. One last question, Ambassador. You mentioned
in your testimony that you think the Cold War issues are
outdated, that Russia certainly is one of those former
adversaries that now has become an ally and friend. You
mentioned continued application of Jackson-Vanik, however, as
an indication to Russia that they continue to be suspect and
viewed as a Cold War adversary. We granted China permanent
normal trade relations recently. In the spirit of Charlie
Rangel, who is not here in this room at this moment, I would
like to ask: Can you tell us why we don't address these same
issues with Cuba?
Mr. Larson. I think that there is a world of difference
between where Russia is and where Cuba is. We have tried to
summarize in my statement all of the extraordinary steps that
Russia has taken over the last 13 years, and some of the
particularly remarkable steps they have taken over the last
year in working with us on the war on terrorism, moving forward
on religious freedom, and things of that sort.
I cannot report that there has been progress on human
rights--or labor rights, for that matter--in Cuba. There is
oppression of any effort to organize political parties or
dissident groups. People that try to express their opinion get
jailed. Workers are taken advantage of when they go to work in
some of these foreign investments that our European friends
make in Cuba.
So for me, the difference between those two situations is a
difference of night and day.
Chairman Crane. Right. Thank you, Ambassador Larson,
Ambassador Allgeier. I hate to interrupt but we are down to
less than 2 minutes to make this vote.
Mr. Allgeier. Thank you, Mr. Chairman.
Chairman Crane. We have three votes in succession, and so
we are going to stand in recess subject to the call of the
Chair for our next panel, but I want to express profound
appreciation to Ambassador Larson and Ambassador Allgeier for
your testimony.
With that, we stand in recess.
[Recess.]
Chairman Crane. I apologize to you for the disruption here,
and I can't control the voting over on the floor. But we had
three recorded votes in a row, and we have other commitments.
But I want to try and complete our hearing this morning with
your testimony, and we will have Members filtering back here.
But in the interim, I think we ought to get started.
And so I will start with the Honorable Thomas Pickering and
then Bob Liuzzi, and then Dave Camp is going to get back here--
he hopes to get back here--to formally introduce Mr. Wood. And
then Harold Luks and Richard Edlin.
So we will start, and try and keep your oral remarks to 5
minutes or less, and any written statements will be made a part
of the permanent record. So we will proceed with you,
Ambassador Pickering.
STATEMENT OF THE HON. THOMAS R. PICKERING, SENIOR VICE
PRESIDENT, INTERNATIONAL AFFAIRS, BOEING COMPANY, ON BEHALF OF
THE U.S.-RUSSIA BUSINESS COUNCIL; FORMER UNDER SECRETARY FOR
POLITICAL AFFAIRS, U.S. DEPARTMENT OF STATE; AND FORMER UNITED
STATES AMBASSADOR TO THE RUSSIA FEDERATION
Mr. Pickering. Thank you, Mr. Chairman. Good afternoon to
you. Thank you for the opportunity to testify on such an
important subject. It is an honor to be with you and a
privilege and a pleasure to give this testimony.
My name is Thomas R. Pickering. I am Senior Vice President,
International Relations, at the Boeing Company. I am testifying
today on behalf of the U.S.-Russia Business Council. I was
Ambassador to the Russian Federation from 1993 to 1996 and
followed Russian events as Under Secretary of State in 1997
through 2000.
I will focus my remarks this morning on terminating the
application of the Jackson-Vanik amendment to Russia, extending
permanent normal trade relations, and Russia's accession to the
WTO. I will outline for the Subcommittee why each of these
issues is important to the Business Council and Boeing, and why
we believe that WTO accession and Jackson-Vanik are separate
issues and should be treated as such.
Boeing and the Business Council, Mr. Chairman, support
terminating the application of the Jackson-Vanik amendment to
Russia, thereby discarding a remnant of the Cold War that is of
no practical consequence. Russia has been in full compliance
with the legislation, as we have heard this morning, since
1994, and its intent should not be altered ex post facto to
deal with other unrelated objectives. If the requirements have
been satisfied and the reason for them is obsolete, it should
be terminated.
The changing nature of our strategic relationship with
Russia has been startling and far-reaching. Russia's reaction
to the September 11th attacks more than any other event best
illustrates how the relationship has fundamentally shifted.
President Putin was the first foreign leader to contact
President Bush, offering condolences to the American people and
his clear support for a strong response. That contact was
followed by a series of concrete actions and policy decisions,
many of which were contrary to previously held public positions
of many senior Russian officials, some of whom currently serve
as senior advisers to President Putin.
As our relationship continues to unfold in previously
unimaginable ways and our security relationship is transformed,
it is important that the trade and investment aspect of that
relationship keep pace with the times. Removing Russia from
annual Jackson-Vanik consideration is an important part of this
evolution. Jews in Russia and others today are free to
emigrate, and Russia is no longer a controlled economy.
Terminating the amendment's application to Russia would help
foster more normal trade relations between our two countries
and demonstrate to countries that continue to restrict
emigration that graduation is possible with the right sort of
reforms.
Permanent normal trade relations for Russia is a logical
event, even outside the Jackson-Vanik context. Russian exports
to the United States include titanium and other materials that
are important components in the aviation manufacturing
industry. Continued access to these products contributes to the
competitive position of Boeing and other U.S. manufacturers in
global markets. We, therefore, encourage continued development
of free, fair, and reciprocal trade with Russia. PNTR and
eventual Russian Membership in the World Trade Organization are
important steps in this direction. Boeing and the Business
Council support Russia's aspirations to join the WTO. Much is
at stake in terms of market access and uniform acceptance of
agreed rules of the game, including the elimination of tariffs
on imported aircraft. However, it is our belief that WTO
accession and the termination of the Jackson-Vanik amendment
are separate issues, and they should be treated accordingly.
At no time since Russia applied for WTO Membership has any
U.S. official linked Jackson-Vanik to Russia's accession to the
WTO. To do so now would be perceived as moving the goalpost on
WTO accession and would treat Russia differently from all other
former Soviet countries in the accession process.
The United States maintains the leverage necessary to
address trade concerns with Russia as obviously Russia cannot
accede to the WTO without our consent. The United States,
regardless of the administration in power, has an excellent
track record in setting the highest bar for new entrants to the
WTO. We are confident that the USTR, under the leadership of
Ambassador Robert Zoellick, will continue to seek strong
commitments from Russia.
Russia has been a good place for the Boeing Co. to build
industrial cooperation to grow our business. Our commitment to
the market is strategic and long-term. There are currently 25
of our airplanes operating in Russia and 45 in the remaining
former Soviet countries. The demand for modern aircraft exists,
and we aim to increase our sales there significantly. This
opportunity hinges on a commitment by the governments of both
countries to facilitate and expand free and open trade between
the United States and Russia. Graduating Russia from annual
Jackson-Vanik review and extending PNTR are consistent with
this principle and are steps supportive of America's industrial
aspirations in the Russian market.
Further, failure to terminate Russia risks encouraging
those in Russia who oppose free trade and more open relations
with the United States. Failure to act risks a more closed and
protectionist Russia.
In conclusion, while this decision involves the principle
of free trade, it also involves the principles of good faith,
upholding one's commitments, and standing by our friends and
partners.
President Putin's policies of closer alignment with the
West and his support for American positions come at some
domestic political cost. Since Russian support in the war on
terrorism is important to its success, it is obviously of
continuing importance for the U.S. government to keep faith
with the Putin Government. In this context, it is, therefore,
important we deliver on our word. The U.S. government can and
should take this step. It will yield benefits in the strategic
bilateral relationship, but, most importantly, it is sound
trade policy for the United States.
Thus, Boeing and the U.S.-Russia Business Council encourage
you to terminate application of the Jackson-Vanik amendment to
Russia.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Pickering follows:]
Statement of the Hon. Thomas R. Pickering, Senior Vice President,
International Relations, Boeing Company, on behalf of the U.S.-Russia
Business Council; Former Under Secretary for Political Affairs, U.S.
Department of State; and Former United States Ambassador to the Russian
Federation
Opening Remarks
Good Morning Mr. Chairman and Members of the Committee. Thank you
for the opportunity to testify on what is certainly an important and
very timely subject. My name is Thomas R. Pickering, and I am Senior
Vice President, International Relations at The Boeing Company. Prior to
joining Boeing, I held a number of senior positions in the U.S.
Department of State, including Undersecretary for Political Affairs for
the years 1997-2000 and Ambassador to the Russian Federation from 1993-
1996. I retired from government with the rank of Career Ambassador at
the end of 2000.
I am testifying today on behalf of the U.S.-Russia Business
Council, a Washington-based nonprofit trade association whose mission
is to expand and enhance the U.S.-Russian commercial relationship on
behalf of more than 260 American firms active in U.S.-Russian trade and
investment. Guided by member interests, the Council promotes an
economic environment in which U.S. business can succeed in a
challenging Russian marketplace. To achieve its mission, the Council
conducts activities and provides services that fall into the following
categories: company-specific assistance and problem-solving; Russian
and U.S. government policy work; information products; Russian business
relationships; and formal and informal briefing and networking
opportunities.
I will focus my remarks this morning on Russia's accession to the
WTO, terminating the application of the Jackson-Vanik amendment to
Russia, and extending Permanent Normal Trade Relations. I will outline
for the committee why each of these issues is important to the USRBC
and Boeing and why we believe that WTO accession and Jackson-Vanik are
separate issues and should be treated as such.
Jackson Vanik
Mr. Chairman, the USRBC and Boeing support terminating the
application of the Jackson-Vanik amendment to Russia, thereby
discarding a remnant of the Cold War that is of no practical
consequence. As we all know Russia has been in full compliance with the
legislation since 1994 and its intent should not be altered ex-post
facto to suit unrelated objectives. If the requirements have been
satisfied and its raison d'etre is obsolete, it should be terminated.
Just as Jackson-Vanik has been successful in its pressure for
important changes within the new post-Soviet Russia, so has the
changing nature of our strategic relationship with Russia been
startling and far-reaching. The tension that defined our relationship
in the early days of the Soviet collapse has been replaced with new
opportunities and cooperation. Compare Russia's reaction to the latest
round of NATO expansion with their reaction to the first round. Rather
than objecting to an enlargement of the alliance, Russia has instead
begun negotiating to establish formal cooperation with NATO and to meet
regularly in a new council ``to pursue opportunities for joint
action.''
There are other examples. Earlier this year, President Putin
announced the closing of the Lourdes listening facility in Cuba, and
both Presidents have agreed to reduce the level of deployed nuclear
warheads by one-third. Russia's reaction to the September 11 terrorist
attacks, more than any other event, best illustrates how the
relationship has fundamentally changed. President Putin was the first
foreign leader to contact President Bush following the attack.
President Putin offered his condolences to the American people and his
clear support for a strong response. That contact was followed by a
series of concrete actions and policy decisions, some of which were
done in clear contradiction to the public positions of the national
security and intelligence officials who form his inner circle and from
which he came.
As our relationship unfolds in previously unimaginable ways, and
our security relationship is transformed, it is important that the
trade and investment aspect of our relationship keep pace with the
times. Removing Russia from annual Jackson-Vanik consideration is an
important part of this evolution. Jews in Russia today are free to
emigrate, and Russia is no longer a controlled economy. Terminating the
amendment's application to Russia would help foster a sense of normal
trade relations between the U.S. and Russia and demonstrate to
countries that continue to restrict emigration that graduation is
possible with the right reforms.
Mr. Chairman, I also believe that PNTR for Russia is logical
outside the Jackson-Vanik context. Russian imports to the United States
increased significantly in both 1999 and 2000, reaching an all-time
high of $7.8 billion in 2000 (U.S. Department of Commerce). Russian
titanium and other materials included in these figures are an important
component in aircraft manufacturing. Continued access to these products
contributes to the competitive position of Boeing and other US
manufacturers in world markets. We therefore encourage continued
development of free, fair, and reciprocal trade with Russia. PNTR and
eventual Russian membership in the World Trade Organization are
important steps in this direction.
Although Russia has been found in compliance with Jackson Vanik for
the past several years, its continued existence perpetuates a feeling
of discrimination among Russians and allows a feeling of uncertainty to
cloud a markedly improved trade and investment climate. Stability and
predictability are important to exporters and importers alike.
WTO and Jackson-Vanik
The USRBC and Boeing support Russia's aspirations to join the WTO,
primarily because much is at stake in terms of market access and
uniform acceptance of agreed rules of the game. However, we also
believe that WTO accession and the termination of the Jackson-Vanik
amendment are separate issues and should be treated accordingly.
At no time since Russia applied for WTO membership has any U.S.
official linked Jackson-Vanik to Russia's WTO accession. To do so now
would be perceived as moving the goalpost on WTO accession and would
treat Russia differently from other former Soviet countries in the
accession process.
It's also important to emphasize that the United States, regardless
of the administration in power, has an excellent track record in
setting the highest bar for new entrants to the WTO. We are confident
that the USTR, under the leadership of Ambassador Robert Zoellick, will
continue to seek strong commitments from Russia pertaining to the
adoption of WTO rules governing its trade regime, the provision of
market access in goods and services, the establishment of limits on
agricultural supports, and the enforcement of the rule of law in
commerce.
Absent Jackson-Vanik, the United States maintains the leverage it
needs to address trade concerns with Russia, as obviously Russia cannot
accede to the WTO without U.S. consent. As in all WTO accessions,
leverage to secure commitments is based on the requirement for
consensus in the Working Party--i.e., acceptance without objection by
all Working Party members, including the United States, of the
accession package. While there remains much to be done, we are
confident that the U.S. government will remain engaged on Russia's
accession process and, likewise, Russia will continue to make great
progress.
WTO Accession as a Policy Framework
In addition to the increase in Working Party meetings, USRBC, its
member companies, and the U.S. business community in general, is seeing
a new momentum within the Putin Administration, which represents an
internal recognition of the need for and benefits of WTO accession (as
compared to external pressure from the international community). We are
not only seeing WTO accession as a mandate from Putin himself and the
Executive Branch, but the Duma has created an Experts Council on
Foreign Trade and Investment, whose main task is to review current
legislation in terms of its WTO compliance and recommend required
changes. The Duma is currently considering amendments to 55 Russian
laws related to WTO norms.
Priority Areas
In order to facilitate Russia's accession to the WTO, several
priority areas need to be addressed.
Civil Aerospace: Russia maintains high tariffs on imported
aircraft. Import duties, when added together with the domestic VAT,
equal 40 percent of the purchase price. In a 1996 bilateral MOU on
``Market Access for Civil Aircraft,'' the Russian Government confirmed
it will join the WTO Agreement on Trade in Civil Aircraft, which
together with other WTO agreements, establishes the basic international
rules governing trade in the aircraft sector.
In the interim, the Russian Government committed to providing
market access by taking trade-liberalizing steps such as tariff
reductions and tariff waivers. These steps are designed to enable
Russian airlines to meet their needs for importing American and other
non-Russian civil aircraft on a nondiscriminatory basis. Since the
signing of the MOU, the Russian Government has lowered its tariffs on
imports of aircraft from 50 percent to 20 percent currently, and
permitted 16 US-built airplanes to enter Russia on limited tariff
waivers. These are steps in the right direction, but to serve Russia's
airlines' need for equipment, more needs to be done.
The Russian Government is under pressure from domestic aircraft
makers to protect its market from competitive imports. The USRBC argues
that by granting PNTR and shoring up domestic support for Russia's
entry into the WTO, today's market barriers will be eliminated. In turn
it will give Russia's domestic industry its best opportunity to bring
value to world production markets by attracting investment to those
areas of comparative advantage.
Telecommunications: The creation of an investor-friendly
infrastructure and legislative environment (e.g., reducing existing
tariff and non-tariff barriers that limit foreign participation in this
sector) is critical to the development of the telecommunications sector
in Russia. Russia presented a new goods and services offer in March
2001, which included its agreement to accept a WTO accord that commits
to binding, pro-competition regulatory disciplines. The new offer also
included an initial offer of 25 percent foreign equity in the mobile
telephone sector. This goods and services offer continues to be revised
based on continual bilateral and multilateral negotiations.
Financial Services: The strengthening of Russia's financial
services sector is crucial to the country's economic development. Some
important steps include a reduction in the number of state-owned banks;
increased liberalization to allow mergers and acquisitions; greater
access for foreign banks; openness to international participation in
the Russian insurance industry (which remains poorly developed and
whose members have promoted exclusionary legislation to date);
development of a legislative framework governing the leasing industry;
and improvement in access to capital and credit relationships. Another
important issue is Russia's adoption of International Accounting
Standards (IAS).
Intellectual Property Rights: Protection of intellectual property
rights is a key factor influencing Russia's WTO accession and its
ability to attract foreign investment. IPR violations--including
trademark and patent infringement, counterfeiting, copyright
violations, and piracy--remain epidemic. Incomplete anti-counterfeit
legislation, lack of enforcement, weak penalties, corruption, and lack
of education and training of law enforcement and judicial officials in
this area are key impediments to better IPR protection and enforcement
in Russia. Specifically, significant shortcomings remain in the
country's trademark and patent laws, especially provisions dealing with
famous trademarks and geographical indications, as well as confiscation
and destruction of counterfeit goods.
The WTO Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS) covers seven types of IPR: patents, copyright,
trademarks, geographical indications, industrial designs, layout-
designs of integrated circuits, and undisclosed information. Each WTO
member is obligated to implement the TRIPS agreement through their
respective domestic legislation, to incorporate the rights and
obligations of an IPR-holder and the manner in which these will be
enforced.
Legislative progress is being made in Russia. The government
submitted a legislative package to the State Duma in July 2001. The
package includes amendments to the Law on Trademarks, Service Marks and
Appellations of Origin of Goods; Patent Law; Copyright Law; and the Law
on Legal Protection of Computer Programs and Databases; among others.
The amendments to the Trademark Law and the Patent Law have passed the
first reading in the Duma, but the amendments to the Copyright Law have
not. In most respects, the proposed amendments will bring Russia's
legislation into TRIPS compliance.
Bilaterally, the U.S. government has not hesitated to criticize the
Russian Government on its failure to protect intellectual property
rights: in May 2001, the USTR placed Russia on the Special 301 Priority
Watch List. The USTR also began a review last year of Russia's
eligibility under the Generalized System of Preferences (GSP) program,
based on issues raised by the U.S. copyright industry concerning
Russia's intellectual property regime. (The GSP program is currently
expired; however, pending its reauthorization, the review of Russia's
GSP eligibility would continue.)
Agriculture: Russia's domestic support for its agricultural sector
is a major impediment to accession. It is important to recognize that
the WTO does not prohibit domestic support (a popular misperception in
Russia); rather, it limits certain types of support (for example,
export subsidies). In WTO terminology, subsidies in general are
identified by ``boxes'' that are given the colors of traffic lights:
green (permitted), amber (slow down or reduce), and red (forbidden).
The WTO Agriculture Agreement has no red box; therefore WTO members
with trade-distorting domestic supports in the amber box must make
commitments to reduce these measures.
Over the past 10 years, Russia's subsidies have primarily been
amber-box measures. The government's main task in current WTO
agricultural negotiations is to reduce these measures and focus on
green-box measures. Examples of green-box measures include programs
that are not directed at particular products such as environmental
protection, rural infrastructure and regional development programs.
In terms of annual support levels, Russia has offered a $16 billion
ceiling on its subsidies, and this issue continues to be negotiated
(WTO members prefer a figure closer to $2-3 billion). Due to the
sensitive role agriculture continues to play in the economy, Russian
Government officials consider agriculture one of the most politically
sensitive issues of its accession.
Boeing and Russia
Russia has been a good place for Boeing to build industrial
cooperation. Boeing's commitment to and investment in Russia are
strategic and long-term. Boeing has invested $1.3 billion in Russia
over the last 10 years. In the civil space sector, the Company has
invested in projects such as the International Space Station and the
Sea Launch satellite-launching venture. In aviation, Boeing's Moscow
Design Center contracts with Russian manufacturers to employ more than
350 Russian aerospace engineers who supply unique design capabilities
while learning market--and rules-based management practices. The
company also cooperates with 350 scientists in 6 Russian research
institutes to explore civil aerospace technologies and ideas, and has
begun work with Russian partners to explore the development of a
Russian regional-size commercial jetliner.
There are currently 25 Boeing airplanes operating in Russia, and
another 45 in the remaining former-Soviet countries. The demand for
modern aircraft exists, and Boeing aims to grow those numbers
significantly.
Further access to the Russian market is vital. Aeroflot's plans to
grow and modernize its fleet presents a great opportunity. In addition,
opportunities exist in aircraft and parts sales to the many smaller
Russian operators, air traffic control infrastructure, airport
development and operation, airline engineering and training, and
management training across the entire civil aviation sector.
This potential, however, hinges on a commitment by the governments
of both countries to facilitate and expand free and open trade between
the United States and Russia. Graduating Russia from annual Jackson-
Vanik review and extending PNTR are consistent with this principle and
are indirectly linked to America's industrial aspirations in the
Russian market.
Russian Expectations and American Commitments
Not only does this decision involve the principle of free trade, it
also involves the principle of good-faith, upholding one's commitments,
and standing by your allies.
President Putin is out in front in Russia in his policies of
alignment with the West and his perceived pro-American positions. In
the hours after September 11, Russian Defense Minister Sergei Ivanov
reversed his position on U.S. troops in Central Asia. After first
saying there was not ``any basis for even the hypothetical
possibility'' of a NATO presence in Central Asia, Ivanov backtracked
and pledged his support to the president. There are number of officials
in the national security and intelligence apparatus, however, who
continue to question the alliance with the West.
These voices of discontent are no longer confined to national
security and intelligence circles. Some who originally praised
President Putin's westward turn are beginning to question how it
benefits Russia. Just last week one of the Duma's most influential
foreign policy and defense experts, Alexei Arbatov, was quoted in an AP
story as saying, ``The majority, who did not support the President's
plans from the beginning, now are washing their hands of them, and
saying `we warned you, you won't get anything from the Americans!''
Also last week, Lenoid Ivashov, a former high-ranking Defense
Ministry official, likened Russia's moves after September 11 to ``an
attempt at geostrategic suicide.'' Former Foreign Minister Andrei
Kozyrev commented to the American Chamber of Commerce in Moscow that,
``even state media portray all these cooperative moves by him (Putin)
almost as treason.''
These comments suggest the growth of real opposition to the Putin
government--opposition rooted in contempt for pro-American policy.
Since Russian support in the war on terrorism is important to its
success, it should be important for the US Government to support the
Putin government. In this context, it is even more important that we
deliver on our word. The US government can and should take this step.
It will yield benefits in the strategic bilateral relationship, but,
most importantly, it is sound trade policy for the United States.
Conclusion
In conclusion, the US Russia Business Council and its member
companies urge the Congress to repeal the outdated Jackson-Vanik
amendment. It is clearly the right time and the right measure. Removing
the restrictions will put healthy political and economic relations
between the US and Russia on a faster track.
The USRBC also urges the Congress to work separately to bring
Russia into the WTO as quickly as possible. In doing so, lawmakers will
help ensure healthy US-Russia trade relations. Accession will codify
and strengthen the obligations Russia has undertaken already to align
themselves with the global rules-based trading system and provide a
firm foundation for progress.
Thank you.
Chairman Crane. Thank you, Mr. Ambassador. Mr. Liuzzi.
STATEMENT OF ROBERT LIUZZI, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, CF INDUSTRIES, LONG GROVE, ILLINOIS, AND CHAIRMAN, AD
HOC COMMITTEE OF DOMESTIC NITROGEN PRODUCERS
Mr. Liuzzi. Thank you, Mr. Chairman, for the opportunity to
be here. My name is Robert Liuzzi. I am President and chief
executive officer of CF Industries, a major farm cooperative
and a major producer of nitrogen and phosphate fertilizer. I am
testifying today in my capacity as Chairman of the Ad Hoc
Committee of Domestic Nitrogen Producers, a group of U.S.
companies that accounts for about 75 percent of total U.S.
nitrogen production.
The U.S. nitrogen fertilizer industry is a major strategic
industry for U.S. agriculture. Without our products, U.S.
farmers cannot efficiently produce food or fiber. U.S. farmers
consume approximately $9 to $10 billion worth of fertilizer
yearly, the majority of which is nitrogen fertilizer.
Russia is the world's largest exporter of nitrogen
fertilizer and a major competitor of ours. Accordingly, how the
United States structures its trading relationships with Russia
in legal terms has major implications for the economic well-
being of U.S. nitrogen producers.
The major threat posed to the U.S. industry by Russian
nitrogen producers derives from the fact that Russian energy
policies provide an artificial advantage to Russian nitrogen
fertilizer producers. Nitrogen is produced from natural gas
feedstock, which accounts for 50 to 80 percent of the cost of
producing such fertilizer. In the United States, we pay market
prices for our natural gas. In Russia, the government sets the
price of natural gas, the price at which it is supplied to
industrial users, including nitrogen manufacturers. That price
is, at best, 20 to 25 percent of the price of that same gas
which is sold for export into Europe. Moreover, one Russian
company, Gazprom, which produces and sells 94 percent of all
the natural gas in Russia, is 40 percent owned by the Russian
Government.
Given this artificially low price for natural gas, Russian
nitrogen producers can place tremendous volumes of nitrogen
product on the world market at prices far below what their
competitors from market economy countries such as ours must
charge to recover our costs. Unfair trade in Russian nitrogen
products has repeatedly done severe harm to U.S. producers.
Fortunately, however, we have been able to obtain antidumping
relief from massive surges of Russian nitrogen imports in the
past, as we did in 1987 against urea and in the year 2000
against ammonium nitrate.
Currently, there are several important administrative,
legislative, and negotiating processes underway that could
dramatically alter the legal structure governing U.S.-Russian
trade. The outcomes of these processes will determine how
Russian nitrogen will be sold in the United States and whether
Russian nitrogen will be sold at a fair price or dumped.
First, the U.S. Department of Commerce will soon decide
whether or not to revoke non-market economy status for Russia
under the antidumping law. Revocation of Russia's NME status
will have serious negative implications for domestic nitrogen
producers because we believe the antidumping law could not then
be meaningfully applied to imports of nitrogen from Russia. We
have urged the Commerce Department not to revoke Russia's NME
status as long as the energy sector in Russia continues to
operate on non-market principles. At a minimum, the Commerce
Department should retain NME status for the nitrogen fertilizer
sector and other energy-related sectors so long as Russia
continues to price energy and petrochemical feedstock at non-
market levels.
Second, at the administration's request, Congress may soon
decide to provide the President with the authority to terminate
the applicability to Russia of Title IV of the Trade Act 1974
and to proclaim permanent normal trade relation status for
Russia. Unfortunately, termination of Title IV will leave the
nitrogen industry without recourse to section 406, the market
disruption provision, for countries operating as non-market
economies. We urge Congress to retain section 406 for Russia,
at least until Russia joins the WTO or operates its natural gas
sector on a market basis. Alternatively, if Title IV is revoked
in its entirety, we urge the Congress to pass a similar
provision for Russia like the one in effect for China based on
section 406 that was passed as part of the China PNTR
legislation.
Finally, we have been working with USTR on Russia's
accession to the WTO. We believe that this negotiation affords
an opportunity to get Russia to reform its energy and natural
gas sector so that market forces and not the government
determine pricing. As long as Russia refuses to allow market
forces to determine the economics of nitrogen production in
Russia, their exports, and the prices of those exports, the NME
provisions of the dumping law and section 406 or some like
substitute must continue to apply to imports into the United
States of nitrogen from Russia.
In conclusion, Mr. Chairman, I ask that you and the
Subcommittee help us to address these issues regarding U.S.-
Russian trade so that the impact on our industry will not be so
negative. The legal structure of U.S.-Russian trade is our
number one public policy issue, and the decisions that the
government makes in this area will determine whether our
industry will survive or not. The stakes for us are high, and
we urgently request your assistance.
Thank you again, Mr. Chairman.
[The prepared statement of Mr. Liuzzi follows:]
Statement of Robert Liuzzi, President and Chief Executive Officer, CF
Industries, Long Grove, Illinois, and Chairman, Ad Hoc Committee of
Domestic Nitrogen Producers
Mr. Chairman and Members of the Subcommittee----
My name is Robert Liuzzi and I am the President and CEO of CF
Industries, a major U.S. farmer cooperative and producer of nitrogen
and phosphate fertilizers headquartered in Long Grove, Illinois. CF
supplies over 1 million farmers in 46 states with their fertilizer
needs. I appear before you today in my capacity as Chairman of the Ad
Hoc Committee of Domestic Nitrogen Producers, a group of U.S. producers
of nitrogen fertilizers. The other members on the Committee are El Paso
Corporation, Mississippi Chemical Corporation, PCS Nitrogen, Inc., and
Terra Industries, Inc. This group of companies accounts for
approximately 75 percent of total U.S. nitrogen fertilizer production.
I appreciate the opportunity to testify before the Subcommittee on
the subject of U.S.-Russian trade relations. Russia is the world's
largest exporter of nitrogen fertilizers and a major competitor of the
U.S. industry, particularly in the U.S. market. How the United States
structures its trading relationship with Russia in legal terms, both
domestically and internationally, has major implications for the
economic well-being of U.S. nitrogen producers.
There are several important administrative, legislative, and
negotiating processes underway that could dramatically alter the legal
structure governing U.S.-Russian trade. Indeed, the outcomes of these
processes will determine how Russian nitrogen fertilizers will be sold
in the U.S. market in the future. These outcomes could have an
extremely negative impact on U.S. producers. As a result, the U.S.
nitrogen industry is following developments closely and is making its
views and concerns known to U.S. officials in both the legislative and
executive branches of the U.S. government.
In my testimony today, I will first provide you with a brief
background on nitrogen fertilizer and its importance to U.S.
agriculture. Then I will describe the current situation with respect to
U.S.-Russian trade in nitrogen fertilizers and how current energy
policies in Russia provide massive unfair advantages to Russian
producers of nitrogen fertilizers. I will then briefly describe the
administrative, legislative, and negotiating processes underway that
will shape the future legal structure of U.S.-Russian trade, and our
positions on each of these processes. I will conclude with several
recommendations on the role the Subcommittee and the Congress could
play to ensure that these processes do not lead to outcomes that will
do grave damage to the domestic nitrogen industry.
Nitrogen Fertilizer and its Importance to U.S. Agriculture
Plants need adequate nutrients to germinate, grow and produce fruit
and seed. Although all of these nutrients can be found in the soil,
there are three primary nutrients--nitrogen (N), phosphate (P) and
potash (K)--that are not supplied naturally in sufficient quantity to
meet the needs of today's high-yielding production agriculture. As a
result, U.S. farmers spend $9-10 billion annually on commercial
fertilizers.
Of the three primary nutrients, nitrogen is generally considered to
be the most important. Commercial nitrogen fertilizers are produced
through a catalytic reaction between elemental nitrogen derived from
the air and hydrogen derived from natural gas. The primary product from
this reaction is anhydrous ammonia (NH3). Anhydrous ammonia
can be used directly as a commercial fertilizer or can be used as the
building block for producing other forms of nitrogen fertilizer such as
urea, ammonium nitrate, or nitrogen solutions. For a typical U.S.
producer, natural gas accounts for as much as 50-80 percent of the
total cash cost of production for a ton of nitrogen fertilizer,
depending on the product.
Historically, the domestic industry has supplied approximately 70-
75 percent of the nitrogen fertilizers used by U.S. farmers with
another 15 percent being supplied from nearby Canadian plants. The
domestic industry and a large portion of the Canadian industry were
constructed primarily to meet U.S. demand. Further, an extensive
distribution and storage infrastructure has been developed over the
years to ensure that American farmers would have adequate supplies at
the right time. This system was specifically designed to move and
handle large volumes of product from domestic production sites to the
major consuming areas, particularly ammonia moving through pipelines.
Consequently, without a strong domestic industry, there is no assurance
that U.S. farmers would be able to secure adequate volumes of nitrogen
fertilizer when they need it.
The importance of nitrogen fertilizers to today's high yielding
agriculture is evidenced by the fact that it is applied on 98 percent
of the corn, 88 percent of the wheat and 86 percent of the cotton
acreage planted in the United States. Recent data from the University
of Illinois indicates that, without nitrogen fertilizers, corn yields
would drop by as much as 30-50 percent. It is clear that without
nitrogen fertilizers and a strong domestic nitrogen industry, the U.S.
would not be able to maintain its position as a reliable, low cost
supplier of food and fiber products to the world market. In addition,
nitrogen fertilizer's contribution to low cost, efficient feed
production has allowed the U.S. to also become a major exporter of meat
products such as beef, pork and poultry. Similarly, without adequate
nitrogen supplies these exports would also likely decline.
Russian Trade in Nitrogen Fertilizer
Russia is the world's largest exporter of nitrogen fertilizers. The
Russian industry is heavily export-oriented and accounts for over 20
percent of global exports in this sector. With the collapse of the
Russian agricultural sector and the resultant drop in Russian
consumption of nitrogen fertilizers, Russian producers have looked to
overseas markets in recent years. In 2000, Russia accounted for about
20 percent of world anhydrous ammonia exports, 15 percent of world urea
exports, 24 percent of world nitrogen solution exports, and 40 percent
of world ammonium nitrate exports. Moreover, again in 2000, Russia
exported 92 percent of its end-product ammonia, 96 percent of its urea,
86 percent of its nitrogen solutions, and 41 percent of its ammonium
nitrate production.
Russian Energy Policies Provide An Artificial Advantage to Russian
Nitrogen Fertilizer Producers
The major reason for Russia's growing success as a nitrogen
exporter is the artificially low price of natural gas feedstock
provided to Russian producers. As previously noted, about 50-80 percent
of the cost of producing nitrogen fertilizer (depending on the type) is
the cost of the natural gas. In Russia, the government sets the price
at which natural gas is supplied to industrial users. The price of the
natural gas supplied to Russian nitrogen producers is best 20-25
percent of the price of that same gas sold for export from Russia, a
price determined by market forces.
The artificially low, government set price at which natural gas is
provided to Russian nitrogen fertilizer producers allows Russian
nitrogen fertilizer to be the lowest priced product on the world
market. Moreover, the setting of gas prices to Russian industry is not
simply the type of ``cost plus'' rate regulation that is common in
market economies. Indeed, according to the U.S. Department of Energy,
the government established price for natural gas in Russia is below the
cost of production. Given this low price for natural gas and extensive
nitrogen capacity built up during the Soviet era, Russian nitrogen
fertilizers are always priced well below nitrogen products from other
countries.
It is also important to realize that the Russian Government's
establishment of domestic natural gas prices that reflect neither
production costs nor supply and demand has other effects.
These low, non-market prices mean that inefficient Russian nitrogen
plants continue to operate and to export. They also mean that Gazprom,
which does not make a profit on its domestic gas sales, often barters
its gas for fertilizer and then exports it for hard currency. In the
absence of profitable domestic natural gas prices, and given the
availability of export markets for nitrogen fertilizer (the cost of
which is comprised 50-80 percent of natural gas), Gazprom has taken,
directly or indirectly, an interest in a substantial portion of the
Russian nitrogen fertilizer industry. The result is that artificially
low Russian gas prices have created a situation in which exporting
large volumes of nitrogen fertilizer has become an imperative. The U.S.
market is an obvious and repeated target for these exports.
While the U.S. nitrogen industry is modern, efficient, and well
situated to serve U.S. agricultural customers, unfair trade in Russian
nitrogen products has repeatedly done severe harm to U.S. producers. As
a result, the U.S. industry has had no choice in the past but to seek
and obtain antidumping relief from massive surges of Russian imports of
urea and ammonium nitrate. In 1987 it obtained an antidumping order
against Russian urea and in 2000 it obtained an antidumping suspension
agreement against ammonium nitrate. The U.S. industry is now preparing
to file an antidumping petition against Russian imports of urea-
ammonium nitrate solutions (UAN), another form of nitrogen fertilizer.
Commerce Department Will Soon Decide Whether To Revoke Non-Market
Economy (NME) Status for Russia Under the Antidumping Law--Revocation
Would Have Serious Negative Implications for Domestic Nitrogen
Producers
The U.S. industry has been able to obtain antidumping relief
against Russian imports of nitrogen fertilizers in the past primarily
because the Department of Commerce has, correctly, applied non-market
economy (``NME'') methodologies to determine if Russian imports have
been sold in the United States at dumped prices. NME treatment of
Russia has been critical because it means that the government-set
natural gas price is not used to determine fair pricing for the Russian
imports. Rather, the Department uses costs and prices from third
countries that operate as market economies and are at a similar stage
of economic development as Russia (such as Poland).
In an administrative proceeding currently underway, the Department
of Commerce will soon decide whether to revoke Russia's status as an
NME country under U.S. antidumping law. This is a decision to be made
solely by the Department based on its evaluation of six criteria set
forth in U.S. antidumping law, namely: 1) the degree of currency
convertibility; 2) free wage rate determination; 3) foreign investment;
4) government ownership or control of production; 5) government control
over the allocation of resources and prices; and 6) other appropriate
factors. While there is no statutory deadline for Commerce to make this
decision, it is widely expected that the decision will be made before
the next Bush-Putin summit in late May.
Revocation of Russia's NME status would have serious negative
consequences for the U.S. nitrogen industry, which has relied on U.S.
antidumping law to address unfairly priced Russian nitrogen imports
that have been dumped on the U.S. market. If NME status for Russia were
revoked, Commerce in the future would determine whether Russian export
prices are ``fair'' by examining the actual prices in Russia for
natural gas (and the derived prices for nitrogen fertilizer) despite
the fact that these are state-determined costs that are not market-
driven prices. If the government-determined natural gas prices are
used, or the resulting domestic prices are referenced, we believe that
there will not be a meaningful dumping analysis.
Revocation of Russia's NME status under the antidumping law will,
in effect, allow Russia to dump nitrogen fertilizers into the United
States with impunity. Russia has huge excess nitrogen capacity and, as
it has already proven, will be able to flood the U.S. market with
nitrogen imports, causing further harm to a U.S. nitrogen industry that
is currently struggling financially and has faced repeated waves of
Russian imports.
Given Russia's continuing central control over its key energy
sectors, we do not believe that Russia has transitioned sufficiently to
be considered a market economy country. It is clear, in any event, that
the energy and natural gas sectors do not operate as a market economy
in Russia. The Commerce Department has the authority to provide market
economy status individually to ``market-oriented industries (MOIs)''
within a non-market economy country, even if the rest of that country's
economy operates as a non-market economy. This would suggest that the
converse would also be true, namely, that a country's NME status could
be revoked (i.e., most industries declared to be MOIs), with exceptions
being made for non-market oriented industries. We have urged the
Commerce Department, if it intends to graduate Russia to market economy
status, to use this approach with respect to Russia. Specifically, we
have advocated to Commerce that, if it decides (incorrectly in our
view) to revoke NME status for Russia, it should nonetheless retain NME
status for the nitrogen fertilizer industry and other industries that
still do not operate on a market economy basis in Russia.
Congress May Soon Decide To Provide the President with Authority to
Terminate Applicability to Russia of Title IV of the Trade Act of 1974
(``Jackson-Vanik'')--Possible Adverse Consequences for Domestic
Nitrogen Producers
Last year, the Bush Administration requested that Congress pass
legislation that would terminate the applicability of Title IV of the
Trade Act of 1974 to Russia. In popular terms, this is referred to as
granting Permanent Normal Trade Relations status (``PNTR'') to Russia.
Supporters of such legislation argue that Title IV (also known as
``Jackson-Vanik'' in honor of its lead sponsors) is a relic of the Cold
War and should no longer be applicable to Russia since Russia now
accords its citizens the right to emigrate, travel freely, and return
to Russia without restriction; has committed itself to ensuring freedom
of religion; has made progress toward democratic reforms and creating a
free market system; and has generally taken positive steps to correct
the abuses against which the original passage of Title IV was intended
to provide leverage.
In response to the Bush Administration's request, Chairman Thomas
and Chairman Crane introduced H.R. 3553 on December 20, 2001. H.R. 3553
would authorize the President to determine that Title IV should no
longer apply to Russia and then to proclaim normal trade relations
treatment to the products of Russia. On the date of such proclamation,
Title IV would cease to apply to Russia.
We take no position at this time on whether the President should be
authorized to grant PNTR to Russia. We understand that there is a
debate on this point among those who believe such authorization should
be granted at once to the President and others who have suggested that
such authority be contingent upon Russia's accession to the World Trade
Organization (WTO).
On the other hand, if this Committee and the Congress do go forward
with legislation granting PNTR to Russia, we strongly urge that the
legislation provide that Section 406 of Title IV, or some similar
provision, would remain in effect with respect to Russia at least until
such time as Russia accedes to the WTO. Section 406 provides for a
remedy under U.S. law against imports from a non-market economy country
that cause market disruption.
It is interesting to note that legislation granting PNTR for China
contains a market disruption provision applicable to Chinese imports
that is patterned after Section 406. This market disruption provision
for China (Chapter 2 of Title IV of the Trade Act of 1974, as amended)
is to remain in effect for twelve years from the date that China
entered into the WTO.
From the standpoint of the U.S. nitrogen industry, retention in
U.S. law of Section 406, or a similar provision like the one in effect
for China, is absolutely essential for Russia at least until Russia
accedes to the WTO or operates its natural gas sector on a market
basis. This is particularly the case if the Commerce Department revokes
Russia's NME status under the antidumping law and leaves the U.S.
nitrogen industry no effective remedy under that statute. Retention of
Section 406 or a similar provision is also entirely appropriate to
continue to give effect to Article XI (``Market Disruption
Safeguards'') of the Agreement on Trade Relations Between the United
States and Russia of June 17, 1992. Revocation of Section 406, without
the passage of a similar replacement provision, would mean that there
would no longer exist under U.S. law any statutory provision to give
domestic legal effect to Article XI of the bilateral trade agreement.
Negotiations on Russian Accession to the WTO--Possibilities and
Prospects for Moving Russia to A Market Economy in the Natural Gas (and
Nitrogen Fertilizer) Sectors
In the last year, Russia has intensified its negotiations with
other WTO members, including the United States, on its terms of
accession to the WTO. The Russian Government under President Putin has
decided that Russian accession to the WTO will help to extend and
solidify Russia's economic reforms in the direction of a more market-
oriented economy with a more open and liberal trading regime. With the
accelerated pace of negotiations, many believe that it will be possible
to conclude Russian accession negotiations as early as the beginning of
2004.
Last year, the Ad Hoc Committee of Domestic Nitrogen Producers
began working with USTR to develop an appropriate approach for
addressing Russia's gas pricing policy as part of Russia's accession to
the WTO. In the view of the Ad Hoc Committee, these negotiations
represent the most favorable opportunity for the international
community to obtain Russian agreement to eliminate state control of
domestic industrial gas pricing and to subject such pricing to market
forces. Unless this is accomplished, either as part of Russia's
accession to the WTO or autonomously, the specter of massive, unfairly
priced Russian imports of nitrogen fertilizers will continue to hang
over the U.S. domestic nitrogen industry for the indefinite future.
It is too early to tell whether USTR will be able to negotiate a
market-oriented outcome on Russian industrial gas pricing as part of
the Russian WTO accession talks. However, they have continued to raise
the issue with the Russians and have pledged to continue to work with
the U.S. industry to find a long-term solution to this problem.
In the meantime, however, it is imperative that the U.S. nitrogen
fertilizer industry be able to address effectively under U.S. trade
remedy laws (especially the antidumping and market disruption laws) the
recurring problems caused by state-controlled natural gas pricing in
Russia. As long as Russia refuses to allow market forces to determine
the economics of Russian nitrogen fertilizer production, exports and
pricing, the NME provisions of U.S. antidumping law and Section 406 of
Title IV (or some appropriate variation thereof) must continue to apply
to Russian imports into the United States of nitrogen fertilizers.
Conclusion
The manner in which the United States structures its trading
relationship with Russia from a legal standpoint, both domestically and
internationally, has huge consequences for the economic well being of
the U.S. nitrogen fertilizer industry. This in turn has important
consequences for the well-being of U.S. agriculture. For that reason,
there is no more important public policy issue facing our industry
today than the legal structure of our trading relationship with Russia.
In my testimony, I have discussed three interrelated and
overlapping administrative, legislative, and negotiating developments
that will likely have a profound impact on this legal structure. From
the standpoint of the domestic nitrogen industry, decisions made in
these areas will determine whether we keep plants open or close them,
whether we continue to employ people or lay them off, and whether we
continue to supply nitrogen fertilizers to the U.S. agricultural
community or totally cede that business to offshore suppliers.
In light of my testimony, I would ask the Trade Subcommittee to
assist us with respect to the following:
(1) Congress should encourage Commerce not to revoke NME
status under the antidumping law for countries where important
sectors of the economy have not yet transitioned to market
economy status and where production economics for major
exported products remains distorted. Certainly, those sectors
that remain subject to significant state control should not be
graduated. This is clearly the case with respect to the Russian
nitrogen industry.
(2) Legislation granting the President authority to terminate
Section 406 of Title IV with respect to Russia should not be
passed at least until such time as Russia joins the WTO or the
bilateral trade agreement with Russia terminates, whichever is
later. If such authority is granted, the Congress should at the
same time enact legislation providing for a market disruption
safeguard against Russian imports similar to that which it
enacted with respect to China.
(3) USTR should be directed by Congress not to agree to terms
of accession to the WTO for Russia unless they include a
requirement that Russia reform its natural gas sector,
permitting industrial pricing for natural gas to be determined
according to market principles. If USTR cannot achieve this,
Russia's terms of accession should include appropriate
safeguards to allow appropriate defenses by other countries
against Russia's unfairly priced energy-derivative products,
particularly nitrogen fertilizers.
I again thank the Trade Subcommittee for allowing me to testify and
look forward to working with the Subcommittee on these important
matters.
Chairman Crane. Thank you, Mr. Liuzzi.
And now I would like to yield to our distinguished
colleague, Mr. Camp, to introduce his constituent, Mr. Wood.
Mr. Camp. Well, thank you, Mr. Chairman. Mr. Wood is the
16th President of the Michigan Farm Bureau, elected in December
2000, and is a fourth-generation Sanilac County dairy farmer.
For more than a decade, he served as Vice President of the 17-
member State Board of Directors and served on the Policy and
Development Committee which recommended State and national
policies for delegates, and has been very active certainly in
his farm organization, which is a family farm partnership, and
also very active in trying to recommend good legislation to
Congress.
Wayne, it is a pleasure to have you here. Welcome to the
Subcommittee.
STATEMENT OF WAYNE WOOD, PRESIDENT, MICHIGAN FARM BUREAU,
LANSING, MICHIGAN, ON BEHALF OF THE AMERICAN FARM BUREAU
FEDERATION
Mr. Wood. Thank you. Mr. Chairman, Ranking Member, and
distinguished Members of the Subcommittee, the American Farm
Bureau Federation, AFBF, appreciates the opportunity to testify
on the important issue of granting permanent normal trade
relation status to the Russian Federation.
I am Wayne Wood and, Mr. Chairman, I will make every
attempt to live up to any preconceived expectations that the
distinguished Mr. Camp has created for me.
The AFBF is the largest agricultural organization in the
Nation with over 5.1 million member families. Our producer
members cultivate every commodity grown in the United States
and Puerto Rico and rely on trade for more than 30 percent of
their farm income.
The ability to access Russia's market, on terms favorable
to our farmers and provide a level of certainty and
transparency, is critically important. That is why we welcome
the eventual membership of Russia into the World Trade
Organization to provide rules-based commitments for our
bilateral trade relationship. However, there are a number of
important issues outstanding in the agricultural concessions of
Russia's accession agreement that must be satisfactorily
addressed.
The Russian market remains largely untapped for our exports
for a number of reasons, not the least of which are
inconsistent regulations, arbitrary bans, and discriminatory
preferences for other countries. These practices are not in
accordance with international rules.
Chief among our concerns with Russia is the arbitrary,
unjustified ban that Russian authorities placed on our poultry
exports to its market last month. The ban lacked scientific
merit and immediately shut the door on our largest poultry
export market valued annually in excess of $660 million. The
U.S. poultry exports to that market represent nearly 40 percent
of our total foreign poultry shipments and constitute over 24
percent of the overall U.S.-Russian trade.
Russia has already established WTO-illegal minimum import
prices for meat and poultry, and recently the Duma passed
legislation authorizing the implementation of tariff rate
quotas, TRQs, for meat and poultry imports. We strongly oppose
the implementation of quantitative restrictions on Russian meat
and poultry imports.
The agricultural concessions offered by Russia to date for
its accession to the WTO are unacceptable. The Doha Declaration
calls for countries to eliminate export subsidies, yet Russia
has requested authorization to use $726 million in export
subsidies.
On domestic supports, Russia's accession offer calls for an
eightfold increase in its trade-distorting domestic supports
from $2 billion to $16 billion, which indicates that Russia
would like to further insulate its domestic producers from the
global market forces.
Farm Bureau supports Russia's accession into the WTO once
the following terms are met: One, elimination of agricultural
export subsidies, consistent with the WTO accession agreement
reached with China; two, Russian food and agricultural tariffs
should be reduced sharply. Under no circumstances should Russia
be permitted to establish new tariff rate quotas; three, trade-
distorting domestic support should be limited to a level equal
to or lower than historical levels of Russian support payments
to its agricultural sector; four, Russia should not be
permitted to nullify or impair its market access commitments
through the use of sanitary or phytosanitary barriers; and,
five, measures should be implemented to improve and standardize
Russia's customs procedures consistent with acceptable
international commercial practices.
The Farm Bureau seeks assurances regarding commitments to
seek the objectives outlined above for Russia's WTO accession.
We are working with the Administration closely on this matter
and appreciate the efforts of the Office of the U.S. Trade
Representative in attempting to build our sector's confidence
that a meaningful accession package will be achieved. We
encourage congressional endorsement of a strong WTO accession
package from Russia.
In closing, the overall U.S.-Russian trade relationship
strongly favors Russia with its exports to our markets reaching
$6.5 billion, compared to $2.5 billion in U.S. exports. Every
effort must be taken to ensure the arbitrary and unjustifiable
poultry ban is resolved in a manner that rapidly restores our
access to that market and ensures that actions of this nature
are not allowed to disrupt the important relationship in the
future. We recognize the significance of granting permanent
normal trade relation status to Russia, but regret that we
cannot endorse PNTR until this important issue is fully
resolved.
Mr. Chairman, I thank you very much for the opportunity to
present this position today, and I thank the distinguished
Congressman Camp for the very eloquent introduction.
[The prepared statement of Mr. Wood follows:]
Statement of Wayne Wood, President, Michigan Farm Bureau, Lansing,
Michigan, on behalf of the American Farm Bureau Federation
Mr. Chairman, Ranking Member and members of the Committee, the
American Farm Bureau Federation (AFBF) appreciates the opportunity to
testify on the important issue of granting Permanent Normal Trade
Relations status to the Russian Federation.
AFBF is the largest agricultural organization in the nation with
over 5. 1 million member families. Our producer members cultivate every
commodity grown in the United States and Puerto Rico and rely on trade
for more than 30 percent of their farm income.
The ability to access Russia's market, on terms that are favorable
to our farmers and provide a level of certainty and transparency, is
critically important. That is why we welcome the eventual membership of
Russia into the World Trade Organization to provide rules-based
commitments for our bilateral trade relationship. However, there are a
number of important issues outstanding in the agricultural concessions
of Russia's accession agreement that must be satisfactorily addressed.
The Russian market offers an important opportunity for the U.S.
food and agricultural sector. However, it remains a largely untapped
market for our exports for a number of reasons, not the least of which
are inconsistent regulations, arbitrary bans and discriminatory
preferences for other countries. These practices are not in accordance
with international rules. We must bring Russia into the global trading
body to ensure that it begins to play by the rules.
Chief among our concerns with Russia is the arbitrary, unjustified
ban that Russian authorities placed on our poultry exports to its
market last month. The ban lacked scientific merit and immediately shut
the door on our largest poultry export market valued annually in excess
of $660 million. U.S. poultry exports to that market represent nearly
40 percent of our total foreign poultry shipments and constitute over
24 percent of the overall U.S.-Russian trade.
This is the second ban that Russia has suddenly and arbitrarily
placed on our poultry exports. In 1996, the Russians imposed a poultry
ban on U.S. imports that was strikingly similar to the current ban.
Ultimately, a bilateral agreement was reached that resolved the issue.
Russian authorities are now alleging that the 1996 agreement is no
longer valid. The Russian market has been a top destination for our
poultry exports for nearly 10 years, mostly without incident. U.S.
poultry exports to Russia have steadily climbed, with significant
increases experienced immediately proceeding both poultry bans. This is
not without coincidence.
We also understand that Russian authorities, at the request of
their domestic poultry industry, are considering implementing new
quotas on imported poultry as early as this year. This would be a very
troubling development in advance of their accession to the WTO, which
is intended to further liberalize--not restrict--the Russian market.
Russia already has established WTO-illegal minimum import prices
for meat and poultry and recently the Duma passed legislation
authorizing the implementation of tariff-rate quotas (TRQ's) for meat
and poultry imports. Notwithstanding the minimum import price rules,
Russia has been the top U.S. poultry export market and one of the
largest markets for U.S. beef and pork exports. Implementation of the
TRQ's would be a severe blow to U.S. meat and poultry producers. We
strongly oppose the implementation of quantitative restrictions on
Russian meat and poultry imports.
The agricultural concessions offered by Russia to date for its
accession to the WTO are unacceptable. The Doha Declaration calls for
countries to eliminate export subsidies, yet Russia has requested
authorization to use $726 million in export subsidies. The trend is for
WTO accession countries to eliminate export subsidies, as China agreed
to do.
On domestic supports, Russia's accession offer calls for an eight-
fold increase in its trade distorting domestic supports from $2 billion
to $16 billion, which indicates that Russia would like to further
insulate its domestic producers from global market forces.
Farm Bureau supports Russia's accession into the WTO once the
following terms are met:
Export Subsidies
Elimination of agricultural export subsidies, consistent with the
WTO accession agreement reached with China.
Market Access
Russian food and agricultural tariffs should be reduced sharply.
Tariff reductions should be as comprehensive as possible and
implemented on an accelerated schedule.
Under no circumstances should Russia be permitted to establish
tariff rate quotas for products for which there is no recent history of
a TRQ.
Products that currently are subjected to a low tariff should be
bound at that rate, or lower.
Product Specific Market Access Issues
Equitable treatment should be accorded to all countries that export
product to Russia. Currently, wheat imports are assessed a twelve
percent tariff, except those originating from Commonwealth of
Independent States (CIS) countries (zero tariffs). Certain
discriminatory tariff discounts for soy oil imports that are extended
to other countries must be provided on a most favored nation basis.
The United States should seek to achieve final bound tariff levels
of no more than 10 percent for all cheese items and butter products.
Likewise, tariffs on skim milk powder and ice cream should also be
maintained at a level no higher than 10 percent.
Russia maintains a minimum price invoicing system on imported meat.
Establishing minimum or target prices for imported products is contrary
to WTO rules. This system should be abolished.
Feed grains currently enjoy access into Russia's market with a
five-percent tariff and are not subject to a TRQ. However, since
imports from CIS countries and some developing countries receive duty
free status, feed grain tariffs should be reduced from the five-percent
tariff.
There is a 10 percent value added tax (VAT) on all products
domestically produced or imported into Russia. This tax is not assessed
on Russian exports, and, given the inability of the Russian tax
collection system to accurately account for all the domestic production
or cross border trade, it is likely that a significant amount of
domestic production and imports from CIS countries escape the 10
percent VAT assessment, further disadvantaging U.S. exports.
Domestic Support Payments
The bar should not be lowered for Russia. Trade-distorting domestic
support should be limited to a level equal to, or lower than,
historical levels of Russian support payments to its agricultural
sector or that amount which other countries entering the WTO have been
held to as a percentage of their total value of agricultural
production. Amber box qualifying de minimis product specific and non-
product specific payments should not exceed 8. 5 percent, consistent
with the WTO accession agreement reached with China.
SPS Measures
Russia should meet all obligations specified under the WTO
Agreement on Sanitary and Phytosanitary Measures.
The administration should ensure that Russian sanitary and
phytosanitary measures that are not based on science, and/or represent
arbitrary and unjustifiable health and safety regulations, are removed
prior to Russia's accession to the WTO.
Russia should not be permitted to nullify or impair its market
access commitments through the use of sanitary barriers.
As part of its accession agreement, Russia should agree to
terminate sanitary measures that impede imports of U.S. agricultural
products and have no scientific basis.
Specific SPS issues to be addressed
Russia should agree to accept meats from all U.S. federally
inspected plants. Current Russian requirements for U.S. meats related
to trichinae and vesicular stomatitis that have no scientific basis,
and that impede market access, should be eliminated.
A bilateral agreement on pest/weed levels & quarantine issues
should be achieved. Russian restrictions on pests/weeds, that are not
necessary for quarantine purposes and lack scientific merit, should be
eliminated.
The U.S. government needs to ensure that products of biotechnology
do not become an impediment to trade. Prior to WTO accession, the
administration should get an official commitment from the Russian
Government to let trade of biotech products already in the marketplace
continue uninterrupted, and that any implementation of rules governing
biotechnology be transparent, timely, and scientifically based.
We oppose mandatory labeling requirements for genetically modified
foods or agricultural commodities, including any requirement that meats
be labeled to indicate that the animal had consumed genetically
modified feed.
Other Non-Tariff Barriers
Russia should agree to adopt internationally accepted standards/
specifications, including those pertaining to soybean and soybean
products. Current differences in the Russian GOST Standards (Russian
State Standards) and the FGIS and NOPA standards, as well as
differences in the method of analysis and terminology for the
standards, impede timely market access.
Trade Facilitation
Measures should be implemented to improve and standardize Russia's
customs procedures consistent with acceptable international commercial
practices.
Coordination of all the Russian governmental bodies and
documentation requirements necessary to import commodities and clear
cargo should be achieved. Currently there are numerous documents
required by various Russian governmental bodies with each promulgating
their own rules, absent central control. Approximately 80 percent of
goods imported into Russia require certificates, compared with only 16
percent in the EU.
Permanent Normal Trade Relations Status
Farm Bureau cannot support granting Permanent Normal Trade
Relations status to Russia until its ban on our poultry exports is
fully lifted and resumption of our poultry exports to the Russian
market approximates previous levels. We note that the de-listing of
certain poultry plants for export to Russia could be used to curtail
future imports, a development that we would strongly oppose.
In addition, the Farm Bureau seeks assurances regarding commitments
to seek Farm Bureau's objectives outlined above for Russia's WTO
accession. We are working with the administration closely on this
matter and appreciate the efforts of the Office of the United States
Trade Representative in attempting to build our sector's confidence
that a meaningful accession package that accommodates our concerns will
be achieved. We look forward to a firm commitment in this regard.
In closing, the overall U.S.-Russia trade relationship strongly
favors Russia with its exports to our market reaching $6.5 billion,
compared to $2.5 billion in U.S. exports. Unfortunately, our
agricultural trade relationship with Russia has been severely damaged
by its arbitrary and unjustifiable ban on our largest export to its
market, poultry. Every effort must be taken to ensure that this issue
is resolved in a manner that rapidly restores our access to that market
and ensures that actions of this nature are not allowed to disrupt the
important relationship that our country is trying to build with that
nation. We recognize the significance of granting Permanent Normal
Trade Relations status to Russia, but regret that we cannot endorse
PNTR until this important issue is fully resolved.
Chairman Crane. Thank you, Mr. Wood. Mr. Luks.
STATEMENT OF HAROLD PAUL LUKS, CHAIRMAN, NCSJ: ADVOCATES ON
BEHALF OF JEWS IN RUSSIA, UKRAINE, THE BALTIC STATES & EURASIA
Mr. Luks. Thank you, Mr. Chairman. My name is Harold Luks.
I am the Chairman of NCSJ. We are now known as the Advocates on
behalf of Jews in Russia, Ukraine, the Baltic States and
Eurasia. With me today is Mark Levin, our Executive Director,
who has been with us for more than 20 years.
As a former congressional staffer in the House and Senate,
I first worked on the waivers from Jackson-Vanik for Eastern
European countries in 1978. And today is a historic hearing. We
represent nearly 50 national Jewish organizations, including
the Anti-Defamation League and B'nai B'rith (which have asked
to be associated with this testimony), 300 local community
councils and federations across the country. Mr. Chairman, I
would like to take this opportunity to summarize our basic
points.
First, we support the graduation of Russia from the
Jackson-Vanik amendment, and we believe the Subcommittee should
focus on the concept of graduation because it represents a
turning point and an important step forward. We base our
position first on the fact that there is free emigration, but,
also that those individuals who are citizens of the Russian
Federation have the opportunity now to choose the religion,
culture, language, and faith of their forefathers, something
that was denied to them during 70 years of Soviet rule.
Second, there are problems in the Russian Federation
confronting the Jewish community. There are anti-Semitic
incidents, some in more places than in others. Two, the Russian
Government has interfered directly in Jewish communal affairs,
such as by unilaterally choosing who should be viewed as the
chief rabbi. And, police have broken into the central synagogue
in Moscow and conducted a search. There have been confiscatory
taxes imposed on Jewish organizations engaged in religious and
humanitarian affairs. Finally, the 1997 law on religion which
requires registration continues to be a problem.
Let me make one thing clear: We support graduation. We have
addressed these issues with someone whom we have come to regard
as a colleague and a voice of reason, and that is Ambassador
Ushakov. But we look to the future with some trepidation given
the uncertainties in the Russian Federation.
The focus of my remarks today is with respect to certain
deficiencies which we see, Mr. Crane, in the bill which you
have cosponsored, H.R. 3553.
I would like to take a moment to just step back in history.
In his State of the Union message to Congress in 1904, Teddy
Roosevelt condemned anti-Semitism in the Russian Empire. In
1911, the United States critiqued the U.S.-Russian trade treaty
that dated from 1832. And, in 1912, Mr. Crane, the United
States abrogated this treaty because of czarist policies
against their Jewish minority.
The Jackson-Vanik was not the beginning of the U.S.
commitment, and the Jackson-Vanik is not the end of this
commitment. It is something that preceded us and we hope will
live on after us, because it reflects the very best in American
values and commitments to human rights and religious freedom.
Therefore, we are asking the Subcommittee for three very
specific things, and they are set forth in our testimony:
Number one, expand the findings section; number two, include a
policy section within the bill that builds on the legacy left
to us by Teddy Roosevelt so there is no ambiguity as to what
the United States stands for; and, number three, in the
Committee report, to address some of the bilateral mechanisms
which were referenced by Mr. Lantos to continue the focus of
the Congress and the President on human rights and religious
freedom.
I would like to close by noting that, after the Holocaust,
Jews who survived still had a memory of Jewish religion and
faith because they were able to maintain it even in the camps.
After 73 years of Soviet rule, that memory became barely
recognizable. Jewish life in an organized way had all but
ceased. The Jackson-Vanik was an instrument, Mr. Crane, that
created an opportunity for Jews in the Soviet Union and now in
Russia to rediscover their past. That is a Jewish issue.
But let me say, the treatment of Jews in the Russian
Federation is a reflection of civil society, and when the
Jewish minority is treated well, there is a much greater
indication that Russia will become a Member of the community of
nations, engage in trade, welcome foreign investment, buy
planes from Boeing, buy American agriculture, and export to us.
We believe the two were never separated, and we believe they
continue to work together.
The substantial progress that has been achieved by Jackson-
Vanik and by many Members of this Subcommittee, in revitalizing
Jewish life, has been a success. But it still reaches a small
portion of the population. We want to make sure that our
message, that NCSJ's message and the message of other Jewish
organizations, can continue to be made inside Russia.
Congress can help to secure their future by articulating a
clear U.S. policy: that they should have the freedom to choose
their faith and their culture.
Mr. Crane, Mr. Levin, this is a noble cause, and we commend
the good work of this Subcommittee and look forward to your
good work to perfect the legislation before you.
Thank you very much.
[The prepared statement of Mr. Luks follows:]
Statement of Harold Paul Luks, Chairman, NCSJ: Advocates on behalf of
Jews in Russia, Ukraine, the Baltic States & Eurasia
Good morning, Mr. Chairman, Representative Levin, and Members of
the Subcommittee. My name is Harold Paul Luks. I am the Chairman of
NCSJ: Advocates on behalf of Jews in Russia, Ukraine, the Baltic States
& Eurasia, i.e., the Former Soviet Union (``FSU''). With me today is
Mark Levin, NCSJ's Executive Director, who has been with our
organization for more than 20 years.
As a former Congressional staffer, I first worked on extending
Jackson-Vanik waivers for Eastern European countries in 1978 and have
been deeply involved in international trade matters since that time. As
member of NCSJ, and Chair of its Jackson-Vanik Committee for many
years, I have had the privilege of working on the linkage among
international trade, emigration, and religious freedom.
NCSJ, representing nearly 50 national organizations and more than
300 local community-based federations, community councils, and
committees on Jews in the FSU, speaks for the organized American Jewish
community on issues affecting the Jewish minority in the FSU. My
organization, formerly known as the National Conference on Soviet
Jewry, changed its name several years ago to reflect the emergence of
independent successor states. We evaluate graduation for each successor
state based on a set of country-specific issues, achievements, and
challenges.\1\
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\1\ For an assessment of these issues, a copy of JCSJ's 2000/01
Country Reports is available upon request by contacting our office in
Washington or online at www.ncsj.org.
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For three decades, NCSJ has mobilized public opinion to oppose
human rights violations in the FSU and the successor states, including
such efforts as the 1987 March on Washington--``Freedom Sunday for
Soviet Jews''--which drew an estimated 250,000. As evidence of our
community's continuing consensus, several major American Jewish
organizations have asked to be associated with our testimony today.
Members of this Subcommittee and the full Committee have earned a
place of merit in the struggle to save the Jewish people in the Soviet
Union from the concerted policy of the Communist Party to extinguish
their religion, culture, and language. Those who met with refuseniks
under the eyes of the KGB, delivered Hebrew texts when they were banned
and stood for the linkage between human rights and trade policy gave
courage to those who struggled for freedom. Jackson-Vanik is a
bipartisan issue. Just as former Chairman Archer was an original
cosponsor of the Amendment, we wish to acknowledge the work of
Representative Tom Lantos who has devoted many hours to advancing the
cause of human rights and developing a new Congressional-Executive
Branch framework following the graduation of the Russian Federation.
The Position of NCSJ on Graduation
Mr. Chairman, NCSJ supports the graduation of the Russian
Federation from Title IV of the Trade Act of 1974--the Jackson, Vanik,
Archer, Mills Amendment (``Jackson-Vanik''). Our position on the
graduation of the Russian Federation does not imply that we are
prepared, at this time, to support the graduation of the other FSU
successor states to which Jackson-Vanik still applies. It is not the
position of NCSJ that the terms of Jackson-Vanik should apply in
perpetuity to the former republics of the Soviet Union. However,
graduation for any successor state must be conditioned upon the
development of a legal structure that guarantees internationally
recognized human rights for its Jewish citizens, and other religious
and national/ethnic minorities. In the absence of such conditions,
there is in our opinion no possibility of establishing democratic
institutions applicable to all citizens.
However, the struggle for the freedom of Soviet Jewry contributed
to the transformation of the Soviet Union into the Newly Independent
States (``NIS''), a process that is not complete. The American
diplomatic commitment to secure freedom for Russian Jewry (that first
found expression before World War One) has not diminished, and the task
before this Committee requires a new legislative formulation, which
NCSJ will advocate this morning. The opening of the doors to emigration
is not the exclusive factor on which we base our support for
graduation. NCSJ's position on graduation is based on substantial
progress toward two factors. These are:
First, freedom of emigration for all Jews in accordance with
the Helsinki Accords and established principles of
international law, and
Second, for those who choose remain in Russia, freedom to
practice the religion of their forbears, to participate in the
unique aspects of Jewish culture and language, unfettered by
governmental interference.
Our support for graduation is not without a reasoned measure of
apprehension.
Across the Russian Federation, the severity and
frequency of anti-Semitic incidents have been increasing. These
have included arson attacks, synagogue and cemetery
desecrations, and direct assaults into Jewish institutions.
The extent to which anti-Semitic acts are
investigated, and perpetrators are prosecuted, requires greater
attention from Moscow and local governmental authorities.
Kremlin officials have either tolerated or actively
promoted government interference in Jewish intra-communal
affairs. This has manifested itself in (1) pressuring
individuals to decline leadership positions in specific Jewish
organizations, (2) threats to withhold entry visas to guests of
the community, (3) unilaterally replacing the Chief Rabbi of
Russia in official fora, refusing to re-register the Moscow
Jewish Community, and (4) interference in intra-communal
disputes as a means to solidify Kremlin influence and control.
At times, governmental interference has become
outright intimidation, such as the illegal search of the Choral
Synagogue, the main synagogue in Moscow.
Unreasonable, and at times confiscatory taxes have
been imposed on the donations provided to organizations
dedicated to performing humanitarian tasks.
In prior position papers, NCSJ has drawn attention to the
dichotomies inherent in Russian President Vladimir Putin's rise to
power. He has clearly demonstrated his support for the revival of
Jewish life. He has visited the Jewish Community Center in Moscow,
participated in lighting the Chanukah menorah, issued statements
condemning anti-Semitism, spoken positively about supporting Jewish
renewal, and developed warm relations with successive Israeli
governments. But seemingly contradicting these actions are the past use
of anti-Semitism in promoting Mr. Putin's candidacy for President, the
election rhetoric of his political allies in elections for the Duma,
and the difficulties posed by Russia's restrictive Law on Religion.
In our meeting with President Putin on November 13th in Washington,
he spoke very personally and firmly about his government's, and his own
personal, commitment to promoting Jewish communal life and to combating
popular anti-Semitism and xenophobia. As impressed as my fellow
community leaders and I were with Mr. Putin's remarks, it is Russia's
formal statements and assurances, and the legislative context in which
Russia may be graduated, that best assure ``the continued dedication of
the United States to fundamental human rights,'' which are the opening
words of the Jackson-Vanik Amendment (22 U.S.C. 2431).
The Position of NCSJ on H.R. 3553
With respect to the present legislation before the Subcommittee,
NCSJ wishes to express its appreciation to Members and their personal
and Committee staffs, both majority and minority, who have consulted
with us on the graduation of Russia and the future status of the other
FSU states under Jackson-Vanik.
Mr. Chairman, as noted above, we believe that the Committee on Ways
and Means has a historic opportunity to restate the American commitment
to securing the future for Jews in the Russian Federation and the NIS.
Before and after the President's announcement on the graduation of
Russia, we have heard that Jackson-Vanik is: a relic of the Cold War;
an impediment to normalizing U.S.-Russia trade relations; a mechanism
that never achieved its objectives; and a statute that speaks only of
emigration. These are the statements of those who are not familiar with
or choose to ignore American diplomatic history, the Amendment's
legislative history, and most importantly, the profound effect it has
had on those who struggled to reassert their Jewish identity either by
emigration or the restoration of organized Jewish communal life.
A. Additional ``Findings'' Should be Included in H.R. 3553
H.R. 3553, as introduced, contains a number of positive
``Findings'' that reflect the language adopted by the Committee and
Congress in graduating Georgia. However, there are certain additional
provisions that should be incorporated into H.R. 3553. Before reviewing
these, Mr. Chairman, permit me to summarize the basis for our request.
In his Annual Message to Congress of 1904, President Theodore
Roosevelt denounced Czarist persecution of the Jews. Moreover, in 1912,
the United States cancelled the 1832 U.S.-Russia trade treaty because
of American displeasure with the Russian Government's treatment of its
Jewish minority. Thus, the enactment of Title IV in the Trade Act of
1974 was not a departure for Congress and American diplomacy, but a
continuation of a longstanding commitment. The voluminous record of
resolutions, letters, appeals and meetings by Members of this Committee
relating to this struggle will continue to have meaning if H.R. 3553 is
expanded to include the following points:
Russia has continued to return religious and communal
properties confiscated from national and religious minorities
during the Soviet period, facilitating the reemergence of these
communities in the national life of the Russian Federation; and
has committed, including through an exchange of letters, to
continue its efforts toward the restitution of such properties
in accordance with existing Russian laws.\2\
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\2\ This would replace Section 1, paragraph 7, in H.R. 3553.
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Russia is committed to addressing issues related to its
national and religious minorities as a member of the
Organization for Security and Cooperation in Europe (OSCE), and
to adopt measures for ensuring that persons belonging to
national minorities have full equality individually, as well as
in community with other members of their group.
Russia is committed to the 1990 Copenhagen Document of the
OSCE affirming the right of national minorities to establish
and maintain their own educational, cultural and religious
institutions, organizations or associations and to establish
and maintain unimpeded contacts among themselves within their
country as well as contacts across frontiers.
Russia has enacted statutory provisions to provide protection
against incitement to violence against persons or groups based
on national, racial, ethnic or religious discrimination,
hostility or hatred, including anti-Semitism, and has adopted a
four-year national program for preventing extremism and
promoting tolerance in Russian society.
Recognition that the exchange of letters between the
Governments of Russia and the United States, and related
assurances, are viewed by Congress as binding obligations by
the Russian Federation.
NCSJ believes that any legislation to graduate successor states
from the Jackson-Vanik Amendment should acknowledge assurances from the
respective governments regarding freedom of emigration and other human
rights. In other words, there should be an assurance provided to the
United States regarding these matters. I would also suggest that this
Subcommittee, in consultation with other appropriate bodies within the
United States Congress, use the opportunity of graduating Russia to
review an inventory of remaining bilateral and unilateral mechanisms
and commitments available to our Legislative and Executive Branches for
addressing and resolving concerns relating to human rights and
religious freedom in Russia.
The trade aspects of Jackson-Vanik, intended to advance a decidedly
non-trade agenda, have tied human rights criteria to bilateral
commercial trade relations. This has now afforded the Subcommittee on
Trade a historic opportunity to formulate and adopt a new framework
that acknowledges Russia's considerable progress, and creates a new
paradigm for continuing America's century-long commitment to religious
freedom in Russia.
For over two decades, our advocacy of Jackson-Vanik has led some in
the business community to express the view that we were concerned with
a religious issue that should be divorced from the business of
international trade. To be sure, for NCSJ and its constituent
organizations, Jackson-Vanik is a religious issue--a Jewish issue.
Despite the collapse of the Soviet Union and substantial emigration,
Russia remains home for the world's third-largest Jewish population.
These people now have the potential to reenter the Jewish world.
We have always regarded Russia's treatment of its Jewish minority
as a barometer of its potential to reenter the community of nations and
to become integrated into the economic lifeline of world trade. Without
question, a vibrant, revitalized Jewish community is a reflection of an
emerging civil society. Such a society, based on laws and implementing
regulations, is a prerequisite for long-term, sustained economic
growth, trade, and foreign investment.
B. H.R. 3553 Should Include a New Section on U.S. Policy Objectives
The current bill acknowledges some of Russia's commitments which
formed the basis for NCSJ's support of graduation from Jackson-Vanik.
However, the current bill does not set forth U.S. policy objectives
post graduation. For this reason, we urge that the Committee adopt a
``Policy'' subsection reflecting Administration assurances and based on
the following:
(1) Urging the Russian Federation to
(A) continue its current policy regarding the free
emigration of its citizens;
(B) safeguard religious liberty throughout the Russian
Federation;
(C) prevent the requirement that religious organizations be
registered from being abused to curtail activities of religious
organizations;
(D) enforce existing Russian laws at the national and local
level to combat ethnic, religious, and racial discrimination
and violence; and
(E) expand the restitution of religious and communal
properties, including establishing a legal framework for
completion of restitution in the future; and
(2) Continuing rigorous U.S. monitoring of human rights
issues in the Russian Federation, including the issues
described in paragraph (1), providing assistance to
nongovernmental organizations and human rights groups involved
in human rights activities in the Russian Federation, and
establishing ongoing discussions with the Russian Federation
regarding such issues, including the participation of U.S. and
Russian non-governmental organizations in such discussions.
Incorporation of such language will provide a firm basis for
continuing the longstanding commitment of successive administrations
and Congress to securing religious freedom in Russia, which is a multi-
ethnic and multi-religious state.
The Ways and Means Committee made clear its policy when Jackson-
Vanik was adopted. As noted above, former Representative Archer was an
original sponsor of the ``Freedom of Emigration Act,'' the initiative
which became the Jackson-Vanik Amendment. In his floor statement of
February 7, 1973, he said, in part:
``By taking this action we call upon the Government of the Union of
Soviet Socialist Republics to cease persecution of these people on the
basis of religious belief.
``We also call upon the Soviet Union to release all prisoners,
those already sentenced and those due to stand trial, arrested as a
result of their attempt to exercise their religious beliefs and to
study their religious heritage and culture.''
Representative Archer concluded his statement with the following
credo: ``We do not need foreign trade enough to do business with
countries that practice religious discrimination and this form of
bondage.'' The Report of the Committee on Finance for the Trade Reform
Act of 1974 (H.R. 10710) emphasized that Jackson-Vanik extended beyond
emigration policy. The Report states an ultimate motivation beyond that
of emigration: ``The Committee believes that it is equally reasonable
to establish conditions on all basic human rights, including the right
to emigrate as well as basic property rights, before extending broad
concessions to communist countries.'' Writing in 1980, the late Senator
Henry M. ``Scoop'' Jackson reiterated that this law ``has long been the
principal hope of thousands of Soviet Jews and others who have
struggled to obtain visas so that they might emigrate to Israel, the
United States, or other countries where they are free to live and
worship according to their faith--a freedom denied them in the Soviet
Union.'' Now, the time has come to develop a new formulation that will
continue to focus the attention of Congress and the Executive Branch on
the issues that led to the enactment of the Jackson-Vanik Amendment.
Background to Jackson-Vanik
The Jackson-Vanik Amendment in Title IV of the Trade Act of 1974
(P.L. 93-618, 19 U.S.C. 2432) was enacted to ``assure the continued
dedication of the United States to fundamental human rights,'' and in
so doing sought to eliminate barriers to emigration, an internationally
recognized human right. Congress has recognized that Jackson-Vanik has
become an instrument of U.S. policy for assessing certain countries'
observance of basic human rights and the protection of minorities.
These principles were reflected in the graduation of Georgia from
Jackson-Vanik in 2000, as well as previous examples (e.g., the Kyrgyz
Republic).
Since before the enactment of the Trade Act of 1974, NCSJ has
worked for free emigration from the Soviet Union and now from the
successor states of the FSU. Numerous Congressional resolutions and
Presidential statements confirm that Jackson-Vanik encouraged the
Soviet Union and its successor states to liberalize emigration policy
and, ultimately, to permit a mass emigration to Israel and other
countries. Today, many take for granted free emigration from the FSU.
For NCSJ and the Jewish community, of course, free emigration can never
be taken for granted. For us, it is celebrated. The Passover festival,
which we concluded last week, reenacts the Biblical exodus of the
Jewish people from Egyptian bondage. The Passover observances hosted at
the United States Embassy in Moscow in the 1980s provided moral support
to thousands of refuseniks and Prisoners of Zion, such as Natan
(Anatoly) Sharansky. It is for these reasons, and the unprecedented
mobilization by American Jews and other human rights advocates, that we
do not take unrestricted emigration for granted. Unfortunately, we must
acknowledge that there remains an undercurrent of anti-Semitic violence
within the Russian Federation. For that reason, the United States needs
to be on record, in legislation approved by Congress and signed into
law by the President, that the United States will not stand aside if
political circumstances should turn against the Russian Jewish
community.
NCSJ believes that economic growth in Russia is in the strategic
interest of the United States. We devoted considerable resources to
support enactment of the 1992 Freedom Support Act, and continue to
support the current assistance package as we have advised every Member
of Congress. NCSJ is an active participant in a broad-based coalition
of business, public interest and ethnic organizations that supports
full funding for U.S. foreign assistance through the Function 150
account. As with freedom of emigration, building democratic societies
in the wake of Soviet tyranny is hardly something we can afford to take
for granted.
Beginning in 1989, the NCSJ Board of Governors endorsed annual
waivers of the Jackson-Vanik Amendment for the Soviet Union and its
successor states. This support was contingent on (1) the President's
affirmation that waivers would encourage emigration and progress on
other humanitarian issues; and (2) assurances concerning a commitment
of further progress in connection with these concerns. Since 1994, NCSJ
has supported semi-annual findings by the President that Russia, and
most of the successor states, are in compliance with Jackson-Vanik's
emigration provisions and have demonstrated progress on protection of
minority rights.
We have never lost sight of the original motivation for Jackson-
Vanik. Representative Archer's words, like those of so many of his
colleagues, underscore the emphasis on religious freedom. In 1974,
emigration constituted the only vehicle for ensuring that Soviet Jews
could live freely as Jews. Dr. William Korey, a leading scholar on
human rights, has noted that the late Andrei Sakharov endorsed Jackson-
Vanik not only as an emigration tool. Dr. Sakharov foresaw that freer
emigration would compel the Soviet regime to observe human rights
generally or risk losing valuable citizens to other countries.
Graduation from Jackson-Vanik was never restricted to narrow
questions of emigration. Terminating application of the Amendment to a
successor state necessarily takes into account a set of broad human
rights considerations that evolved since implementation of the Trade
Act. Especially in the post-Soviet landscape, emigration, the ability
of Jews and other minorities to identify with their cultural heritage,
restitution of communal property, governmental responses to anti-
Semitism and xenophobia as well as commitments on implementation of
laws and practices ensuring minority protection have become part of the
test for graduation. These are reasonable standards and, in effect,
confirm the transition from the legacy of communism to the development
of a civil society.
In our consultations with the Government of the Russian Federation,
discussions with Executive Branch officials and contacts with so many
Members of the House and Senate, we have communicated our support for
Russia's graduation. We know that President Putin, his government,
members of the Duma and members of the Russian intelligentsia will
carefully review the legislation approved by this Committee and
ultimately passed by the United States Congress. In simple terms, Mr.
Chairman, you have the ability to send an important message that will
be reviewed by multiple audiences in the United States, Russia, and the
FSU.
Support for Permanent Normal Trade Relations
Graduation of any successor state from the terms of Jackson-Vanik
must be based upon an assessment of emigration policies as reflected in
law and fact, and, no less importantly, other national policies that
affect the status of ethnic and religious minorities, such as the
Jewish community. Virtually every Member of Congress has subscribed to
this formulation. Therefore, graduation should be conditioned upon
Congressional consideration of the following standards and conditions
that provide the basis for the language we propose be incorporated into
H.R. 3553.
An unrestricted right of emigration, protection of minority
rights, including legislation to provide protection against
incitement to violence against persons or groups based on
various criteria, including religion (e.g., anti-Semitism), and
the exercise of freedom of religion;
The incorporation of human rights standards (including
freedom of emigration and religion) into the country's
constitutional and legal structure, their protection by the
judiciary, and the implementation of administrative practices
that do not detract from such rights; and
Participation in bilateral and multilateral mechanisms
related to the observance of religious freedom and basic human
rights, demonstrating a commitment to these freedoms and
rights.
Mr. Chairman, Russian Jewish life has increasingly flourished since
the Soviet collapse. Thousands of students--young and old--across the
country now study their Jewish heritage. Welfare activities proceed
generally uninhibited by official interference. Jews everywhere are
forming congregations and cultural groups. Jewish communities are
forming in places where we believed Jewish life had been crushed by the
Soviets in the 1920s, as a consequence of the Holocaust, or through
Stalinist persecutions. Russia's friendship with Israel is largely a
testament to over one million Soviet emigres who have become Israeli
citizens since Jackson-Vanik was enacted. Russia's evolving
relationship with the United States offers potential for progress in
ways we did not imagine just over a decade ago. Although it is
unrelated to Jackson-Vanik, I must also recognize the critical support
and cooperation that Russia provides to the ongoing campaign in support
of our collective struggle against international terror.
Additional Protections for Religious Freedom
Mr. Chairman and Members of the Subcommittee, we encourage the
Congress to approve Russia's graduation from Jackson-Vanik, and to do
so through legislation that reflects and acknowledges the
accomplishments of Title IV with respect to the Russian Federation. As
we have reiterated throughout our testimony, we believe that Congress
and the President must continue to focus attention on Jackson-Vanik-
related issues. Paraphrasing Jackson-Vanik, to assure the continued
dedication of the United States to human rights in Russia, Congress
should consider the following measures so as to make certain that there
is an unambiguous record documenting the objectives of U.S. policy and
the standards to which the United States expects the Russian
Federation's adherence. The Committee's report should reference the
following items:
Executive Branch prerogatives such as the International
Emergency Economic Powers Act (``IEEPA'') and the resources at
the disposal of the Ambassador at Large for International
Religious Freedom;
Legislative oversight of human rights and matters involving
linking of religious freedom to U.S. assistance to Russia. This
can be accomplished through Legislative-Executive Branch
partnerships, such as Congressional participation in
multilateral fora including the OSCE Parliamentary Assembly;
The Department of State's Annual Report on Human Rights
Practices and the Report on International Religious Freedom,
which include sections that address specifically matters
affecting the Jewish community;
Official bodies such as the U.S. Commission for International
Religious Freedom and the U.S. Commission for the Preservation
of America's Heritage Abroad, which have opened new avenues for
communication with FSU successor governments and local
administrators on minority rights issues and the preservation
of communal properties (e.g., synagogues, schools, cemeteries
and mass-murder sites dating from the Holocaust).
U.S. Government initiatives to convene meetings of
Congressional, Administration and non-governmental
organizations (``NGOs''), both American and Russian, including
the Roundtable on Religious Freedom in Russia;
The exchange of letters on religious freedom between the
Russian and U.S. governments, related assurances,
communications between the Administration and Congress, and the
multilateral treaties and agreements to which Russia is a
party, including the Helsinki Final Act and subsequent OSCE
documents.
The Legacy of the Jackson-Vanik Amendment
In the quarter-century since the adoption of Jackson-Vanik, its
boldness has contributed to a sea change in U.S. and Russian policies,
and in some measure to the roadmap for the 21st century. In announcing
his intent to graduate Russia, President George W. Bush underscored the
importance of Russian assurances on religious freedom. The President
recently wrote to American Jewish organizations about Jackson-Vanik:
``The Jewish community has helped write a proud chapter in the history
of American foreign policy, but the work is not complete. We need your
continued advocacy and support . . .'' (I ask, Mr. Chairman, that the
President's letter to NCSJ of November 19, 2001, be entered into the
record of this hearing.) Today, the U.S. Government expects,
appreciates and invites public interest in the internal human rights
policies of other countries, just as we do at home.
The continuing force and effect of Jackson-Vanik are reflected in
the correspondence between Secretary of State Colin Powell and Russian
Foreign Minister Igor Ivanov. Foreign Minister Ivanov's November 13
letter to Secretary Powell welcomes the Bush administration's decision
to graduate Russia, stresses his country's commitment to religious
freedom and minority rights, and applauds the ``genuine renaissance''
of Russian Jewish life. As a testament to the reordering of post-Soviet
priorities, Mr. Ivanov concludes his historic letter by reaffirming
``our commitment to these principles [of religious freedom], which we
consider an indispensable condition for Russia's development as a
multiethnic country based on the principles of civil society.''
The purpose of Jackson-Vanik was never to promote trade, but rather
to ensure that free trade would never be confused for the ultimate goal
of U.S. foreign policy. Thomas Jefferson wrote of America in 1824 that
``even should the cloud of barbarism and despotism again obscure the
science and liberties of Europe, this country remains to preserve and
restore light and liberty to them.'' As a result of Jackson-Vanik,
never again can critics in either country credibly claim that religious
freedom has no substantive place in U.S.-Russian relations or that
internal government practices are a solely domestic concern.
To conclude, let me emphasize what graduation of Russia does not
mean for the Jewish community. It does not mean Russian anti-Semitism
has disappeared, or that the Russian authorities are doing all they
could to eradicate racism, xenophobia, and intolerance. Nor does it
mean that the gains for Jewish life in Russia are irreversible; this
progress remains vulnerable to the voices of darker days, voices that
can be heard still in Russian political life and in the Duma.
When World War Two ended, there remained tens of thousands of Jews
in Europe who lost everything--their families, homes, communities, and
personal possessions. What remained was an indomitable spirit to
survive and to preserve their Jewish heritage. In the FSU, there still
are hundreds of thousands of persons who would be welcome members of
the Jewish community. However, 73 years of communist rule eviscerated
virtually all aspects of Jewish life in the Soviet Union. Rabbis and
religious leaders were either expelled or disappeared. Religious and
Jewish cultural institutions were closed, their assets seized and
properties confiscated. With the passage of generations, memory of
Judaism dissipated and became barely recognizable. Although Soviet
support was a critical factor in the creation of Israel, expressing
Jewish identity in the 1950s was, at times, life-threatening. Through
the balance of the 20th century, Soviet policy achieved one of its main
objectives regarding its Jewish citizens: a population largely devoid
of Jewish identity or fearful of expressing it. Completion of this goal
was thwarted because the dissidents, refuseniks and Hebrew teachers
could no longer just disappear. This was, in part, due to the spotlight
Jackson-Vanik shined on human rights.
Jackson-Vanik was instrumental in creating the opportunity for
Soviet Jewry, now Russian Jewry, to find new ways to express their
identity. The story of those who will remain in Russia is yet to be
written. The substantial progress in revitalizing Jewish life has
reached a small percentage of this population. Their future as part of
the Jewish People remains tentative. NCSJ and our member organizations
are working to inspire a Jewish revival. Congress can help to secure
their future by articulating a clear United States policy that they
should have the freedom to choose their faith and culture. This is a
noble cause and we look forward to the continued good work of this
Committee.
Thank you, Mr. Chairman, for this opportunity to share the views of
NCSJ and the organized American Jewish community on an issue which has
been and continues to be of utmost importance to us, to Jewish
communities everywhere, and to our brethren in the FSU.
______
Attachment: Letter from President Bush to Harold Paul Luks
November 19, 2001
Mr. Harold P. Luks
Chairman
NCSJ
1640 Rhode Island Avenue, N.W.
Suite 501
Washington, D.C. 20036-3278
Dear Mr. Luks:
In my meeting last week with President Putin of Russia, we
discussed a matter of particular interest to the American Jewish
community: the graduation of Russia from the provisions of the 1974
Jackson-Vanik Amendment that linked emigration rights from the Soviet
Union to American trade policy. Mr. Putin and I agreed that on the
basis of the Russian Government's consistent, nearly decade-long
allowance of unfettered emigration, Russia merits permanent normal
trade relations status. To this end, I intend to work with the 107th
Congress to pass the necessary legislation for removing Jackson-Vanik
requirements for Russia.
I know the American Jewish community maintains a great and
continuing interest in the human rights situation in Russia,
particularly as it affects Russian Jews. So does my Administration. Mr.
Putin provided clear assurances that his government would take concrete
actions to promote our common interest in core human rights and basic
freedoms. He stated that anti-Semitism has no place in a modern Russia.
My Administration is fully committed to work with Russia to bring about
progress in human rights, including safeguarding of religious liberty,
enforcement of hate crimes laws, and restitution of religious community
property.
Please accept my deep appreciation for the American Jewish
community's steadfast commitment to defend the basic rights of Soviet
Jewry. Through the darkest days of the Cold War and the tumult of the
post-Soviet era, American Jews never wavered in this cause. Your
decades-long struggle has won a once unthinkable victory. Russian Jews
are now free to emigrate freely from Russia.
The Jewish community has helped write a proud chapter in the
history of American foreign relations, but the work is not complete. We
need your continued advocacy and support, and my Administration looks
forward to working closely with you on these challenges.
Sincerely,
/s./
George W. Bush
Chairman Crane. Thank you, Mr. Luks.
Mr. Edlin.
STATEMENT OF RICHARD A. EDLIN, PARTNER, GREENBERG TRAURIG LLP,
AND U.S. COUNSEL, SPI SPIRITS LTD, NETHERLANDS
Mr. Edlin. Mr. Chairman, honorable Members of the
Subcommittee, thank you very much for the opportunity to come
and speak before you today. As it is late and I am last, I will
take that opportunity to try to be brief as well. I am here
representing the interests of Stolichnaya Vodka and its
business partners throughout the United States and, indeed, the
rest of the world.
Mr. Chairman, vodka is the second largest industry in
Russia. Prior to the fall of the Soviet Union, trademarks to
vodka were state-owned. They were owned by a company called
SPI. Following the fall of the Soviet Union and the reforms of
perestroika, those rights to those trademarks were passed from
the state-owned company to a privately owned company of the
same name, SPI. And since that time, in 1991, when
privatization occurred, our client has invested tens of
millions of dollars rebuilding the brand of Stolichnaya so that
it is now, I believe, the largest selling distilled spirit in
the world.
In that time, we have required our trade partners to
similarly invest millions of dollars in building the brand
Stolichnaya for sale throughout the world. Now, some 10 or 11
years after privatization has occurred, the Russian Government
has determined to take back the trademarks and nationalize and
monopolize the vodka industry.
Now, in testimony before the Commerce Department, Deputy
Minister Sharonov clearly stated--and I was there in the room--
clearly stated that the government of Russia has no interest in
owning the means of production of industries other than those
required for the national defense or those that are typically
owned by a government, such as printing currency. I believe
that the Ambassador for the Russian Federation in his testimony
before this Subcommittee also echoes the same government
policy.
This, unfortunately, is not what is occurring within Russia
today, and it is extremely important, as we take up the issue
of normalizing trade relations with Russia, that we understand
that we need to match what they say they intend to do with what
they are doing today on the ground.
We are interested in only the most simple and basic form of
international trade. All our clients has done since it has
obtained the right to do so in privatization in Russia is buy
vodka from Russian distilleries and export it throughout the
world for sale.
What the Russian Government is now doing is blocking the
export of vodka out of the country. There are 150,000 cases of
vodka sitting in the Russian port of Kaliningrad which the
government refuses to let out of the country. But it refuses to
let it out of the country despite its own court orders
requiring it to do so. It is attempting to usurp the same
trademark rights that were given to SPI during privatization
and usurp them for their own use. And it is doing so, again,
despite court orders from Russian courts saying it has no right
to do so.
As I listened to Ambassador Allgeier testify earlier today
on issues of normalization of trade and Russian accession to
the WTO, two issues come out very clearly from that testimony:
the need for Russia to respect private property rights and the
need for Russia to respect the rule of law. On both counts, Mr.
Chairman, Russia is falling tragically short of its stated
goals. Mr. Putin has expressed strongly on a number of
occasions in a variety of fora that he intends to respect the
privatization process and that is the government policy.
However, Agricultural Minister Leganov, the same person who is
charged with taking back these trademarks, has set up a
privately owned enterprise to usurp those trademarks, and has
monopolized the vodka industry within Russia. This is not
something that American trading partners can tolerate. It is
not a system that is reliable enough for companies throughout
the world to engage in trade with Russia on.
If Boeing's 25 planes, as I understood Ambassador Pickering
earlier today, if those 25 planes on the ground in Russia were
nationalized by the government, it would be exactly the same
thing as what Russia is presently doing to our client in the
vodka industry. And everyone is at risk when one person is at
risk. Until we have uniform rules that the Russian Government
is willing to live up to, I respectfully suggest to this
Subcommittee that the normalization of trade relations cannot
be entered into and Russia cannot be permitted to ascend to
membership in the WTO.
My final point, Mr. Chairman, is that Russia has been a
very willing and very active participant in the war against
terror. That is a noble effort from which Russia itself
benefits. We should not link positive and progressive acts in
the area of anti-terrorism to allow someone to fall short of
positive and progressive policy in the area of international
trade.
Thank you very much.
[The prepared statement of Mr. Edlin follows:]
Statement of Richard A. Edlin, Partner, Greenberg Traurig, LLP, and
U.S. Counsel, SPI Spirits, Ltd., Netherlands
Mr. Chairman and Honorable Members of the Committee, my name is
Richard Edlin and I am a partner in the law firm of Greenberg Traurig.
Thank you for your invitation to appear before this distinguished
Committee. I am counsel to SPI Spirits, which is the maker of
Stolichnaya Vodka, the principal brand of Russian Vodka and one of the
best selling brands of Vodka in the United States and the World. I come
before this Committee in order to bring to your collective attention
certain facts and conduct by the Russian Government which brings into
serious question Russia's ability to act as a reliable trade partner,
to respect the rule of law, and to conduct itself in accordance with
the practices we associate with free market economies and reliable
trade partners. Rather, recent events highlight a troubling pattern of
regression by the Russian Government to the tactics and policies of the
Soviet era.
Background to Russian Regression on International Trade and Russia's
Attempt To Reverse the Privatization of Russian Vodka
Vodka is the second largest industry in Russia. Prior to the
collapse of the Soviet Union, trademarks to Russian vodka products were
state-owned. Beginning in 1991 or thereabouts, many Russian industries,
including the Vodka industry, were privatized. SPI International NV
(``SPI'') and its predecessor entities became the legal owner directly
of, or of reversionary interests in, Stolichnaya, one of the most
popular brands of Vodka in the world and the principal brand of Russian
Vodka sold throughout the United States and the world. Now, utilizing
many of the presumably discarded methods of Soviet-era intimidation,
disrespect for international legal principles, and raw police power,
the government of Russia is attempting to nationalize again the Vodka
industry. In effect, this will reverse Russia's progressive
privatization practices of the past and casts significant doubt on
Russia's ability to become a reliable member of the international
economic community.
Many of the facts below were recited and recognized as accurate in
a lawsuit which took place in 1992 over rights to the Stolichnaya
trademark, Financial Matters, Inc. v. PepsiCo, Inc. and Monsieur Henri
Wines, Ltd., 806 F. Supp 480 (S.D.N.Y. 1992)(Owen, J.), in which
representatives of SPI participated as fact witnesses.
SPI received trademark registration for the Stolichnaya mark in the
United States in 1967. In 1969, SPI assigned all its rights in the mark
to Kraus Bros. & Co.; SPI designated MHW, Kraus' subsidiary, as SPI's
representative in its trademark application. In 1973 PepsiCo entered
into an agreement with Sojuzplodoimport (the predecessor to SPI), the
Soviet state-controlled bureaucracy that controlled all agricultural
exports from the U.S.S.R., to export Pepsi-Cola syrup to the Soviet
Union, and to receive in return the exclusive right to import
Stolichnaya Vodka into the United States. PepsiCo acquired Kraus and
MHW in order to secure its right to import the Stolichnaya Vodka. The
mark became incontestable in the United States in 1974 on the filing of
the requisite affidavit of continuous use. PepsiCo also owned the mark
``Stoli.''
Upon its acquisition of the Stolichnaya import rights, PepsiCo set
up a system for approving potential suppliers, establishing quality
specifications, assisting distilleries in improving their product,
testing the final product, and rejecting unsuitable shipments. PepsiCo
was thus instrumental, following its trademark assignment from SPI's
predecessor, in creating a domestic American product of consistently
high quality and uniform characteristics. Upon acquiring the right to
distribute Stolichnaya in the U.S., PepsiCo and MHW spent over $100
million to popularize Stolichnaya vodka in the U.S.\1\ PepsiCo approved
only seven distilleries in the USSR to produce and export Stolichnaya
vodka to the U.S., and imported Stolichnaya vodka had come from those
same seven distilleries over the more than twenty years of PepsiCo's
control.
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\1\ In 1977, PepsiCo acquired the Pizza Hut restaurant chain. Since
Pizza Hut restaurants served liquor, and since various states forbid a
manufacturer, importer or wholesaler of liquor products from retaining
any interest in premises where alcoholic beverages are sold (``Tied
House'' laws), PepsiCo divested itself of the ownership of MHW when it
acquired Pizza Hut. However, PepsiCo retained ownership of the
Stolichnaya mark, and entered into an agreement with MHW under which
MHW agreed to continue importing the vodka made by the same
distilleries. PepsiCo, as the trademark owner, continued to monitor the
nature and quality of the vodka as it had done before, and it continued
to receive a royalty based on sales from MHW.
It is irrelevant that the consuming public does not know that it
was actually PepsiCo who owns the mark. Under well-established law it
is clear that the public need not know the name of the trademark owner
for their to be goodwill in a mark, nor does the name of the owner have
to appear on the product itself.
---------------------------------------------------------------------------
In 1983, PepsiCo assigned to SPI the Stolichnaya trademark
registration, as well as its pending application to register Stoli. In
June, 1991, SPI reassigned to PepsiCo all of its right, title and
interest in and to the said marks. That agreement was amended on
February 6, 1992, after the dissolution of the USSR, by deleting
paragraph 8, which had conferred a right upon the now-defunct Soviet
Government to request the reassignment of the marks back to SPI at
will.
In August, 1991, the USSR patent office cancelled SPI's
registration in Russia for Stolichnaya on the ground that Stolichnaya
had come to identify a type rather than a brand of vodka in the USSR.
However, an opinion by the patent office clarifying that decision notes
that under Russian law, the ownership and validity of rights in marks
outside Russia is independent of such rights in Russia, and that the
cancellation of the mark in Russia should not affect rights outside
Russia. Furthermore, pursuant to Article 6(3) of the International
Convention for the Protection of Industrial Property, the ``Paris
Convention,'' to which Russia is a signatory, a mark duly registered in
one country is independent of marks registered in other countries, even
including the country of origin.
When the USSR collapsed in December 1991, SPI became a private
joint stock company which succeeded to the same rights as its
governmental predecessor; these rights were confirmed by the statements
of various Russian Government officials and trade representatives of
the Russian Federation in the United States. PepsiCo, MHW and SPI then
continued their business relationship virtually unchanged.\2\
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\2\ In Financial Matters, Judge Owen accepted PepsiCo's testimony
that PepsiCo continued to do business with the same SPI staff in the
same manner as it had done when the USSR was extant, and that the new
SPI operated out of the same physical facilities as the old state-run
SPI. With respect to the position that SPI did not undertake the
requisite privatization procedures authorized by the Russian
Government, Judge Owen noted that the situation in Russia was
volatile--a statement that could be made with equal relevance today. As
Judge Owen concluded: ``Nobody knows precisely what procedures were
undertaken by SPI to privatize, but all the evidence seems to indicate
that this new private joint-stock company is indeed carrying on the
functions of the old SPI.''
---------------------------------------------------------------------------
As the official documents of the Ministry of Foreign Economic
Relations of the Russian Federation, attached as EXHIBIT A, stated in
October 1992, SPI ``is a legal entity in the Russian Federation and the
successor of its Soviet predecessor VVO `Sojuzplodoimport'. [SPI] has
the right to export Russian vodka to the USA under the following
trademarks: Stolichnaya, Stolichnaya Christall, Pertsovka, Limonnaya,
Prievet, Prievet Orange (Apelsinovaya), Russian, Okhotnichya.'' It
could not be stated any more clearly and legally. And there are
numerous such documents. Russia now, acting solely out of its own
desire to take back property it has already privatized, has ignored its
own official actions during the privatization process. We ask: ``By
what right?''
Since privatization in Russia took place a decade ago, SPI has sold
Stolichnaya vodka to the American and European markets without
any claim by the Russian Government in any country that SPI did
not have the right to do so. After the legally privatized
company was sold to its present owners, tens of millions of
dollars were invested to successfully rebuild the nearly
bankrupt company into one of the world's leading vodka
producers. SPI also requires its distributors in various
countries, including the United States, to make significant
investments in marketing and advertising the Stolichnaya brand.
All of SPI's actions were taken with the knowledge of the Russian
Government and without any suggestion at all that when SPI and its
trade partners around the world were spending tens of millions of
dollars to build and support the Stolichnaya brand, that the Russian
Government has any reservations regarding SPI's right to do so. AND NOW
RUSSIA WANTS TO TAKE STOLICHNAYA BACK. Again we ask: ``By what right?''
Russia's Testimony Before the United States Department of Commerce
Misstates Material Facts Regarding the Government's Actions to
Nationalize and Monopolize the Vodka Industry
In testimony before the United States Department of Commerce, the
Russian Government expressly represented that it would respect its
former privatization of industry and that it did not wish to own the
means of production of industries other than those typically associated
with national security or the fundamental acts of governments, such as
printing currency. I do not believe the vodka industry would fall into
this category.
Nonetheless, The Moscow Times reported on April 4, 2002 that the
Russian Government has set up a federal enterprise through which it
intends to nationalize and monopolize the Vodka industry. Deputy
Agriculture Minister Loginov, the same individual who has been active
in attempting to deny SPI export permits for SPI's vodka and illegally
take back numerous vodka trademarks, is the same person who has been
designated to run the new state-controlled vodka company. Obviously
this is no accident. These acts with respect to the Russian
Government's continuing and aggressive efforts to nationalize the vodka
industry flatly contradicts the Russian Government's testimony to the
Commerce Department. We leave the Committee to reach its own
conclusions as to the continuing reliability of the Russian
Government's representations regarding the actual facts of what is
taking place in Russia today.
Russia's Refusal to Respect the Rule of Law And its Efforts to
Politically Manipulate its Court System
We believe that the Committee will also find relevant the rash of
litigation within Russia between the Government and SPI. Acting in a
manner contrary to its own laws, Russia has attempted to and is in the
process of nakedly usurping SPI's trademarks to Stolichnaya and other
brands within Russia itself. Russia is also presently violating Russian
court orders requiring the government to allow SPI and its U.S.
distributor, Allied Domecq, to ship some 120,000 cases of vodka out of
the Russian port of Kaliningrad. Attached as EXHIBIT B is the
translation of the February 22, 2002 decision of the Leningrad District
Court for the City of Kaliningrad which orders the Russian Government
to ``cease prohibiting the exiting of the alcoholic products of'' SPI
that bear, among others, the trademark of Stolichnaya. Again, what
could be clearer?
Most disturbingly, there are credible reports that the Russian
Government has threatened baseless criminal prosecutions and engaged in
physical threats against SPI employees.
From the legal point of view, Russia's ``strategy'' is doomed to
failure. As alluded to above, Russia cannot sell Stolichnaya in the
United States, only the registered trademark holder can do that, in
this case Allied Domecq. Allied Domecq is obligated to return the U.S.
trademark to SPI in 2010 and until that time SPI is Allied Domecq's
exclusive supplier of Stolichnaya in the United States. This analysis
is applicable in every country in which SPI or its partners holds the
Stolichnaya trademark.
However, from the point of view of fair international trade
practices, Russia has run amok. Russia's efforts to re-nationalize and
monopolize its vodka industry--when it has in the past said that it
would respect privatization--and its reversion to the tactics of
Soviet-era thuggery to do so, sends an ominous message and poses
fundamental questions regarding Russia's fitness to enter the WTO and
to receive normalization of trade relations with our government. It is
critical that commercial issues be resolved by the rule of law and that
those laws be consistently applied in Russia as they are in
international markets.
Russia's Former Deputy Prime Minister Criticizes the Present Russian
Economic and Political Climate As Providing Inadequate Respect for
Private Property Rights
The problems facing SPI are hardly unique. The unfortunate fact is
that SPI's problems are simply one part of a larger problem. In an
April 5, 2002 article in The Wall Street Journal Europe, which is
attached as EXHIBIT C, Boris Nemtsov, former Deputy Prime Minister for
the Russian Federation and presently a member of the Russian Duma,
calls for President Putin to ``Stop the Rot.'' Mr. Nemtsov identifies
``dangerous trends that threaten to undermine the twin pillars of true
progress for Russia--democracy and property rights.'' Mr. Nemtsov asks
a question that this Committee should be equally concerned with: ``Why
are property rights in Russia so weak?'' And the answer which Mr.
Nemtsov gives goes directly to the heart of SPI's present problem with
the Russian Government. As Mr. Nemtsov says: ``The short, and long,
answer is bureaucratic corruption.''
In connection with Russia's court system, which supposedly provides
private parties aggrieved by the Russian Government's illegal
interference with private property rights, Mr. Nemtsov describes
decisions issued by Russia's courts as ``shocking'' and ``Kafkaesque.''
A recent decision by Russia's courts concerning the securities industry
was criticized by the prominent English firm Freshfields in this way:
``[T]his decision threatens the very idea of securities and the
securities markets in Russia. To say nothing of the violations of
constitutional principles of private property, freedom to contract and
principles of trade.''
Russia's court system has met with similar disapproval last summer
in a decision reached in the United States District Court for the
Eastern District of New York. The overall dispute involved efforts by a
state-sponsored company to rescind copyrights previously issued to an
American company and bears all of the hallmarks of the Russian
Government's tactics to illegally rescind SPI's property rights to
Stolichnaya.
United States District Court Judge Trager conducted an exhaustive
review of Russian law and the facts behind the issuance of copyrights
to the American company, Films By Jove. Judge Trager upheld Films By
Jove's copyrights and, significantly for the purposes of this testimony
and these hearings, described a decision from the Russian Arbitrazh
Court, rendered under pressure from the Government, as ``incoherent,''
``irrelevant,'' and ``shocking.'' \3\
---------------------------------------------------------------------------
\3\ We refer the Committee to Films By Jove, Inc. v. Berov, et al.,
2001 WL 967781, August 27, 2001 (E.D.N.Y.)(Trager, J.).
---------------------------------------------------------------------------
I respectfully submit that SPI's present problems with the Russian
Government, and those of a great many other companies, demonstrate that
Russia has not developed a market economy that is reliable in any
reasonable manner with respect to protection of property rights, the
rule of law, or due process. Rather, old-fashioned, Soviet-era
corruption and the tactics of intimidation and threats are all too
often the governing principles of the Russian economy.
Conclusion:
Before the United States Rewards Russia With Normalized Trade
Relations, Russia Must First Put its House in Order and Make Amends to
Those Who Have Been Hurt by its Recent Actions
Until Russia demonstrates that it is willing to be a reliable
member of the world economic community, and that it is willing to
respect internationally accepted principles of free trade, free
markets, and private enterprise free from government persecution, it
should be denied normalization of trade relations and admission to the
WTO.
______
[EXHIBIT A IS BEING RETAINED IN THE COMMITTEE FILES]
______
EXHIBIT B
[Document 1]
RULING
On February 22, 2002 the Leningrad District Court of the city of
Kaliningrad represented by:
the Chief Judge L.G. Kilienko
has considered a petition with respect to the complaint entered by
Rinat Akbarovitch Zuparov as to the illegal actions of the Kaliningrad
Customs Office, and
HAS DETERMINED:
The petitioner in the case has submitted a complaint to the court
as to the illegal actions of the Kaliningrad Customs Office and has
requested that the actions of the Kaliningrad Customs Office, which
manifested themselves in a prohibition against the exiting of the
export products applied for by OAO SPI-RVVK in accordance with the
State Customs Declaration Nos. 10205030/040202/0003034, 10205030/
140202/0004179, 10205030/140202/0004180, and 10205030/140202/0004181
(four documents, in total), on the basis of the absence and non-
submittal of the licensing agreement with the Ministry of Agricultural
Products of Russia, be deemed to be illegal.
The court has received a petition that requests that, for the
purposes of the securing of the submitted demands pending the
conclusion of the legal proceedings in the case, the Kaliningrad
Customs Office is to be ordered to cease prohibiting the exiting of the
alcoholic products of OAO SPI-RVVK, which bear the trademarks in
accordance with the state customs declarations mentioned above, from
the customs territory of the Russian Federation.
The court deems it feasible, for the purposes of the securing of
the demands submitted in the petition, to order the Kaliningrad Customs
Office to cease prohibiting the exiting of the alcoholic products of
OAO SPI-RVVK that bear the trademarks SOVIET, SPARKLING, STARKA,
YUBILEYNAYA, KUBANSKAYA, SUBROVKA [sic], STOLICHNAYA, RUSSKAYA [in the
Cyrillic alphabet], OKHOTNICHYA/PERTSOVKA, MOSKOVSKAYA, LIMONNAYA [in
the Cyrillic alphabet], KREPKAYA, STOLOVAYA, SIBIRSKAYA, BALTIYSKAYA,
KRISTAL, and SPI in accordance with State Customs Declaration Nos.
10205030/040202/0003034, 10205030/140202/0004179, 10205030/140202/
0004180, and 10205030/140202/0004181 (four documents, in total) from
the customs territory of the Russian Federation on the basis of the
absence and non-submittal of the licensing agreement with the Ministry
of Agricultural Products of Russia.
In accordance with Articles 133 and 134 of the Code of Civil
Procedure of the Russian Soviet Federated Socialist Republic, the court
HAS RULED:
To order the Kaliningrad Customs Office to cease prohibiting the
exiting of the alcoholic products of OAO SPI-RVVK that bear the
trademarks SOVIET, SPARKLING, STARKA, YUBILEYNAYA, KUBANSKAYA, SUBROVKA
[sic], STOLICHNAYA, RUSSKAYA [in the Cyrillic alphabet], OKHOTNICHYA/
PERTSOVKA, MOSKOVSKAYA, LIMONNAYA [in the Cyrillic alphabet], KREPKAYA,
STOLOVAYA, SIBIRSKAYA, BALTIYSKAYA, KRISTAL, and SPI in accordance with
State Customs Declaration Nos. 10205030/040202/0003034, 10205030/
140202/0004179, 10205030/140202/0004180, and 10205030/140202/0004181
(four documents, in total) from the customs territory of the Russian
Federation on the basis of the absence and non-submittal of the
licensing agreement with the Ministry of Agricultural Products of
Russia.
The present ruling may be appealed within the term of 10 days to
the Kaliningrad Regional Court through the Leningrad District Court of
the City of Kaliningrad.
s/
[rubber-stamped seal with emblem of the Russian Federation:]
Leningrad District Court of the City of Kaliningrad
______
[Document 5]
[script in English]
[rubber stamp:] COPY
RULING
March 21, 2002
The Leninsk-Kuznetsk City Court represented by:
the Chief Judge E. Yu. Erokhina,
and the Court Clerk Naydenova,
has considered, for the purposes of pre-trial preparation, a
petition from Galina Leonidovna Naumova as to the implementation of
measures for the securing of the claims submitted in the complaint, and
HAS DETERMINED:
That Galina Leonidovna Naumova, a shareholder of the joint stock
company of the closed type ZAO Sojuzplodimport, requests that the
actions of the Patents and Trademarks Agency of Russia in the process
of the re-registration of the rights to seventeen trademarks from ZAO
Sojuzplodimport to the Russian Federation, represented by the Ministry
of Agriculture of the Russian Federation, are to be deemed by the court
to be illegal, and that the Patents and Trademarks Agency of Russia is
to be obligated to reinstate ZAO Sojuzplodimport as the owner of the
disputed trademarks, on the grounds of the violation of its rights and
legal interests as a shareholder due to the actions of the Patents and
Trademarks Agency of Russia that led to the change in the name of the
owner of the trademarks in the register, as a result of which ZAO
Sojuzplodimport and, therefore, the shareholders, suffered financial
losses.
The court is of the opinion that the petition is to be granted due
to the fact that a lack of implementation of measures for the securing
of the demands would make it difficult or impossible to implement a
decision by the court due to the following circumstances.
A failure to implement measures for the securing of the demands
would enable the Ministry of Agriculture of the Russian Federation to
exercise ownership rights and enable Rospatent to carry out
registration activities with respect to the disputed trademarks. All of
this may lead to future multiple changes of owners of the trademarks as
a result of their alienation and to burdening them with the making of
the licensing agreements and carrying out of other activities.
In accordance with Articles 133, 134, and 136 of the Code of Civil
Procedure of the Russian Soviet Federated Socialist Republic, the court
HAS RULED:
I. To prohibit the Ministry of Agriculture of the Russian
Federation from exercising the rights of an owner, that is, the rights
to own, use, and dispose, with respect to the following trademarks:
1. Starka (label), Registration Certificate No. 38384 of 10/10/69,
with a priority date of 3/12/69.
2. Yubileynaya [in the Latin alphabet] (label), Registration
Certificate No. 38385 of 10/10/69, with a priority date of 3/12/69.
3. Kubanskaya [in the Latin alphabet] (label), Registration
Certificate No. 38386 of 10/10/69, with a priority date of 3/12/69.
4. Zubrovka [in the Latin alphabet] (label), Registration
Certificate No. 38387 of 10/10/69, with a priority date of 3/12/69.
5. Stolichnaya [in the Latin alphabet] (label), Registration
Certificate No. 38388 of 10/10/69, with a priority date of 3/12/69.
6. Russkaya (label), Registration Certificate No. 38389 of 10/10/
69, with a priority date of 3/12/69.
7. Okhotnichya [in the Latin alphabet] (label), Registration
Certificate No. 38391 of 10/10/69, with a priority date of 3/12/69.
8. Pertsovka [in the Latin alphabet] (label), Registration
Certificate No. 39231 of 2/12/70, with a priority date of 3/12/69.
9. Moskovskaya [in the Latin alphabet] (label), Registration
Certificate No. 38237 of 9/9/69, with a priority date of 3/12/69.
10. Limonnaya (label), Registration Certificate No. 39232 of 2/12/
70, with a priority date of 3/12/69.
11. Krepkaya (label), Registration Certificate No. 40207 of 8/15/
70, with a priority date of 9/23/69.
12. Stolovaya [in the Latin alphabet] (label), Registration
Certificate No. 40208 of 8/15/70, with a priority date of 9/23/69.
13. Sibirskaya [in the Latin alphabet] (label), Registration
Certificate No. 68655 of 7/29/81, with a priority date of 3/4/81.
14. Baltiyskaya [in the Latin alphabet] (label), Registration
Certificate No. 38390 of 10/10/69, with a priority date of 3/12/69.
15. Kristal [in the Latin alphabet] (word), Registration
Certificate No. 49140 of 3/13/74, with a priority date of 9/3/73.
16. Soviet Sparkling [in the Latin alphabet] (label), Registration
Certificate No. 38383 of 10/10/69, with a priority date of 3/12/69.
17. SPI (graphic), Registration Certificate No. 34475 of 12/23/67,
with a priority date of 2/17/67.
II. To prohibit the Ministry of Agriculture of the Russian
Federation from preventing the exercise by ZAO Sojuzplodoimport of the
rights of an owner, that is, the rights to own, use, and dispose, with
respect to the following trademarks, until the termination of the
proceedings in the case:
1. Starka [in the Latin alphabet] (label), Registration Certificate
No. 38384 of 10/10/69, with a priority date of 3/12/69.
2. Yubileynaya [in the Latin alphabet] (label), Registration
Certificate No. 38385 of 10/10/69, with a priority date of 3/12/69.
3. Kubanskaya [in the Latin alphabet] (label), Registration
Certificate No. 38386 of 10/10/69, with a priority date of 3/12/69.
4. Zubrovka [in the Latin alphabet] (label), Registration
Certificate No. 38387 of 10/10/69, with a priority date of 3/12/69.
5. Stolichnaya [in the Latin alphabet] (label), Registration
Certificate No. 38388 of 10/10/69, with a priority date of 3/12/69.
6. Russkaya (label), Registration Certificate No. 38389 of 10/10/
69, with a priority date of 3/12/69.
7. Okhotnichya [in the Latin alphabet] (label), Registration
Certificate No. 38391 of 10/10/69, with a priority date of 3/12/69.
8. Pertsovka [in the Latin alphabet] (label), Registration
Certificate No. 39231 of 2/12/70, with a priority date of 3/12/69.
9. Moskovskaya [in the Latin alphabet] (label), Registration
Certificate No. 38237 of 9/9/69, with a priority date of 3/12/69.
10. Limonnaya (label), Registration Certificate No. 39232 of 2/12/
70, with a priority date of 3/12/69.
11. Krepkaya (label), Registration Certificate No. 40207 of 8/15/
70, with a priority date of 9/23/69.
12. Stolovaya [in the Latin alphabet] (label), Registration
Certificate No. 40208 of 8/15/70, with a priority date of 9/23/69.
13. Sibirskaya [in the Latin alphabet] (label), Registration
Certificate No. 68655 of 7/29/81, with a priority date of 3/4/81.
14. Baltiyskaya [in the Latin alphabet] (label), Registration
Certificate No. 38390 of 10/10/69, with a priority date of 3/12/69.
15. Kristal [in the Latin alphabet] (word), Registration
Certificate No. 49140 of 3/13/74, with a priority date of 9/3/73.
16. Soviet Sparkling [in the Latin alphabet] (label), Registration
Certificate No. 38383 of 10/10/69, with a priority date of 3/12/69.
17. SPI (graphic), Registration Certificate No. 34475 of 12/23/67,
with a priority date of 2/17/67.
III. To prohibit the Ministry of Agriculture of the Russian
Federation from disseminating, in any manner, information concerning
registration activities with respect to the following trademarks, until
the termination of the proceedings in the case:
1. Starka [in the Latin alphabet] (label), Registration Certificate
No. 38384 of 10/10/69, with a priority date of 3/12/69.
2. Yubileynaya [in the Latin alphabet] (label), Registration
Certificate No. 38385 of 10/10/69, with a priority date of 3/12/69.
3. Kubanskaya [in the Latin alphabet] (label), Registration
Certificate No. 38386 of 10/10/69, with a priority date of 3/12/69.
4. Zubrovka [in the Latin alphabet] (label), Registration
Certificate No. 38387 of 10/10/69, with a priority date of 3/12/69.
5. Stolichnaya [in the Latin alphabet] (label), Registration
Certificate No. 38388 of 10/10/69, with a priority date of 3/12/69.
6. Russkaya (label), Registration Certificate No. 38389 of 10/10/
69, with a priority date of 3/12/69.
7. Okhotnichya [in the Latin alphabet] (label), Registration
Certificate No. 38391 of 10/10/69, with a priority date of 3/12/69.
8. Pertsovka [in the Latin alphabet] (label), Registration
Certificate No. 39231 of 2/12/70, with a priority date of 3/12/69.
9. Moskovskaya [in the Latin alphabet] (label), Registration
Certificate No. 38237 of 9/9/69, with a priority date of 3/12/69.
10. Limonnaya (label), Registration Certificate No. 39232 of 2/12/
70, with a priority date of 3/12/69.
11. Krepkaya (label), Registration Certificate No. 40207 of 8/15/
70, with a priority date of 9/23/69.
12. Stolovaya [in the Latin alphabet] (label), Registration
Certificate No. 40208 of 8/15/70, with a priority date of 9/23/69.
13. Sibirskaya [in the Latin alphabet] (label), Registration
Certificate No. 68655 of 7/29/81, with a priority date of 3/4/81.
14. Baltiyskaya [in the Latin alphabet] (label), Registration
Certificate No. 38390 of 10/10/69, with a priority date of 3/12/69.
15. Kristal [in the Latin alphabet] (word), Registration
Certificate No. 49140 of 3/13/74, with a priority date of 9/3/73.
16. Soviet Sparkling [in the Latin alphabet] (label), Registration
Certificate No. 38383 of 10/10/69, with a priority date of 3/12/69.
17. SPI (graphic), Registration Certificate No. 34475 of 12/23/67,
with a priority date of 2/17/67.
IV. To prohibit the Patents and Trademarks Agency of Russia from
issuing copies of the Registration Certificates for the following
trademarks to any legal or physical entities, until the termination of
the proceedings in the case:
1. Starka [in the Latin alphabet] (label), Registration Certificate
No. 38384 of 10/10/69, with a priority date of 3/12/69.
2. Yubileynaya [in the Latin alphabet] (label), Registration
Certificate No. 38385 of 10/10/69, with a priority date of 3/12/69.
3. Kubanskaya [in the Latin alphabet] (label), Registration
Certificate No. 38386 of 10/10/69, with a priority date of 3/12/69.
4. Zubrovka [in the Latin alphabet] (label), Registration
Certificate No. 38387 of 10/10/69, with a priority date of 3/12/69.
5. Stolichnaya [in the Latin alphabet] (label), Registration
Certificate No. 38388 of 10/10/69, with a priority date of 3/12/69.
6. Russkaya (label), Registration Certificate No. 38389 of 10/10/
69, with a priority date of 3/12/69.
7. Okhotnichya [in the Latin alphabet] (label), Registration
Certificate No. 38391 of 10/10/69, with a priority date of 3/12/69.
8. Pertsovka [in the Latin alphabet] (label), Registration
Certificate No. 39231 of 2/12/70, with a priority date of 3/12/69.
9. Moskovskaya [in the Latin alphabet] (label), Registration
Certificate No. 38237 of 9/9/69, with a priority date of 3/12/69.
10. Limonnaya (label), Registration Certificate No. 39232 of 2/12/
70, with a priority date of 3/12/69.
11. Krepkaya (label), Registration Certificate No. 40207 of 8/15/
70, with a priority date of 9/23/69.
12. Stolovaya [in the Latin alphabet] (label), Registration
Certificate No. 40208 of 8/15/70, with a priority date of 9/23/69.
13. Sibirskaya [in the Latin alphabet] (label), Registration
Certificate No. 68655 of 7/29/81, with a priority date of 3/4/81.
14. Baltiyskaya [in the Latin alphabet] (label), Registration
Certificate No. 38390 of 10/10/69, with a priority date of 3/12/69.
15. Kristal [in the Latin alphabet] (word), Registration
Certificate No. 49140 of 3/13/74, with a priority date of 9/3/73.
16. Soviet Sparkling [in the Latin alphabet] (label), Registration
Certificate No. 38383 of 10/10/69, with a priority date of 3/12/69.
17. SPI (graphic), Registration Certificate No. 34475 of 12/23/67,
with a priority date of 2/17/67.
V. To prohibit the Patents and Trademarks Agency of Russia from
publishing in the official Bulletin of the State Patent Agency of the
Russian Federation, or disseminating, in any manner, information
concerning registration activities with respect to the following
trademarks:
1. Starka [in the Latin alphabet] (label), Registration Certificate
No. 38384 of 10/10/69, with a priority date of 3/12/69.
2. Yubileynaya [in the Latin alphabet] (label), Registration
Certificate No. 38385 of 10/10/69, with a priority date of 3/12/69.
3. Kubanskaya [in the Latin alphabet] (label), Registration
Certificate No. 38386 of 10/10/69, with a priority date of 3/12/69.
4. Zubrovka [in the Latin alphabet] (label), Registration
Certificate No. 38387 of 10/10/69, with a priority date of 3/12/69.
5. Stolichnaya [in the Latin alphabet] (label), Registration
Certificate No. 38388 of 10/10/69, with a priority date of 3/12/69.
6. Russkaya (label), Registration Certificate No. 38389 of 10/10/
69, with a priority date of 3/12/69.
7. Okhotnichya [in the Latin alphabet] (label), Registration
Certificate No. 38391 of 10/10/69, with a priority date of 3/12/69.
8. Pertsovka [in the Latin alphabet] (label), Registration
Certificate No. 39231 of 2/12/70, with a priority date of 3/12/69.
9. Moskovskaya [in the Latin alphabet] (label), Registration
Certificate No. 38237 of 9/9/69, with a priority date of 3/12/69.
10. Limonnaya (label), Registration Certificate No. 39232 of 2/12/
70, with a priority date of 3/12/69.
11. Krepkaya (label), Registration Certificate No. 40207 of 8/15/
70, with a priority date of 9/23/69.
12. Stolovaya [in the Latin alphabet] (label), Registration
Certificate No. 40208 of 8/15/70, with a priority date of 9/23/69.
13. Sibirskaya [in the Latin alphabet] (label), Registration
Certificate No. 68655 of 7/29/81, with a priority date of 3/4/81.
14. Baltiyskaya [in the Latin alphabet] (label), Registration
Certificate No. 38390 of 10/10/69, with a priority date of 3/12/69.
15. Kristal [in the Latin alphabet] (word), Registration
Certificate No. 49140 of 3/13/74, with a priority date of 9/3/73.
16. Soviet Sparkling [in the Latin alphabet] (label), Registration
Certificate No. 38383 of 10/10/69, with a priority date of 3/12/69.
17. SPI (graphic), Registration Certificate No. 34475 of 12/23/67,
with a priority date of 2/17/67.
VI. To prohibit the Patents and Trademarks Agency of Russia from
inhibiting the exercise by ZAO Sojuzplodoimport of the rights of an
owner, that is, of the rights to use and dispose, with respect to the
following trademarks, until the termination of the proceedings in the
case:
1. Starka [in the Latin alphabet] (label), Registration Certificate
No. 38384 of 10/10/69, with a priority date of 3/12/69.
2. Yubileynaya [in the Latin alphabet] (label), Registration
Certificate No. 38385 of 10/10/69, with a priority date of 3/12/69.
3. Kubanskaya [in the Latin alphabet] (label), Registration
Certificate No. 38386 of 10/10/69, with a priority date of 3/12/69.
4. Zubrovka [in the Latin alphabet] (label), Registration
Certificate No. 38387 of 10/10/69, with a priority date of 3/12/69.
5. Stolichnaya [in the Latin alphabet] (label), Registration
Certificate No. 38388 of 10/10/69, with a priority date of 3/12/69.
6. Russkaya (label), Registration Certificate No. 38389 of 10/10/
69, with a priority date of 3/12/69.
7. Okhotnichya [in the Latin alphabet] (label), Registration
Certificate No. 38391 of 10/10/69, with a priority date of 3/12/69.
8. Pertsovka [in the Latin alphabet] (label), Registration
Certificate No. 39231 of 2/12/70, with a priority date of 3/12/69.
9. Moskovskaya [in the Latin alphabet] (label), Registration
Certificate No. 38237 of 9/9/69, with a priority date of 3/12/69.
10. Limonnaya (label), Registration Certificate No. 39232 of 2/12/
70, with a priority date of 3/12/69.
11. Krepkaya (label), Registration Certificate No. 40207 of 8/15/
70, with a priority date of 9/23/69.
12. Stolovaya [in the Latin alphabet] (label), Registration
Certificate No. 40208 of 8/15/70, with a priority date of 9/23/69.
13. Sibirskaya [in the Latin alphabet] (label), Registration
Certificate No. 68655 of 7/29/81, with a priority date of 3/4/81.
14. Baltiyskaya [in the Latin alphabet] (label), Registration
Certificate No. 38390 of 10/10/69, with a priority date of 3/12/69.
15. Kristal [in the Latin alphabet] (word), Registration
Certificate No. 49140 of 3/13/74, with a priority date of 9/3/73.
16. Soviet Sparkling [in the Latin alphabet] (label), Registration
Certificate No. 38383 of 10/10/69, with a priority date of 3/12/69.
17. SPI (graphic), Registration Certificate No. 34475 of 12/23/67,
with a priority date of 2/17/67.
VII. To prohibit the Appellate Chamber of the Patents and
Trademarks Agency of Russia from accepting, scheduling hearings and
considering oppositions to the registrations with respect to the
following trademarks, until the termination of the proceedings in the
case:
1. Stolichnaya (label), Registration Certificate No. 134843 of 11/
24/95, with a priority date of 9/21/94.
2. Kubanskaya (label), Registration Certificate No. 134844 of 11/
24/95, with a priority date of 9/21/94.
3. Pertsovka (label), Registration Certificate No. 134841 of 11/24/
95, with a priority date of 9/21/94.
4. Yubileynaya (label), Registration Certificate No. 134840 of 11/
24/95, with a priority date of 9/21/94.
5. Moskovskaya (label), Registration Certificate No. 134836 of 11/
24/95, with a priority date of 9/21/94.
6. Starka (label), Registration Certificate No. 134839 of 11/24/95,
with a priority date of 9/21/94.
7. Zubrovka (label), Registration Certificate No. 134837 of 11/24/
95, with a priority date of 9/21/94.
8. Okhotnichya (label), Registration Certificate No. 134838 of 11/
24/95, with a priority date of 9/21/94.
9. Stolovaya (label), Registration Certificate No. 134842 of 11/24/
95, with a priority date of 9/21/94.
10. Limonnaya [in the Latin alphabet] (label), Registration
Certificate No. 135314 of 12/15/95, with a priority date of 9/21/94.
11. Stolichnaya-Ohranj [in the Latin alphabet] (label),
Registration Certificate No. 142892 of 6/17/96, with a priority date of
2/3/95.
12. Stolichnaya Limon [in the Latin alphabet] (label), Registration
Certificate No. 147472 of 6/17/96, with a priority date of 2/3/95.
13. Moskovskaya Limon [in the Latin alphabet] (label), Registration
Certificate No. 147471 of 6/17/96, with a priority date of 2/3/95.
14. Moskovskaya [in the Latin alphabet] (word), Registration
Certificate No. 155062 of 7/31/97, with a priority date of 9/25/95.
15. Moskovskaya (word), Registration Certificate No. 155063 of 7/
31/97, with a priority date of 9/25/95.
16. Stolichnaya [in the Latin alphabet] (word), Registration
Certificate No. 155061 of 7/31/97, with a priority date of 9/25/95.
17. Stolichnaya (word), Registration Certificate No. 155064 of 7/
31/97, with a priority date of 9/25/95.
18. Stoli Kafya [in the Latin alphabet] (label), Registration
Certificate No. 156044 of 8/31/97, with a priority date of 5/8/96.
19. Stoli Peshka [in the Latin alphabet] (label), Registration
Certificate No. 156047 of 8/31/97, with a priority date of 5/8/96.
20. Stoli Strasberi [in the Latin alphabet] (label), Registration
Certificate No. 156046 of 8/31/97, with a priority date of 5/8/96.
21. Stoli Razberi [in the Latin alphabet] (label), Registration
Certificate No. 156045 of 8/31/97, with a priority date of 5/8/96.
22. Stoli Vanil [in the Latin alphabet] (label), Registration
Certificate No. 156048 of 8/31/97, with a priority date of 5/8/96.
23. Stoli [in the Latin alphabet] (label), Registration Certificate
No. 155939 of 8/27/97, with a priority date of 7/19/96.
24. Stoli (word), Registration Certificate No. 155940 of 8/27/97,
with a priority date of 7/19/96.
25. Stolichnaya Kristal [in the Latin alphabet] (word),
Registration Certificate No. 156960 of 10/13/97, with a priority date
of 7/11/96.
26. Ruby of Russia [in the Latin alphabet] (label), Registration
Certificate No. 156961 of 10/13/97, with a priority date of 9/12/95.
27. Pristyn Stolichnaya [in the Latin alphabet] (label),
Registration Certificate No. 162956 of 4/9/98.
28. Pristin Stolichnaya [in the Latin alphabet] (label),
Registration Certificate No. 166301 of 7/31/98.
29. Starka [in the Latin alphabet] (word), Registration Certificate
No. 175041 of 5/18/99.
30. Stoli Zinamon [in the Latin alphabet] (label), Registration
Certificate No. 162957 of 4/9/98.
31. Stoli [in the Latin alphabet] (word), Registration Certificate
No. 155939 of 8/27/97.
32. Stoli (word), Registration Certificate No. 155940 of 8/27/97.
33. Na Zdorovye (word), Registration Certificate No. 55807 of 6/14/
76.
34. Na Zdorovye [in the Latin alphabet] (word), Registration
Certificate No. 55806 of 6/14/76.
35. Ruby of Russia [in the Latin alphabet] (label), Registration
Certificate No. 156961 of 10/13/97.
VIII. To prohibit any legal or physical entities, the agencies of
executive power and management, from inhibiting the exercise by ZAO
Sojuzplodoimport of the rights of the owner, that is, the rights to
own, use, and dispose, with respect to the following trademarks, until
the termination of the proceedings in the case:
1. Starka [in the Latin alphabet] (label), Registration Certificate
No. 38384 of 10/10/69, with a priority date of 3/12/69.
2. Yubileynaya [in the Latin alphabet] (label), Registration
Certificate No. 38385 of 10/10/69, with a priority date of 3/12/69.
3. Kubanskaya [in the Latin alphabet] (label), Registration
Certificate No. 38386 of 10/10/69, with a priority date of 3/12/69.
4. Zubrovka [in the Latin alphabet] (label), Registration
Certificate No. 38387 of 10/10/69, with a priority date of 3/12/69.
5. Stolichnaya [in the Latin alphabet] (label), Registration
Certificate No. 38388 of 10/10/69, with a priority date of 3/12/69.
6. Russkaya (label), Registration Certificate No. 38389 of 10/10/
69, with a priority date of 3/12/69.
7. Okhotnichya [in the Latin alphabet] (label), Registration
Certificate No. 38391 of 10/10/69, with a priority date of 3/12/69.
8. Pertsovka [in the Latin alphabet] (label), Registration
Certificate No. 39231 of 2/12/70, with a priority date of 3/12/69.
9. Moskovskaya [in the Latin alphabet] (label), Registration
Certificate No. 38237 of 9/9/69, with a priority date of 3/12/69.
10. Limonnaya (label), Registration Certificate No. 39232 of 2/12/
70, with a priority date of 3/12/69.
11. Krepkaya (label), Registration Certificate No. 40207 of 8/15/
70, with a priority date of 9/23/69.
12. Stolovaya [in the Latin alphabet] (label), Registration
Certificate No. 40208 of 8/15/70, with a priority date of 9/23/69.
13. Sibirskaya [in the Latin alphabet] (label), Registration
Certificate No. 68655 of 7/29/81, with a priority date of 3/4/81.
14. Baltiyskaya [in the Latin alphabet] (label), Registration
Certificate No. 38390 of 10/10/69, with a priority date of 3/12/69.
15. Kristal [in the Latin alphabet] (word), Registration
Certificate No. 49140 of 3/13/74, with a priority date of 9/3/73.
16. Soviet Sparkling [in the Latin alphabet] (label), Registration
Certificate No. 38383 of 10/10/69, with a priority date of 3/12/69.
17. SPI (graphic), Registration Certificate No. 34475 of 12/23/67,
with a priority date of 2/17/67.
IX. To order the Kaliningrad Customs Office to cease prohibiting
the carrying out of the customs exportation procedures and the
exportation exiting of the alcoholic products of OAO SPI-RVVK that bear
the following trademarks:
1. Starka (label), Registration Certificate No. 38384 of 10/10/69,
with a priority date of 3/12/69.
2. Yubileynaya [in the Latin alphabet] (label), Registration
Certificate No. 38385 of 10/10/69, with a priority date of 3/12/69.
3. Kubanskaya [in the Latin alphabet] (label), Registration
Certificate No. 38386 of 10/10/69, with a priority date of 3/12/69.
4. Zubrovka [in the Latin alphabet] (label), Registration
Certificate No. 38387 of 10/10/69, with a priority date of 3/12/69.
5. Stolichnaya [in the Latin alphabet] (label), Registration
Certificate No. 38388 of 10/10/69, with a priority date of 3/12/69.
6. Russkaya (label), Registration Certificate No. 38389 of 10/10/
69, with a priority date of 3/12/69.
7. Okhotnichya [in the Latin alphabet] (label), Registration
Certificate No. 38391 of 10/10/69, with a priority date of 3/12/69.
8. Pertsovka [in the Latin alphabet] (label), Registration
Certificate No. 39231 of 2/12/70, with a priority date of 3/12/69.
9. Moskovskaya [in the Latin alphabet] (label), Registration
Certificate No. 38237 of 9/9/69, with a priority date of 3/12/69.
10. Limonnaya (label), Registration Certificate No. 39232 of 2/12/
70, with a priority date of 3/12/69.
11. Krepkaya (label), Registration Certificate No. 40207 of 8/15/
70, with a priority date of 9/23/69.
12. Stolovaya [in the Latin alphabet] (label), Registration
Certificate No. 40208 of 8/15/70, with a priority date of 9/23/69.
13. Sibirskaya [in the Latin alphabet] (label), Registration
Certificate No. 68655 of 7/29/81, with a priority date of 3/4/81.
14. Baltiyskaya [in the Latin alphabet] (label), Registration
Certificate No. 38390 of 10/10/69, with a priority date of 3/12/69.
15. Kristal [in the Latin alphabet] (word), Registration
Certificate No. 49140 of 3/13/74, with a priority date of 9/3/73.
16. Soviet Sparkling [in the Latin alphabet] (label), Registration
Certificate No. 38383 of 10/10/69, with a priority date of 3/12/69.
17. SPI (graphic), Registration Certificate No. 34475 of 12/23/67,
with a priority date of 2/17/67, on the basis of the absence and non-
submittal of the licensing agreement with the Ministry of Agriculture
of the Russian Federation.
X. To prohibit the Kaliningrad Customs Office from carrying out of
the customs exportation procedures and the exportation exiting of the
alcoholic products that bear the following trademarks:
1. Starka [in the Latin alphabet] (label), Registration Certificate
No. 38384 of 10/10/69, with a priority date of 3/12/69.
2. Yubileynaya [in the Latin alphabet] (label), Registration
Certificate No. 38385 of 10/10/69, with a priority date of 3/12/69.
3. Kubanskaya [in the Latin alphabet] (label), Registration
Certificate No. 38386 of 10/10/69, with a priority date of 3/12/69.
4. Zubrovka [in the Latin alphabet] (label), Registration
Certificate No. 38387 of 10/10/69, with a priority date of 3/12/69.
5. Stolichnaya [in the Latin alphabet] (label), Registration
Certificate No. 38388 of 10/10/69, with a priority date of 3/12/69.
6. Russkaya (label), Registration Certificate No. 38389 of 10/10/
69, with a priority date of 3/12/69.
7. Okhotnichya [in the Latin alphabet] (label), Registration
Certificate No. 38391 of 10/10/69, with a priority date of 3/12/69.
8. Pertsovka [in the Latin alphabet] (label), Registration
Certificate No. 39231 of 2/12/70, with a priority date of 3/12/69.
9. Moskovskaya [in the Latin alphabet] (label), Registration
Certificate No. 38237 of 9/9/69, with a priority date of 3/12/69.
10. Limonnaya (label), Registration Certificate No. 39232 of 2/12/
70, with a priority date of 3/12/69.
11. Krepkaya (label), Registration Certificate No. 40207 of 8/15/
70, with a priority date of 9/23/69.
12. Stolovaya [in the Latin alphabet] (label), Registration
Certificate No. 40208 of 8/15/70, with a priority date of 9/23/69.
13. Sibirskaya [in the Latin alphabet] (label), Registration
Certificate No. 68655 of 7/29/81, with a priority date of 3/4/81.
14. Baltiyskaya [in the Latin alphabet] (label), Registration
Certificate No. 38390 of 10/10/69, with a priority date of 3/12/69.
15. Kristal [in the Latin alphabet] (word), Registration
Certificate No. 49140 of 3/13/74, with a priority date of 9/3/73.
16. Soviet Sparkling [in the Latin alphabet] (label), Registration
Certificate No. 38383 of 10/10/69, with a priority date of 3/12/69.
17. SPI (graphic), Registration Certificate No. 34475 of 12/23/67,
with a priority date of 2/17/67, without the licensing agreement with
ZAO Sojuzplodimport which permits the export of alcoholic products
bearing the mentioned trademarks.
The ruling with respect to the implementation of the measures for
the securing of the claim shall enter into force immediately and in the
manner provided for the execution of the decisions of the court.
The present ruling may be appealed, within the term of 10 days, to
the Kemerovo Regional Court.
Judge s/
[rubber-stamped seal with emblem of the Russian Federation:]
Leninsk-Kuznetsk City Court of the Kemerovo Region of the Russian
Federation
______
EXHIBIT C
Russia House: Mr. Putin: Stop the Rot
By Boris Nemtsov
04/05/2002
The Wall Street Journal Europe
President Vladimir Putin has made some real and positive changes in
his first year as Russian head of state. He has made Russia politically
stable in the short-run. This has allowed him to push through radical
economic reforms such as a new income tax and a land code, and lay the
groundwork for legal and military reform. Post-September 11, he has
changed Russia's geopolitical view. However, these accomplishments will
be of little long-term significance if Mr. Putin cannot reverse
dangerous trends that threaten to undermine the twin pillars of true
progress for Russia--democracy and property rights.
The threats to democracy have been much discussed in the West--
beginning with the president's expressed desire to ``trash the Chechen
fighters in the toilet'' rather than seek a peaceful solution of the
conflict in Chechnya. More recently, the West has correctly criticized
the Putin administration for its support for the systematic destruction
of the independent television stations NTV and TV6. Many Western
friends of democracy are suspicious of oligarchs such as Boris
Berezovsky and Vladimir Gusinsky (the owners of TV6 and NTV
respectively) but they are rightly more suspicious of the methods used
to destroy them.
And yet the same Western observers have been less quick to notice
an equally worrying trend which directly affects Western investors:
President Putin's failure to support property rights in Russia by
addressing the abuse of office that so systematically undermines them.
Property rights and minority shareholder rights are keys to healthy
economic growth and investment. While reforms such as the land code,
pension reform and indeed tax reform all help, these will be for naught
if the fundamental weaknesses of the Russian state that undermine
property and minority shareholder rights are not addressed.
Why are property rights in Russia so weak? The short, and long,
answer is bureaucratic corruption. Secure property rights are as strong
as the government officials who enforce the rules. In Russia today,
when ordinary citizens and business people turn to the government to
protect their rights, they too often encounter civil servants and
government appointees who use their positions of power to tilt the
playing field to a favored team. One agency that Mr. Putin needs to
examine is the Federal Commission for the Securities Market of the
Russian Federation. This is the Russian equivalent of the U.S.
Securities and Exchange Commission and the body responsible for
defending property rights in the securities market--a cornerstone of
any modern economy.
The Commission's Chairman Igor Kostikov has been dogged by
persistent allegations in the Russian press that the FCSM gives special
treatment to brokerage and asset management firm AVK, which Mr.
Kostikov founded (the K stands for Kostikov). Mr. Kostikov says that
his shares in the company were sold in December 1998. Last year, AVK
brought a lawsuit against a St. Petersburg newspaper which alleged that
the Commission gives unfair advantage to AVK. AVK, however, never
showed up for the court date, giving the paper a victory by default.
There is nothing particularly unusual in Russia about a minister
regulating the very sector in which he has had a commercial interest.
To cite another example, Press Czar Mikhail Lesin founded Video
International, which captures the bulk of the Russian advertising
market on state television (which Mr. Lesin oversees). Russia's nuclear
power minister was sacked last year following allegations (which the
minister denied) that he retained an ownership stake in a small
Pennsylvania consulting firm that had been hired to advise a U.S.
company responsible for a nuclear security pact between the U.S. and
Russia.
But if allegations of conflict-of-interest and charges of kickbacks
aren't unique to the Commission, Mr. Kostikov's ability to impact
property rights makes his job particularly crucial for Russia's economy
and investment climate. This is in part why the Commission's tussles
with Pallada Asset Management, Russia's top performing fund in 2001,
have received so much attention from market participants in Russia.
Pallada is the Moscow subsidiary of State Street Global Advisors--a
large asset manager affiliated with State Street Corporation, a leading
global custodian. In other words, this is the kind of company Russia
ought to be welcoming with open arms. Yet, Pallada's activities have
been the subject of the most extraordinary attention by the Commission
as well as numerous government investigations on grounds of ``tax
irregularities,'' non-compliance with FCSM regulations or ``serious
economic crimes.'' None of the investigations have produced evidence of
negligence or wrong-doing.
Pallada claims that changes to its fund prospectus were not
registered by the Commission because Pallada refused the Commission's
demand that it drop its St. Petersburg broker. Pallada claims Mr.
Kostikov was also unhappy that Pallada wasn't buying its St. Petersburg
bonds through AVK. For seven months, the Commission refused to register
amendments to a different Pallada fund while a new fund prospectus for
AVK, with similar provisions, was registered. After a widely publicized
lawsuit filed by Pallada (and settled out of court), the Commission, a
few days before the scheduled court hearing, quietly registered
Pallada's amendments. But in what Pallada calls an act of revenge, the
Commission forced Pallada to change the name of its fund that competed
with AVK (two years after its creation).
Recent events have been even more interesting. Last October, a
Russian individual filed a mysterious lawsuit against the Federal
Commission for registering a private share issuance by Pallada to State
Street in 1998. The individual, Alexei Drobysh, has no known
relationship to any of the private parties involved and certainly
didn't plead any in his suit.
The Federal Commission did not object to this suit, nor did it
inform any of the private parties of the existence of the lawsuit.
Neither State Street nor Pallada were allowed to participate in
judicial hearings regarding Pallada's share issue to State Street.
Shockingly, the court decided that the share issue was illegal
because the Russian plaintiff had not been provided with adequate
information about the share issue. On its face, the decision means that
every private share issue in Russia may be invalidated unless the
parties have taken pains to ensure that each of Russia's 144 million
citizens have received information about the transaction. Rather than
protest this Kafkaesque result, the Federal Commission simply informed
the press that State Street's property rights to the shares issued in
1998 had been cancelled. While surprising court decisions are hardly
unusual in Russia and a single decision can be dismissed as politically
motivated and thus not a broader threat, it's hard to see how such an
environment can be conducive to legal reform or the protection of
property rights. As a lawyer at the prominent English law firm of
Freshfields wrote in a letter to the newspaper Vremya Novosti, ``this
decision threatens the very idea of securities and the securities
markets in Russia. To say nothing of the violations of constitutional
principals of private property, freedom to contract and principals of
trade.'' These actions of the FCSM must be investigated and the
widespread concerns of abuse of office either proved or refuted.
Loyalty means a lot in politics, especially in Russia. President
Putin understands this better than anyone. To that end, he should adopt
a Presidential Code of Ethics for government officials already
submitted to the Duma by the Union of Right Forces. The Code of Ethics
should equate loyalty with honesty in government service. While a
conflict-of-interest law exists, government officials should have to go
further and sign an oath that they have no commercial interests and
will implement the law and policies of the government of Russia.
Equally crucially, corporate governance rules ought to be strengthened
to provide more transparency. When officials are shown to have violated
their oaths, they should be publicly disgraced and dismissed. Only
President Putin can tackle this difficult problem, and he needs to do
it soon if he wants a place in Russian history.
Each time the market is not regulated fairly, or public office used
impartially, signals are sent and messages learned by the marketplace.
Until bureaucratic corruption and the improper use of office is
addressed, President Putin's other reforms to revive the Russian
economy and nation will be useless.
Mr. Nemtsov is leader of the Union of Right Forces and a member of
the Russian Duma.
Reached for comment by the editors, Mr. Kostikov's office issued
the following statement:
The Federal Commission for the Securities Market, which I chair,
never favors one market participant over another. There has never been
any suggestion by any authority or market participant that it has,
except in the matter of Pallada Asset Management, which over the past
year has lost a series of court actions it initiated against the
Commission that were unrelated to this claim, and which concocted the
notion as a public relations maneuver. The specific accusation that the
Commission has shown favor, to the detriment of Pallada, toward a
financial-sector firm which I had founded before entering public
service in 2000, was apparently thought up by Pallada to conveniently
exploit negative perceptions by foreign audiences of Russian commercial
practices. To be responsive to Russian media inquires caused by
Pallada's loud complaints, the Commission invited well-established
foreign auditors and attorneys to examine the claim. It was found to be
baseless. Russian law-enforcement authorities examined the claim and
also found it baseless. Nonetheless, Russian politicians sometimes pick
up on Pallada's complaint when it suits their own goals with respect to
the Federal Commission, or when they possess a link with Pallada, the
origination of which has been an object of investigation by U.S. legal
officials examining the use of U.S. government technical assistance
funds to Russia in the 1990s.
Igor V. Kostikov
Chairman
Russian Federal Commission for the Securities Market
Chairman Crane. Thank you, Mr. Edlin. And let me, to all of
our witnesses who testified today, express our apologies for
the disruptions. This place doesn't run smoothly. But we
appreciate your participation, and we will accept any written
testimony or information that you have in addition to your oral
testimony, which will be made a part of the permanent record.
And that will be open until Wednesday, April 24th.
With that, that concludes our hearing, and I thank you
again, all of you, for being here, and we stand adjourned.
[Whereupon, at 12:41 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of Bethlehem Steel Corporation, Bethlehem, Pennsylvania;
National Steel Corporation, Mishawaka, Indiana; and United States Steel
Corporation, Pittsburgh, Pennsylvania
These comments are submitted pursuant to the Advisory from the
Committee on Ways and Means, Subcommittee on Trade No. TR-8, inviting
written comments with respect to the possible establishment of
permanent normal trade relations with Russia. Bethlehem Steel
Corporation, National Steel Corporation, and the United States Steel
Corporation are U.S. producers of flat-rolled steel products.
President Bush has requested that Congress pass legislation
authorizing the President to terminate the application of Title IV of
the Trade Act of 1974 to Russian Federation, including the so-called
Jackson-Vanik freedom of emigration provision. Responding to the
administration's request, Congressman Thomas (R-CA) introduced H.R.
3553, with Congressmen Crane and Dreier co-sponsoring, on December 20,
2001. The bill authorizes the President to graduate Russia from
Jackson-Vanik and establish Permanent Normal Trade Relations status
(PNTR). The move to repeal Jackson-Vanik in relation to Russia reflects
the fact that it now accords its citizens freedom of emigration and
travel as well general human rights progress.
We take no position on the question of whether Russia should be
granted PNTR status. However, if Congress decides to approve H.R. 3553,
a provision similar to Section 406 of Title IV, which provides an anti-
import surge mechanism in the case of market disruption, should be
included in the final version. Such a market disruption mechanism was
included in legislation providing PNTR for China (19 U.S.C. Sec. 2451),
reflecting the fact that the U.S. and China had agreed to maintain that
provision in force for twelve years following the latter's accession to
WTO.
There is no question that since the breakup of the Soviet Union and
the fall of communism, Russia has made significant progress in moving
toward a market economy. However recent surveys of the economic
situation reveal that significant distortions persist, reflecting
elements of the old command-style economy which remain in place:
Government ownership and control of the means of
production is widespread and actually increasing, reflecting
deeply imbedded vestiges of the Soviet era centrally planned
economy.
The government-controlled structure of the largest
companies in Russia, most notably Gazprom and UES, results in
pervasive price distortions and government direction of the
allocation of resources and determination of prices. The prices
of nearly all goods and services in the energy, transportation
and communications field are set by the government, and the
government sets prices for hundreds of other enterprises
identified as ``natural monopolies.''
Low wage rates, late or nonpayment of wages,
inadequate protection of workers' rights, and restrictions on
labor mobility reflect the continuing lack of free bargaining
between labor and management. The actual situation of workers
relations in Russia has yet to evidence positive changes due to
the three-month old, new Labor Code.
Capital allocation is badly distorted, with the
government controlling the only major banks in the country. The
allocation of capital and interest rates are commonly
determined by political considerations rather than market-based
factors.
While the use of barter in lieu of money
transactions has declined, the persistence of a significant
degree of barter is indicative that a true money economy is not
fully established.
Reflecting the absence of a properly functioning
system of bankruptcy, insolvent enterprises which should shut
down instead continue to produce and export goods, often under
the control or direction of local or regional government
authorities.
Such distortions were important factors contributing to the massive
Russian export surge of 1998, as the Commerce Department found in a
comprehensive July 2000 study. That surge disrupted markets around the
world and had a devastating impact on the American steel industry,
particularly with respect to hot-rolled flat products. The 1998 surge
was brought under control by the application of antidumping measures on
hot-rolled steel products, using existing rules governing dumping by
nonmarket economies, and through the conclusion of a comprehensive
bilateral trade agreement limiting the quantities of a range of Russian
steel products exported to the U.S. At present, however, it appears
that the Commerce Department is on the verge of extending ``market
economy'' status to Russia under the antidumping law, and the Russian
Government has reportedly renounced the comprehensive agreement. While
normal antidumping and countervailing duty remedies remain available to
U.S. producers, there are significant reasons to believe that they
cannot be utilized effectively with respect to an economy which remains
as grossly distorted as that of Russia.
Recent changes with respect to the comprehensive agreement and
Russia's nonmarket economy raise the very real prospect that another
devastating surge of Russian steel exports into the U.S. market could
occur. The addition to this legislation of a safeguard-like feature,
comparable to that in the China PNTR bill, is important to provide a
fair and adequate protection to threatened U.S. industries for a
transition period. The duration of this period should be decided on by
Congress based on the time it takes Russia to complete its transition
to a real market economy.
In the past, legislation granting PNTR status has been enacted
after the conclusion of bilateral negotiations between the United
States and the country in question over the latter's WTO accession, as
was the case with respect to China. In this case, the administration
has asked Congress to grant PNTR status to Russia, while Russia's WTO
accession negotiations are nowhere near completion. Granting
unconditional PNTR status prior to the parties' agreement on a protocol
of accession risks dissipation of leverage this country might otherwise
enjoy to negotiate conditions necessary to provide safeguards, after
Russian accession, with respect to potentially problematic Russian
policies, practices, and economic structures. Accordingly, if Congress
sees fit to enact PNTR legislation in advance of an agreement, it
should include the requirement of an anti-surge safeguard in order to
preserve U.S. leverage and to ensure that U.S. industries and workers
are not injured by another Russian export surge after PNTR status is
granted.
International Paper
Washington, DC 20003
The Honorable Philip Crane
Chairman, Subcommittee on Trade
Committee on Ways and Means
1102 Longworth House Office Building
Washington, DC 20515-6348
Dear Mr. Chairman:
On behalf of International Paper I am writing in support of
Congressional action to graduate Russia from Jackson-Vanik
consideration. International Paper is a member of the US-Russia
Business Council and endorses the testimony they have provided
supporting this action.
With the end of the Cold War, and the transformations that have
taken place in the Russian political and economic systems, it is
appropriate for Congress to remove Russia from Jackson-Vanik annual
review. Continued Jackson-Vanik review does nothing to improve the
trade relationship with Russia. Terminating its application to Russia
would help further normal trade relations between the U.S. and Russia.
In our view, Jackson-Vanik review should not be linked to Russia's WTO
accession. We believe the Administration is well positioned to
negotiate strong commitments from Russia in terms of market access and
other market opening measures in the accession negotiations. We would
view linking Jackson-Vanik to Russia's WTO membership application as
counterproductive since it could be perceived as the U.S. raising the
bar on Russia vis-a-vis other countries seeking WTO accession.
International Paper has a significant investment in Russia in the
Svetogorsk paper mill, which is producing positive returns for the
company and the community. The mill has seen steady improvement in
productivity, profitability, and employee wages. The mill has become
the market leader in office papers in Russia and is now also supplying
export markets in Europe.
International Paper managers have worked effectively with
government officials at all levels in Russia, and have seen many
positive changes in the economic and legal framework allowing private
enterprise to operate successfully in Russia. These changes have been
noted in the submissions of the US-Russia Business Council, which
International Paper supports. We also recognize that there is room for
further improvement, particularly with respect to tax policy, currency
controls, law enforcement, and import/export duties.
We believe it important to continue to encourage progress on the
market reforms the Russian Government has begun, and a positive step in
this direction would be graduating Russia from annual Jackson-Vanik
review.
Sincerely,
Lyn M. Withey
Vice President Public Affairs
Statement of the National Cattlemen's Beef Association
Producer-directed and consumer-focused, the National Cattlemen's
Beef Association (NCBA) is the trade association of America's cattle
farmers and ranchers, and the marketing organization for largest
segment of the nation's food and fiber industry.
NCBA has been and continues to be a strong believer in
international trade. We support aggressive negotiating positions to
open markets and to remove unfair trade barriers to US beef products.
Livestock producers are becoming increasingly dependent on the rest of
the world to buy our products. Exports of meat and grains make sense
for the US, a country that has only 4 percent of the world's
population, but a large share of the world's production agriculture.
Exports of beef have helped to increase overall beef demand and
have complemented improving beef demand in the domestic US market. We,
as an industry, have worked hard to promote beef exports that currently
account for over 12 percent of the value of wholesale beef sales. On a
tonnage basis, we export approximately 10 percent of what we produce.
NCBA supports terminating application of Jackson-Vanik to Russia
and extending Permanent Normal Trading Relations (PNTR) for Russia. We
also strongly support Russia's WTO accession and look forward to
incorporating Russia into a rules-based system of trade. To be
perfectly honest, however, these positions were much easier to support
before Russia imposed the ban on imports of US chicken on March 10.
Severe price declines in cattle and hog futures markets, price
volatility and losses throughout the cattle feeding and cow-calf
sectors have been accentuated because of Russia's unjustified trade
action. The domestic US meat market perceives that it will have to
absorb an additional 45 million pounds of protein per week for every
week that Russia does not resume importing US poultry products.
Uncertainty about the outcome of this trade dispute has weighed on the
markets for beef and pork and losses have accumulated at increasing
rates. Russian leadership must resolve meat access issues and maintain
uninterrupted access for US meat if it is serious about generating and
maintaining political support for graduating from Jackson-Vanik and
negotiating for WTO accession.
During the last few years the US successfully negotiated China PNTR
and WTO accession on nearly concurrent timelines. Because that strategy
was successful with China, NCBA had concerns when it was first proposed
to grant PNTR to Russia before the WTO accession package is negotiated
and finalized. However, we also realize that the circumstances in China
and Russia are very different and the strategy that successfully
concluded with China's WTO accession will not necessarily apply to
Russia. If firm assurances are received from U.S. negotiators that
issues specific to beef will be resolved in the Russian WTO accession
package, the U.S. beef industry could support PNTR for Russia prior to
and independent of WTO accession negotiations.
We realize that the situations in China and Russia are very
different, with respect to the commercial interests involved, each
country's trade regime, the level of economic reform, and their
respective human rights situations. In contrast to the situation with
Russia, China's MFN (NTR) treatment was subject to an annual waiver and
spirited annual debate until Congress approved PNTR for China.
Russia has met its human rights obligations and qualifies for PNTR
under the Jackson-Vanik legislation. During the past eight years,
Russia has not been subject to an annual review of Normal Trading
Relations (NTR) or a Congressional vote on the waiver process because
it has met its human rights obligations. There has been little question
about whether to continue providing NTR to Russia so the vote for PNTR
provides little leverage in the negotiation process for Russia's WTO
accession. To reiterate, the US beef industry will not oppose PNTR for
Russia as long as firm assurances are received from U.S. negotiators
that issues specific to beef will be resolved in the Russian WTO
accession package.
The following beef--specific issues that must be resolved before NCBA
will support a WTO accession package for Russia:
Minimum Invoice Prices: U.S. beef is subject to minimum
invoice pricing requirements. Any Russian agreement must
eliminate this WTO-illegal practice.
Export Subsidies: Any U.S./Russian bilateral
negotiations or WTO accession package must include provisions
to eliminate export subsidies comparable to agreements reached
with China and other countries.
Zero for Zero Production Subsidies: Any U.S./Russian
bilateral negotiations or Russian WTO accession package should
explore a zero for zero option with respect to production
subsidies specific to meat production (possibly on a species by
species basis) to set the stage for Russian/EU bilateral
negotiations.
Tariffs and Tariff Rate Quotas: In recent months,
certain actions in Russia appear to be at odds with the WTO
accession process. Beef imports now may be subject to tariff
rate quotas as a result of new legislation passed by the Duma.
Implementation of TRQs--a proposal supported not only by the
Russian meat producers but also apparently by the European
Union--would be counter to the interests of U.S. beef
producers. NCBA opposes implementation of TRQs by Russia and
beef tariffs should be bound at low levels consistent with the
levels in the China WTO accession package and with target
levels in the WTO multi-lateral agricultural negotiations.
SPS/TBT/Inspection Equivalency: Russia currently
requires individual plant-by-plant-level approval for beef
processing plants. The U.S. should insist that Russia, like
China and most other U.S. trading partners, accept beef from
all USDA-inspected plants. There should be an elimination of
all unjustifiable technical and sanitary barriers to trade
including the following:
Beef products originating from beef animals raised
in the states with counties that have had confirmed bovine
cases of vesicular stomatitis (VS) within the last 12 months
are not eligible for shipment to Russia.
Importation of ground beef, packaged in bulk form or
in the form of meat patties, is prohibited.
The Russians periodically raise the issue of `GMO
statements' on meat certificates. Thus far, USDA has rebutted
this issue. Requirement by any country for certification that
meat originates from animals that have not consumed GMO feeds
is not based on science and will be absolutely opposed by NCBA.
Thank you for the opportunity to submit these
comments. We look forward to working with you as this issue
moves through the legislative process.
U.S. Chamber of Commerce
Washington, DC 20062-2000
April 24, 2002
The Honorable Philip Crane
United States House of Representatives
Washington, DC 20515
Dear Representative Crane:
I am writing to you on behalf of the U.S. Chamber of Commerce, the
world's largest business federation, representing more than three
million businesses and organizations of every size, sector and region,
to urge you and your colleagues to support graduating Russia from the
Jackson-Vanik provisions under Title IV of the Trade Act of 1974, and
extending Permanent Normal Trade Relations (PNTR) status to Russia.
The U.S. Chamber of Commerce and its affiliated American Chamber of
Commerce in Russia have been closely following the economic and
political developments in Russia. As a matter of fact, Tom Donohue, the
U.S. Chamber's President and CEO, is currently in Russia continuing our
frequent dialogues with Russian and American companies who are engaged
in business in the Russian Federation, NGOs, Russian officials, and
business association executives.
The U.S. Chamber strongly supports the graduation of Russia from
Jackson-Vanik, a remnant of U.S. trade law that has been superceded by
the end of the Cold War. Based on our experience and analysis of the
developments in Russia, we believe that it meets the statutory
requirements for unconditional NTR treatment and that the extension of
such treatment is in the economic interests of both Russia and the
United States.
Since 1994, the President has found Russia to be in full compliance
with the Jackson-Vanik emigration criteria. However, the country's
trade status remains conditional upon annual compliance determinations
by the President. This, understandably, continues to be an irritant
between our two countries. The time has come to put U.S.-Russian
commercial relations on a solid foundation, unencumbered by legacies of
policy differences with a government that no longer exists.
American companies are keenly interested in the growth of the
Russian market for U.S. goods and services. With a trade turnover of
only about $9 billion per year, our economic ties with Russia have
still not matched the breadth of our political relationship. The
extension of permanent NTR status to Russian goods and services is one
crucial step in sustaining the transformation of the Russian economy
and ensuring its balanced orientation in the global marketplace.
The U.S.-Russian commercial relationship would also benefit from
increased efforts to acquaint Russian firms with the U.S. market and
business practices, resulting in opportunities for Russian firms to
become integral players in the global economy. Through their operations
in Russia, U.S. companies establish benchmarks for corporate practice
in areas such as corporate governance, minority shareholder rights,
sanctity of contracts, respect for private property, and other aspects
of the rule of law. U.S. companies have been and will continue to be a
powerful force for positive change in Russia.
Extending PNTR status to Russia would send a clear signal of our
commitment to help fully integrate Russia into the global economy. It
would allow American business to constructively engage Russia's private
sector, which is the driving force of reform. It is Russia's private
sector that will ultimately benefit from--and solidify--the country's
integration into global markets through eventual accession to the World
Trade Organization (WTO). The U.S. Chamber of Commerce looks forward to
working with you, as well as other Members of Congress, to ensure the
extension of PNTR treatment to Russian goods and services.
Sincerely,
R. Bruce Josten
Executive Vice President
Government Affairs
Statement of Micah H. Naftalin, National Director, UCSJ: Union of
Councils for Jews in the Former Soviet Union
Mr. Chairman:
On behalf of our president, Yosef I. Abramowitz and the entire UCSJ
Board of Directors, I thank you for this opportunity to comment on the
issue of graduating the Russian Federation from the strictures of the
Jackson-Vanik Amendment. In the early 1970s, UCSJ was the first NGO to
recommend to Scoop Jackson the need to link America's trade benefits to
freedom of emigration--perhaps the most effective piece of human rights
legislation ever enacted.
I am providing here for your record an extended discussion of the
situation that provides the context for our views and concerns. So let
me begin with the bottom line: UCSJ can support graduating Russia from
Jackson-Vanik, but only if a bilateral institutionalized mechanism is
established to assure periodic review of Russia's status and efforts to
reform its human rights and civil society, including concrete steps to
combat antisemitism, xenophobia and manifestations of terrorism.
Overall, President Putin is solidly on record as pledging such reforms.
What remain to be accomplished are concrete actions that implement
those pledges. We seek bilateral mechanisms that, in the words that
Ronald Reagan borrowed from Lenin, enable the United States and the
human rights community to ``trust but verify.''
We have just concluded the observance of the Passover holy days,
the Jewish celebration of freedom. At every seder table, worldwide, the
participants sing the song ``Dayeinu,'' which means ``it would have
been enough.'' It is a way of thanking God for each of the step-by-step
miracles that led to the Exodus from slavery in Egypt. Thus had God
taken us out of Egypt and punished our oppressors, Dayeinu, it would
have been enough. Had God parted the Red Sea permitting our escape,
Dayeinu. Had God supplied our needs for forty years in the desert,
Dayeinu, and so forth.
But, Mr. Chairman, here on the ground, human rights activists can
never say Dayeinu. When the U.N. enacted the Universal Declaration of
Human Rights, it was not enough. We could not say Dayeinu. When the
Congress enacted the Jackson-Vanik Amendment, we could not say Dayeinu.
When Sakharov, Orlov, Sharansky and all the other Prisoners were
released, when the Soviet Jews were released from quarantine, even when
President Putin declares war on terrorism and antisemitism, and even if
the time to release Russia from Jackson-Vanik has arrived, we must not
say Dayeinu. It is not nearly enough.
In partnership with the Moscow Helsinki Group, UCSJ monitors
grassroots human rights, antisemitism and xenophobia in each of
Russia's 89 regions. The genius of Jackson-Vanik was to link trade and
human rights and that linkage remains. The shortcomings of civil
society remain a barrier to economic development and the confidence of
foreign investors as long as there is government control of media,
severe harassment of Muslims and non-Orthodox Christians, widespread
corruption of the civil and criminal justice system. And then, even in
the relative absence of Soviet-style official antisemitism, this
historic scourge, which is rising across Europe and throughout the
Middle East to levels not seen since the defeat of Hitler, is not being
effectively combated in Russia's regions.
One way of explaining this is to say that President Putin and his
government must go beyond decrying antisemitism and systematically
punish antisemites as well. As fully documented by UCSJ, despite his
unprecedented and appreciated strong pledges to combat them, large-
scale antisemitic, xenophobic and anti-American incidents and
propaganda are nonetheless perpetrated, largely unchallenged, by
dedicated Communists, neo-Nazis, Islamic extremists and elements within
the Russian Orthodox Church, often in league with local officials and
police. Human rights-based civil society reforms must be
institutionalized for Russia's benefit and as a guarantor of a
constructive and reliable bilateral relationship. How Russia handles
the challenge of grassroots antisemitism is a reasonable indicator of
its human rights progress overall.
Mr. Chairman, it is always difficult to keep human rights goals on
the regular agenda of bilateral diplomacy. While we view it as integral
to America's national security, it almost invariably is overshadowed by
more quantifiable indices like trade or oil or weapons. In the Clinton
years, we were critical of the Gore-Chernomyrdin semi-annual meetings
because of all the original ten issue categories, only human rights
failed to be included for automatic, regular review on each agenda.
Indeed, and this is our central concern: it has been only Jackson-Vanik
that has compelled Russia and the United States to come together to
discuss and negotiate Russia's human rights progress at least once a
year in the context of considering the annual waiver. Accordingly, we
are asking the Administration and the Congress--and Russia as well--to
replace Jackson-Vanik with an effective venue, a mechanism for
continuing, regularly scheduled bilateral oversight for human rights
and civil society reform and progress.
Examples of such mechanisms could include, inter alia, scheduled
annual reviews by the Congressional Helsinki Commission and the foreign
relations committees of the House and Senate; a bilateral commitment to
include human rights review on the agenda of summit meetings and annual
joint review sessions convened by the Department of State and Ministry
of Foreign Affairs which would include full participation by Russia's
Human Rights Ombudsman and by all interested human rights NGOs from
both countries. The Congress might also consider extra appropriations
for USAID or the National Endowment for Democracy to support US-Russian
cooperative human rights and religious freedom monitoring efforts by
NGOs and to encourage continuing dialogue among US and Russian business
organizations, economic development and trade officials and human
rights and environmental NGOs to explore the mutual benefits of
improving Russia's human rights and economic goals.
Concrete steps that President Putin and his government could and
should take, consistent with his publicly declared goals, which would
provide confidence beyond the generalities already expressed, include
the following:
Through the Ministry of Internal Affairs and the
Federal Security Service (FSB), vigorously investigate and
prosecute antisemitic and extremist organizations and
individuals, and incidents of hate crimes, under the currently
existing law prohibiting the incitement of ethnic or religious
hatred (Article 282 of the Criminal Code). Redirect FSB
resources currently being used to investigate and prosecute
religious minorities, environmental scientists, and human
rights NGOs to the crucial task of fighting extremism.
Continue to encourage the Duma to enact the draft
law ``On Political Extremism'' to bolster the Article 282-based
efforts to confront antisemitic extremism.
Provide effective police protection to endangered
Jewish, Muslim and other especially non-Orthodox Christian
minority religious and community sites.
Repudiate the 1997 law on religion and introduce
legislation in the Duma to restore full freedom of religion in
Russia.
Dismiss Russian federal officials in regional and/or
municipal offices who collaborate with, or are tolerant of,
extremist groups and individuals. At minimum, President Putin
should not hesitate to signal these officials out for public
criticism--rather than just condemning antisemitism, he should
condemn antisemites, such as Kursk governor Aleksandr Mikhaylov
and Krasnodar Kray's representative to the Federation Council
Nikolai Kondratenko, by name.
Thank you, Mr. Chairman. What follows is the policy statement
issued by UCSJ in the Fall of 2001.
______
``Civil Society Reforms Can Replace Jackson-Vanik''
Antisemitism in the Russian provinces is gradually becoming
as customary and trivial as foreign made cars on the roads and
computers in people's apartments. Not only Stavropol and
Krasnodar Kray, but several other regions are becoming totally
pro-fascist given the authorities' lax attitude or even direct
involvement. Izvestiya, May 12, 2000
In sharp contrast to the statements intended to minimize the
scope and danger of antisemitism by some Jewish leaders in
Russia, President Putin himself has candidly noted the problem
and vowed to combat it. If he can make concrete progress here,
it will be an indication that civil society, upon which
America's security and Russia's business environment depend,
can be reformed. UCSJ, November 2001
As presidents Bush and Putin prepare for their Texas Summit
rendezvous, the headlines will deal with the state of their bilateral
coalition for security against terrorism, with America's hopes for
renegotiating the ABM treaty to accommodate domestic missile defense,
the possibility of accessing Russia's vast oil and gas reserves as a
counter to our dependence on the Gulf states, and generally with the
warming temperature of the relationship itself in what has been called
the post-post-Cold War era of post-September 11. Only slightly below
these headlines will be a sub-headline dealing with the long-held hope
of Russia and the American business community that President Bush will
move to ``graduate'' Russia, that is, exempt it permanently, from the
strictures of the 1974 Jackson-Vanik Amendment to American trade law,
which conditions Russia's access to competitive tariff treatment to its
de jure free emigration and de facto human rights behavior. For a
decade, Russia has received an annual waiver; the proposed action
therefore is symbolic but, as Russia sees it, negative symbolism has no
place between friends. Subject to concrete assurances that would
confirm promises already made by President Putin, UCSJ: Union of
Councils for Jews in the Former Soviet Union, the initial and strongest
supporter of Jackson-Vanik, agrees.
How presidents Bush and Putin resolve the Jackson-Vanik issue will
offer an important window for measuring the relative merits of
political form and national security substance. Virtually all the
political and diplomatic pressures argue for the graduation, seen as a
thorn in the relationship at a time when both parties are seeking
diplomatic harmony and economic benefits. But not so fast if one
believes, as do we, that reliability and shared human and democratic
values in a coalition partner are in the best long range interest of
promoting America's national security. A country that lacks the
elemental infrastructure of a civil society--e.g., multiple political
parties, minimal corruption, independent media, religious freedom,
civil and criminal codes and practices that meet reasonable
international standards of rule of law--cannot be a secure and reliable
partner. One leading indicator of all these issues, including not only
the original goals of Jackson-Vanik but also the presence of global
terrorism and anti-Americanism, is the rate of antisemitism and the
effectiveness of state and local authorities in combating it.
Linking U.S. trade benefits to Soviet antisemitism, emigration
policy and thus human rights was the brainchild of Refusenik leaders in
Leningrad and Moscow, and brought to the attention of Senator Henry M.
``Scoop'' Jackson (D-WA) by UCSJ in the early 1970s. Enacted in 1974
over the strong objection of President Nixon and his national security
adviser, Henry Kissinger, the Amendment was one of America's finest
hours in the international battle for human rights. The Cold War
demanded a stick; today's increasingly warm bilateral relationship with
Russia calls for carrots from the West but also reciprocal concrete
accomplishment with respect to reforms in Russia's civil society.
Actions, in other words, must follow the promising rhetoric.
UCSJ favors graduation but pursuant to the Bush Administration
obtaining some concrete actions indicative of a commitment to actual
reform. These include: (1) Breaking up alliances between local
officials and antisemitic groups, and directing regional prosecutors to
prosecute perpetrators of criminal incitement to antisemitic hate
crimes, physical or through publishing, under Article 282. Virtually no
cases have been brought in the past five years. (2) Giving rhetorical
support to independent human rights NGOs such as MHG and Memorial. (3)
Providing explicit endorsement of the work of the Human Rights
Ombudsman, Oleg Mironov, and support for the appointment of regional HR
ombudsmen.
UCSJ's chief adversary in the decades-long controversy over
Jackson-Vanik has been the U.S.-Russia Business Council. Today, the
policy differences are slight. They, and their Moscow-based counterpart
American Chamber of Commerce in Russia, like UCSJ, seek ``to develop a
market environment in Russia attractive to investment and long-term
business operations.'' Among their policy recommendations to the Bush
Administration last March was the following, with which UCSJ agrees:
``A bilateral agenda exclusively focused on security issues [to the
detriment of our economic and commercial relations] is not in our
national interest, as it does not accurately reflect the challenges and
opportunities associated with engaging Russia.'' UCSJ has similarly
recommended that the bilateral agenda should go beyond traditional
national security concerns to embrace human rights and civil society
reforms that both make Russia a more reliable security partner and
improve its attractiveness to foreign investment.
Accordingly, we are urging the Bush Administration to recognize
that reform of the civil society, including fighting antisemitism,
human rights, corruption, the justice system, civil and contract law,
etc, is an important strategy for making Russia a more attractive venue
for foreign business and investment that will make positive
contributions to the Russian economy. We want our Commerce Department,
the American business community and appropriate Russian economic
planners and ministries, to work with the human rights NGO community in
a strategic alliance to improve civil society and Russia's economy
together.
Antisemitism is by no means the most important failure of Russia's
civil society; but it is a leading indicator. And how Jews are treated,
in politics, in the media, and in the courts is a leading indicator of
how Russian authorities respond to messengers of problems generally,
including barriers to commerce. So far, the record is not good.
Alexander Nikitin was tried for treason simply for working for a
Norwegian foundation in documenting the public record of dangerous
nuclear contamination of the seas from submerged mothballed nuclear
submarines. Putin called him a spy; to its credit, after five years of
imprisonment, house arrest and several trials, the Supreme Court
finally approved his acquittal. The justice system, like the economy,
is corrupt; bribes are the best defense in a country where the accused,
who can be held without bail and tortured into confession, is presumed
guilty until proven innocent. The resulting catastrophically
overcrowded prisons are breeding grounds for epidemics of tuberculosis
and AIDS, at monumental cost to public health as well as budgets. Legal
codes and procedures still mostly date to the Soviet era. Business
contracts--civil and governmental--are corrupt and disputes are often
resolved by mafia, not law. These conditions not only contribute to the
discontent of a poverty-stricken provincial public, and drain public
resources, they contribute to a decidedly negative environment for
attracting foreign investment. These are but some of the human rights
violations well documented, region by region, by a nationwide network
of local human rights NGO monitors coordinated, under a USAID grant, by
the prestigious Moscow Helsinki Group, assisted by UCSJ. Now for the
good news.
From the inception of his tenure Putin, to his credit, has
displayed candor and accuracy in publicly describing the elements of
Russia's problems. He has made genuine efforts to attack the
unmanageable drift of authority towards provinces and away from Federal
and Constitutional authority. He has addressed problems of taxation and
of corruption. He has targeted judicial reform. All, in the early days,
with a disconcerting affinity for the methods and colleagues of his
basic training, the KGB. Most well known are the mass human rights
violations incident to the war in Chechnya and his determination to
repress the independent media which, in the absence of true political
parties other than the Communists, represented his only serious
adversary.
The spotlight of systematic human rights and antisemitism
monitoring by experienced and independent NGOs plays two important
roles: the inherent protection of the individual that the spotlight
provides, and the ability of the public and governments alike to
measure abuses and progress both subjectively and objectively.
Our belief and hope for the future is that Jewish and other human
rights monitors and activists will work constructively with officials
and the business community on reforms that would protect Jews and other
minorities, improve the rule of law-based civil society and lead to a
market economy and attractiveness to foreign investors as well.