U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

81–873—PDF 2012

S. HRG. 112–796 

RUSSIA’S WTO ACCESSION: 

IMPLICATIONS FOR THE UNITED STATES 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

MARCH 15, 2012 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

RUSSELL SULLIVAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1 

Kyl, Hon. Jon, a U.S. Senator from Arizona ......................................................... 3 

WITNESSES 

Allen, Samuel, chairman and CEO, Deere and Company, Moline, IL ................ 5 

Pollett, Ronald, president and CEO, GE Russia/CIS, Moscow, Russia ............... 7 

Taylor, Watty, president, Montana Stockgrowers Association, Helena, MT ...... 8 

Williams, Paul, president and chairman of the board, American Society of 

Composers, Authors, and Publishers, New York, NY ....................................... 10 

Larson, Hon. Alan, chairman of the board, Transparency International USA, 

Washington, DC ................................................................................................... 12 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Allen, Samuel: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 33 

Baucus, Hon. Max: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 37 

Letter from Sergey Aleksashenko, et al. to Chairman Baucus, dated 

March 12, 2012 .............................................................................................. 39 

Letter from Lyudmila Alekseeva, et al. to Senator Reid, et al., undated .... 41 

Cornyn, Hon. John: 

Letter from Senator Cornyn, et al. to Leon E. Panetta, dated March 

12, 2012 .......................................................................................................... 43 

Kyl, Hon. Jon: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 46 

‘‘The Right Way to Sanction Russia,’’ by Garry Kasparov and Boris Nemtsov, Wall Street Journal, March 15, 2012 ................................................. 48 

Larson, Hon. Alan: 

Testimony .......................................................................................................... 12 

Prepared statement .......................................................................................... 50 

Pollett, Ronald: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 55 

Taylor, Watty: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 58 

Williams, Paul: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 62 

COMMUNICATIONS

American Farm Bureau Federation ....................................................................... 69 

American Russian-Speaking Association for Civil and Human Rights ............... 73 

Bipartisan Policy Center ......................................................................................... 76 

Medtronic, Inc. ......................................................................................................... 77 

National Association of Manufacturers (NAM) ..................................................... 80 

Pharmaceutical Research and Manufacturers of America (PhRMA) .................. 82 

U.S. Chamber of Commerce .................................................................................... 85 

(1) 

RUSSIA’S WTO ACCESSION: 

IMPLICATIONS FOR THE UNITED STATES 

THURSDAY, MARCH 15, 2012 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10:05 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Kerry, Wyden, Menendez, Grassley, Kyl, 

Cornyn, and Thune. 

Also present: Democratic Staff: Russ Sullivan, Staff Director; 

Amber Cottle, Chief International Trade Counsel; Hun Quach, 

International Trade Advisor; Chelsea Thomas, International Trade 

Advisor; and Bruce Hirsh, International Trade Counsel. Republican 

Staff: Chris Campbell, Staff Director; Everett Eissenstat, Chief 

International Trade Counsel; Paul Delaney, International Trade 

Counsel; and Maureen McLaughlin, Detailee. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The committee will come to order. 

Catherine the Great once said, ‘‘There is nothing so difficult as 

to escape from that which is essentially agreeable.’’ Russia joining 

the World Trade Organization presents a lucrative opportunity for 

the United States’ economy and American jobs. We can all agree 

on that. We must all embrace, rather than escape, this opportunity. 

Russia is the largest economy currently outside the WTO. It is 

the 6th-largest economy in the world. To allow American businesses, workers, farmers, and ranchers to seize the opportunity 

that Russia joining the WTO presents, Congress must act. We must 

pass permanent normal trade relations, or PNTR, to ensure that 

our exporters can access the growing Russian market. 

If the United States passes PNTR with Russia, U.S. exports to 

Russia are projected to double within 5 years. If Congress does not 

pass PNTR, Russia will join the WTO anyway, and U.S. exporters 

will lose out to their Chinese and European competitors. These 

competitors will expand their exports at our expense. 

Russia PNTR is a 1-sided agreement that benefits American 

workers and businesses and requires them to give up nothing in return. Unlike a free trade agreement, the United States will not further open its market to Russia. We will not lower any of our tariffs 

or make any other changes to our trade laws. It is a 1-way street. 

2 

Russia, on the other hand, will lower its tariffs and open its markets to U.S. exports. U.S. service providers will gain access to Russia’s telecommunications, banking, and other key markets. U.S. 

meat producers will secure greater access to the Russian market, 

including a generous U.S.-specific beef quota of 60,000 metric tons. 

And the United States will get new tools for our toolbox to hold 

Russia accountable to its obligations. These include binding legal 

enforcement and transparency measures. 

But, in order for U.S. businesses and workers to benefit from 

Russia joining the WTO, Congress must pass PNTR and repeal the 

Jackson-Vanik amendment. Jackson-Vanik denies normal trade relations to communist and former communist countries unless the 

President determines that the country permits free and unrestricted emigration of its citizens. 

Congress originally passed the law in response to the Soviet 

Union’s emigration restrictions, particularly with respect to its 

Jewish citizens. Jackson-Vanik served its purpose and helped millions of Jews emigrate freely, but it is now a relic of the past. 

Every President, regardless of political party, has waived JacksonVanik’s requirement for Russia for the past 20 years. 

When I traveled to Russia last month, I met with Russian and 

American business leaders, including Ron Pollett, who is here with 

us today. I also met with activists working to improve democracy, 

human rights, and corruption in their country, and I met with 

leaders of the Jewish community. The message from all of these activists was clear: the United States should repeal Jackson-Vanik 

and pass Russia PNTR. 

In fact, earlier this week leading Russian democracy and human 

rights activists wrote two letters calling on Congress to repeal 

Jackson-Vanik. I am entering both letters into the record as part 

of this statement. 

[The letters appear in the appendix on p. 39.] 

The CHAIRMAN. One letter from the activists states that today 

the Jackson-Vanik amendment ‘‘only hinders the interaction of the 

economies and the peoples of the two countries and worsens the 

human rights situation in Russia.’’ Repealing Jackson-Vanik weakens the ability of the hard-liners in Russia to rally anti-American 

forces. 

The activists in the other letter explain that Jackson-Vanik is a 

very useful anti-American propaganda tool. As they stated, it provides a tool that helps ‘‘to depict the United States as hostile to 

Russia, using out-dated Cold War tools to undermine Russia’s 

international competitiveness.’’ 

Repealing Jackson-Vanik takes away this tool and opens Russia 

to U.S. competition, to ideas, and to transparency. These activists 

have all raised serious questions about Russia’s human rights and 

democracy record. I share these questions. But, like the activists, 

I believe that PNTR should not be in question. 

We owe it to American businesses, ranchers, and farmers who 

are working to increase exports to the growing Russian market. We 

owe it to U.S. workers whose jobs depend on those exports, and we 

owe it to the Russia activists who are asking for our help in their 

fight for democracy. 

3 

So let us embrace this opportunity for our economy and for 

American jobs. In the spirit of Catherine the Great, let us move forward with that on which we can all agree. Let us work together 

to pass Russia PNTR. 

[The prepared statement of Chairman Baucus appears in the appendix.] 

The CHAIRMAN. Senator Kyl? 

OPENING STATEMENT OF HON. JON KYL, 

A U.S. SENATOR FROM ARIZONA 

Senator KYL. Thank you, Mr. Chairman. 

I think that I understand the message this hearing is intended 

to convey: American businesses want access to Russian markets, so 

we should repeal Jackson-Vanik and grant Russia permanent normal trade relations without delay and without conditions. It is a 

slam-dunk. 

But it is not a slam-dunk. Let us stipulate that American businesses, farmers, and ranchers should be able to sell products to 

Russia, and that free trade is important and beneficial to the 

United States. We still need to determine whether America is getting a good deal through Russia’s WTO accession, and whether 

more should be done to protect our interests. 

For example, Russia has never ratified the bilateral investment 

treaty that the Senate ratified years ago. That treaty would prevent Russia from expropriating businesses, an admittedly big problem in Russia. This is a very basic economic right that is not being 

protected. In addition, one of our witnesses will discuss Russia’s 

failure to remit royalties, which is also not directly covered by the 

WTO agreements. 

And I submit, the administration is missing a point on the repeal 

of Jackson-Vanik, which ties most favored nation status to freedom 

of emigration. While emigration may no longer be an issue, Russia’s blatant disregard for human rights and the rule of law is 

every bit as relevant today as it was decades ago. 

Human rights cannot be divorced from the discussion of our economic relationship with Russia, particularly since some of the most 

egregious cases of abuse involve citizens exercising their economic 

and commercial rights. Consider the case of Sergei Magnitsky, the 

young lawyer who was imprisoned, tortured, and died in prison because he sought to expose economic corruption at the highest levels 

of Russian government. 

Several of us have joined Senator Cardin in co-sponsoring legislation to send a clear message to those who commit gross violations 

of human rights that they will not have the privilege of visiting or 

accessing the financial network of the United States. 

Mr. Chairman, I would like to submit for the record, at the conclusion of my statement, an op-ed in the Wall Street Journal, 

March 15, by Garry Kasparov and Boris Nemtsov on this issue. 

The CHAIRMAN. Without objection. 

[The article appears in the appendix on p. 48.] 

Senator KYL. When the U.S. Ambassador to Russia, Michael 

McFaul, suggests that there is no association between a country’s 

respect for individual liberties and its business environment, he is 

simply denying reality. When two parties enter into a contract, it 

4 

is essential that both parties operate in good faith. There is scant 

evidence that the Russian state operates in good faith. It has a 

troubling pattern of intimidation, disregard for the rule of law, 

fraudulent elections, human rights abuses, and governmentsanctioned anti-Americanism. 

Contrary to the administration’s assertion, Russia is moving further away from international norms and values. In recent months, 

Moscow has not only blocked U.N. Security Council action on Syria, 

but has continued to sell arms to Assad’s regime, which is responsible for the slaughter of innocent citizens. This is not a government that can be trusted to uphold its international commitments 

or give a fair shake to American businesses. 

In looking only at the WTO context, Russia has not even lived 

up to all of the commitments it has already made on intellectual 

property rights, for example, as a condition of joining WTO. Russia 

remains on the U.S. Trade Representative’s Special 301 Priority 

Watch List for IP violations. What makes us think it will live up 

to its commitments after being allowed to join WTO? Yes, we would 

have access to a WTO dispute settlement process if we grant Russia PNTR, but what has that gotten us in our trade relationship 

with China? 

Twelve years ago Congress repealed Jackson-Vanik and authorized PNTR for China, and how did that work out? Well, USTR reports to Congress annually on China’s compliance with WTO commitments. The most recent report is 127 pages long, filled with 

problems. The U.S. has used the formal dispute settlement process 

to address these issues only in a handful of cases. One case has remained open since 2007. Even in the rare cases that we would get 

justice, it is not speedy justice. 

Despite all the structures of the WTO, China cheats, and continues to get away with it. If this is what we get from China, which 

ranks 75th among all countries on Transparency International’s 

Corruption Perceptions Index, what can we expect from Russia, 

which ranks a dismal 143rd on the same list? 

China was not granted PNTR without condition and without 

delay. It takes only a couple of pages of legislative text to repeal 

Jackson-Vanik, but the bill Congress passed had six separate subtitles dealing with the U.S.-China relationship. Given the current 

problems with our trade relationship with China, it probably was 

not enough. 

It is simply unreasonable to believe that PNTR can be extended 

to Russia without a more thorough examination of the issues. So, 

yes, we should have free trade; yes, Russia should become part of 

the community of law-abiding commercial nations. The question is 

whether the proposed agreement and repeal of Jackson-Vanik gets 

us there. 

Mr. Chairman, I hope this is not our last hearing on this subject. 

[The prepared statement of Senator Kyl appears in the appendix.] 

The CHAIRMAN. Thank you, Senator, very much. 

I will now turn to our witnesses. First, we have Mr. Samuel 

Allen, who is chairman and CEO of Deere and Company. I must 

tell you, Mr. Allen, as you already know, when I was in Russia not 

long ago, I visited one of your plants there, an assembly operation 

5 

just outside of Moscow. I was very impressed with the people, and 

the products that you are selling to Russians are helping Russian 

agriculture. I very much appreciated that opportunity. 

Next we have Mr. Ron Pollett. Good to see you again, Ron, having talked with you when I was over there in Russia, in Moscow, 

not long ago. Mr. Pollett is president and CEO of GE Russia. 

Thanks very much again, Mr. Pollett. 

Next, Mr. Watty Taylor. Watty is one of our guys; he is from 

Montana. He is president of the Montana Stockgrowers Association, a 2nd-generation family rancher from Kirby, MT. Thank you, 

Watty, very much for coming to join us. 

Next, we have Mr. Paul Williams, president and chairman of the 

board of the American Society of Composers, Authors, and Publishers. Thank you very much, Mr. Williams. Senator Hatch sends 

his special regards to you. He could not be here today, but he wanted me to tell you how much he appreciates working with you in 

various matters. It has meant a lot to him, and he deeply regrets 

he cannot be here. 

Mr. WILLIAMS. I appreciate it. He has been very kind. 

The CHAIRMAN. Yes. And finally, Mr. Alan Larson, chairman of 

the board of Transparency International USA. I must tell you, Mr. 

Larson, I enjoyed meeting with the director of Transparency International Russia in Moscow last month. I think her name was 

Elena. Very, very impressive, sharp, intelligent lady, and a very 

compelling story to tell of why she is back in Russia and did not 

stay over in Brussels. But thank you, all five of you, very much for 

coming today. 

The usual practice, as I am sure you are aware, is just to submit 

your statements for the record and speak about 5 minutes. I urge 

you to be just very direct and forthcoming, candid. Tell it like it 

is. 

Mr. Allen, you are first. 

STATEMENT OF SAMUEL ALLEN, CHAIRMAN AND CEO, 

DEERE AND COMPANY, MOLINE, IL 

Mr. ALLEN. Thank you. Chairman Baucus, Senator Kyl, distinguished members of the committee, my name is Sam Allen, chairman and CEO of Deere and Company. On behalf of John Deere and 

the Business Roundtable, thank you for the opportunity to provide 

testimony today on the importance of establishing permanent normal trade relations with Russia to John Deere and the U.S. business community. 

Granting PNTR is crucial for U.S. manufacturers, service providers, and agricultural producers to receive the full benefits of 

Russia’s WTO accession. It is essential to enable us to compete on 

a level playing field for Russian customers. 

The reasons are clear. First, PNTR will ensure equal treatment 

for U.S. companies doing business in Russia. Here is a concrete example: Russia has committed, upon accession, to significantly reduce its tariffs on imported agricultural equipment from 15 percent 

to 5 percent. However, it is likely that Russia would not extend the 

lower tariff rates to U.S.-made products until it is granted PNTR. 

U.S. companies like John Deere, thus would be at a competitive 

disadvantage relative to our foreign competitors, and we would 

6 

have no recourse to the WTO should disputes arise. This would 

negatively affect our U.S. operations, because many of the products 

we sell in Russia utilize components closely connected to jobs in our 

facilities in the American Midwest. 

Second, PNTR will strengthen commercial ties between the two 

countries. PNTR will subject U.S.-Russia trade to the WTO-based 

adjudication process for trade disputes. It also will promote transparency and certainty through WTO rules, ranging from service 

regulations to agricultural standards to intellectual property rights. 

Third, granting PNTR will directly benefit U.S. workers, manufacturers, service providers, and agricultural producers, helping to 

maintain and create good jobs here in the United States. Russia’s 

large and growing economy, coupled with PNTR, presents significant opportunities for U.S. companies to serve customers across 

many sectors. Russia is already one of the world’s largest markets, 

with a nearly $2-trillion economy and a rapidly growing, welleducated middle class. 

John Deere has had a presence in Russia for over 100 years. This 

has greatly expanded in recent years with investments in two factories, including our newest facility just outside Moscow, which 

Chairman Baucus did recently visit. These facilities use components produced and exported from John Deere facilities in Iowa, Illinois, North Dakota, and other States to produce agricultural, forestry, and construction equipment for the Russian market. 

This activity directly affects jobs at eight Deere factories that are 

supported by almost 2,800 suppliers located in 45 States. In fact, 

we recently announced a $70-million investment in our Waterloo, 

IA facility to expand our production capabilities for large tractors 

for which Russia is a leading export market. 

We are also exporting Deere business values and standards. Our 

Russian operations apply the same high standards for compliance, 

integrity, safety for our workers and customers, product quality, 

and environmental stewardship that we have in our facilities here 

in the United States and around the world. 

Our interests and investments reflect the enormous potential for 

the Russian economy in the segments which are especially significant for our business. Russia can become a major contributor to 

meeting the world’s fast-growing demand for food and forestry 

products as the global population expands and becomes more affluent. 

Let me close with a few words about Deere’s business experience 

in Russia. Our experience overall has been positive—yes, with frustrations from time to time, but little different than in any other 

emerging market. 

We understand the challenges of doing business in Russia, but 

we recognize the enormous opportunity as well. Enhancing trade 

relations and strengthening business connections will improve the 

overall business climate to the benefit of both the American and 

Russian people. 

PNTR with Russia is, simply put, a benefit to the United States 

rather than an accommodation to Russia. There is a strong business case for congressional approval of PNTR. I urge the Congress 

to carefully consider the matter, but then to act quickly to ensure 

that U.S. companies, their workers, and shareholders receive the 

7 

benefits from the outset of Russia’s long-awaited WTO membership. 

Thank you again for the opportunity to testify. I will be pleased 

to respond to any questions that the committee may have. 

The CHAIRMAN. Thank you, Mr. Allen, very much. 

[The prepared statement of Mr. Allen appears in the appendix.] 

The CHAIRMAN. Mr. Pollett, you are next. 

STATEMENT OF RONALD POLLETT, PRESIDENT AND CEO, 

GE RUSSIA/CIS, MOSCOW, RUSSIA 

Mr. POLLETT. Chairman Baucus, Senator Kyl, and distinguished 

members of the committee, thank you for the opportunity to testify 

today on a subject that I feel is of critical importance: the opportunity to grow the U.S. economy and U.S. jobs by establishing permanent normal trade relations with Russia. 

Just a moment of background about me. I am a U.S. citizen, born 

and raised in New York. I joined GE in 1991 and for the past 13 

years have been living and working in Russia. For the past 6 years, 

I have also served as chairman of the board of the American Chamber of Commerce in Russia, with more than 700 member companies, the largest and most influential foreign business association 

in the country. 

So I have been in a unique position to witness firsthand the dramatic changes Russia has undergone in such a short period of time, 

and I truly believe that Russia is now poised to become an even 

more active and significant player in the global economy. But I 

have also been in a position to observe how, on the whole, U.S. 

businesses are under-represented in the Russian market. I believe 

PNTR can change this. 

Russia presents extremely good opportunities for U.S. companies, 

provided—and this is an important proviso—we are able to have a 

level playing field. Such a level playing field is essential for U.S. 

companies to take advantage of these opportunities. 

Russia is a big, fast-growing economy. But the U.S. has a relatively small presence in the Russian market, accounting for just 

4 percent of Russian imports. By contrast, east Asia and the European Union accounted for 29 percent and 43 percent, respectively. 

When I arrived in Russia in 1998, GE had $110 million in sales. 

Last year, we had more than $1.6 billion in sales, and our industrial businesses alone saw almost $1.2 billion in U.S.-origin orders 

from Russia, up from $410 million in 2010. These orders support 

more than 3,000 jobs for GE and its suppliers in the United States, 

and we believe that our sales, with PNTR, could triple by 2020. 

For U.S. companies to take full advantage of Russia’s growing 

market, however, Congress must repeal the Jackson-Vanik amendment and establish PNTR with Russia. Let me offer a few concrete 

examples of what Russia’s WTO accession and PNTR will mean for 

GE. 

Russia is the 4th-largest electricity market in the world. GE Energy, with 38,000 U.S. employees, will see average tariffs fall from 

12 to 5 percent on gas turbines. These turbines are principally produced in South Carolina and Texas. 

Russia is looking to double its spending on health care. With 

more than 22,000 U.S. employees, principally in Wisconsin, Texas, 

8 

and New Jersey, GE Healthcare will see tariffs on medical equipment fall from 15 to 4.3 percent. 

Russia has the world’s second-largest railway system. Some 10,000 locomotives will need upgrades, to the tune of $10 billion. 

This is an enormous opportunity for GE’s transportation business, 

based in Pennsylvania, which employs over 8,300 U.S. workers. 

GE is also the largest supplier today of foreign aircraft engines 

to Russia and the largest aircraft lessor. GE Aviation, with 25,000 

U.S. workers, and our GECAS leasing business stand to benefit as 

Russia reduces its tariffs on aircraft engines from 20 to 5 percent. 

These GE products are made in Ohio, Vermont, Kentucky, and 

North Carolina, not to mention hundreds of suppliers in 34 States. 

It is not simply lower tariffs. WTO commitments to eliminate 

non-tariff barriers, implement a high standard of IPR protection, 

and improve transparency are critical for U.S. companies. Without 

PNTR, the U.S. would have no recourse to WTO dispute settlement 

should disputes arise. 

If the U.S. does not grant PNTR to Russia, American companies 

and their workers will be at a significant disadvantage relative to 

our global competitors. Equally concerning is the signal that would 

be sent to Russia. At a time when export growth is key to the U.S. 

economy, we would be rejecting an important opportunity while our 

competitors take advantage of our absence. 

One thing is clear: Russia will join the WTO whether or not the 

U.S. grants PNTR status. The vote to accord PNTR to Russia is 

about one thing and one thing only. It is about the ability of American companies to compete on a level playing field, according to the 

same set of rules, with foreign companies eager to do business in 

a fast-growing economy. 

I urge this committee and the full Congress to allow the American economy and American workers to be able to reap the benefits 

of these opportunities. Thank you. 

The CHAIRMAN. Thank you, Mr. Pollett, very much. 

[The prepared statement of Mr. Pollett appears in the appendix.] 

The CHAIRMAN. Mr. Taylor? 

STATEMENT OF WATTY TAYLOR, PRESIDENT, 

MONTANA STOCKGROWERS ASSOCIATION, HELENA, MT 

Mr. TAYLOR. Good morning, Chairman Baucus. 

The CHAIRMAN. Good morning. 

Mr. TAYLOR. Senator Kyl, distinguished members of the committee, thank you for the opportunity to speak to you on behalf of 

the Montana Stockgrowers Association regarding our point of view 

on Russia’s accession to the World Trade Organization. 

My name is Watty Taylor, and I am a rancher from Kirby, MT. 

I currently serve as the president of the Montana Stockgrowers, 

one of the Nation’s oldest and most historically significant cattle 

ranching organizations, established in 1884. I, along with my wife 

Lyla and three sons, operate a commercial Hereford and Angus 

cow/calf operation on 30,000 acres in southeastern Montana. 

Ranching has been a vital part of my family heritage for many 

years. 

Ninety-six percent of the world’s population lives outside the borders of the United States. We must have access to the additional 

9 

demand for beef from consumers who live outside the U.S. if we 

hope to remain successful. Russia was the U.S.’s 5th-largest export 

market for beef in 2011. 

We can now achieve a significant increase in our exports to Russia, thanks to the provisions of Russia’s WTO accession agreement. 

These provisions include a large, country-specific beef quota and 

lower tariffs for high-quality beef. This will be greatly beneficial to 

my family’s ranch if Congress passes PNTR legislation. I am confident that we can provide a significant amount of high-quality 

beef, as defined by the agreement. 

Montana is leading the way to produce large volumes of USDA 

quality grade ‘‘choice’’ and ‘‘prime’’ cuts of beef. We have a reputation for raising superior cattle genetics that perform in many different kinds of harsh environments. Our hardy northern-tier ranchlevel certified calves will meet the demand for high quality. 

It is also exciting that Montana is currently exporting several 

thousand head of our superior cattle to Russia to help establish a 

more vibrant domestic beef industry. The possibilities are endless. 

In fact, Montana ranchers are currently living and working in Russia to establish western-style cattle ranching enterprises. 

While Russia is a tremendous opportunity for our beef, we need 

to ensure that we do not run the risk of facing unscientific restrictions. Montana ranchers have always appreciated the efforts by 

Chairman Baucus to move us toward trade agreements that are 

based on sound science and international standards. 

In particular, ensuring that Russia lives up to its WTO commitments on sanitary and phytosanitary standards, along with other 

technical issues for beef, is crucial. Without PNTR, we will not be 

able to enforce these commitments. 

Recognizing the international science-based standards is very important. It not only creates less market volatility, but it also encourages the safest, most prudent production practices. Issues that 

are most important to ranchers with regard to Russia include: 

(1) Tetracycline. We encourage the adoption of the Codex Standard for tetracycline residues in beef. 

(2) Beta-agonists. We encourage the adoption of standards for 

beta-agonist residues in beef that are based on scientific risk assessments conducted according to internationally recognized methods. 

(3) Bacterial parameters. We encourage the adoption of sciencebased standards for bacterial contamination in the unfortunate 

event that beef becomes contaminated with bacteria, such as salmonella or lysteria. 

(4) Sanctions policy. Once Russia has adopted science-based 

standards, we encourage them to implement a risk-based sanction 

policy for U.S. beef shipments that do not comply with those standards. 

(5) Veterinary equivalents. We encourage the use of the 2012 

meat plant audits by the Russian veterinary service to make a determination of the equivalence of the U.S. meat inspection system. 

(6) USDA food safety inspection service as the competent authority. We encourage the recognition of FSIS as the competent veterinary authority of the United States. This includes recognizing FSIS 

10 

authority to approve and suspend U.S. beef establishments for export to Russia. 

(7) In addition, we need to ensure that Russia fully implements 

the tariffs and quota concessions they have agreed to make on beef. 

Extending permanent normal trade relations to Russia will give us 

the means to enforce those concessions and give Montana family 

ranchers the momentum we need to benefit our rural ranching 

economies at home. 

Exports create jobs. Our competitiveness depends on profitability 

and attracting the next generation of ranchers back into the business. Our ranch families’ livelihood depends on exports, which are 

our most dynamic and vibrant opportunity for long-term sustainability. 

I appreciate the opportunity that I have been granted to present 

my testimony today, and I look forward to working with you 

throughout the course of this process to secure permanent normal 

trade relations with Russia. 

I am happy to answer any questions that you may have. Thank 

you. 

The CHAIRMAN. Thank you, Mr. Taylor, very, very much. 

[The prepared statement of Mr. Taylor appears in the appendix.] 

The CHAIRMAN. Mr. Williams? 

STATEMENT OF PAUL WILLIAMS, PRESIDENT AND CHAIRMAN 

OF THE BOARD, AMERICAN SOCIETY OF COMPOSERS, 

AUTHORS, AND PUBLISHERS, NEW YORK, NY 

Mr. WILLIAMS. Thank you, Chairman Baucus, Senator Kyl, and 

members of the committee. My name is Paul Williams. I am an 

American songwriter. It is an honor and a privilege to appear in 

my capacity as president and chairman of the board of ASCAP, the 

American Society of Composers, Authors, and Publishers, and on 

behalf of our 427,000 American songwriter, composer, and music 

publisher members. 

Senators, I am not here today to address rampant Russian copyright piracy, which other U.S. copyright interests have historically 

addressed. Rather, I am here to bear witness to the challenges U.S. 

music creators face in securing fair compensation for public performance of our music through ‘‘normal’’ channels in Russia. 

With reproduction royalties declining globally, public performance royalties increasingly determine whether a talented music 

creator can remain a professional or is forced to take a day job to 

subsidize a music hobby. Bill Withers at one time said to his Senator, ‘‘You don’t want us taking day jobs, Senator, because you’re 

liable to wind up with Ozzy Osborne as your plumber, and then 

you’re in a lot of trouble.’’ 

Such a transition would be a huge loss not only for American culture, but also for our economy. ASCAP members are overwhelmingly the owners of small, innovative businesses. I have always 

said that I am metaphorically the perfect president for ASCAP. I 

am a small businessman, Mr. Chairman. 

Music creators and owners depend on the efficiencies of performing rights organizations, PROs, like ASCAP to license their 

public performance rights and collect and distribute royalties. For 

example, I have been blessed to make a living writing songs, but 

11 

I live in California. How am I, a songwriter living in California, expected to collect royalties for performances of my songs throughout 

the world? ASCAP does this for me. I love ASCAP. 

We rely on a network of reciprocal relationships with foreign 

PROs in countries all over the world. These foreign royalties can 

constitute an ever-increasing portion of American music creators’ 

income. It is over one-third, and it makes a positive contribution 

to our balance of trade. 

I am sad to report, however, that we are grossly underpaid for 

public performances of our works in Russia. A few comparisons 

prove my point. With the French and Italian economies, roughly 

the same size, our performance royalties collected in 2009 in 

France are 11 times greater—viva la France!—and in Italy, almost 

9 times greater. 

Denmark—Denmark—with only 4 percent of Russia’s population 

and an economy one-tenth the size of Russia, collects nearly twice 

as much for public performances as does Russia. It is clear that 

American music creators are not reaping the benefits from Russia’s 

passion for American music and movies. Why is this? We believe 

the Russian legal system handicaps the efforts of RAO—that is 

ASCAP’s Russian counterpart—in collecting public performance 

royalties. 

RAO is fully qualified under Russian law to act as a collecting 

society for U.S. music creators. Yet, Russian courts often do not follow the law. They do not follow the law. Russian courts demand 

extraordinary, costly documentation of RAO’s right to represent 

ASCAP members, and sometimes they simply refuse to recognize 

the standing of RAO to do so. It makes no sense. 

Further, ASCAP composers are supposed to receive royalties for 

the public performance of music in movies exhibited in Russian 

theaters. In fact, RAO has sent us royalties through the years in 

the past. But there is no doubt that such royalties could be increasingly significant, as American movies are enormously popular and 

widely distributed in Russia. Everybody loves American movies. 

In January, three of the top five grossing films in Russia were 

American, including the wonderful film Hugo, whose score was 

written by an ASCAP writer, Howard Shore. However—however— 

meritless legal challenges now threaten RAO’s authority to collect 

from this critically important source of royalties for U.S. music, 

which translates to food on the table, gas in the car, and taking 

your kids to school. 

Finally, Russian fiscal authorities require RAO to collect—this is 

the icing on the cake—a value-added tax, or VAT, at a statutory 

rate of 18 percent from our royalty distribution! Eighteen percent 

from our royalty distribution. No other PRO in the world deducts 

this VAT from our members’ royalties. 

Although Russia grants a VAT exemption for other intellectual 

property, this exemption is not extended to copyrights. Senator, 

this is just plain unfair and adds insult to injury, given the apparent under-collection of royalties. 

We are realists. We know there is no magic wand that our government can wave to ensure American music creators and copyright owners are fairly compensated in Russia. 

12 

However, regardless of what happens with PNTR, we ask that 

the U.S. Government help us achieve the following goals, three 

simple things. 

Three things we ask: Russian judges and lawyers must receive 

better training and education in the handling of foreign copyrights; 

Russia must stop its discriminatory VAT treatment of U.S. songwriters; and they must clarify that its law provides a performance 

right for music incorporated in audiovisual works and movies. 

Based on our ongoing problems with China, we are under no illusions that Russia’s entry into the WTO by itself will improve the 

predicament of ASCAP members. If Congress decides to grant 

PNTR, the U.S. Government must aggressively use all available 

enforcement tools to protect American songwriters, composers, and 

publishers. Agreements without enforcement may be worse than no 

agreement at all. 

It is a great honor, Senators, to sit down in front of you and 

share my thoughts with you. It is a privilege to be here, and I 

thank you for that. 

The CHAIRMAN. Thank you, Mr. Williams. As I said, Senator 

Hatch wished he were here to participate with you. Thank you. 

Mr. WILLIAMS. He is a damn good songwriter, did you know that? 

The CHAIRMAN. I know. 

Mr. WILLIAMS. And a member of ASCAP. 

The CHAIRMAN. I know that, too. I have heard some of his songs. 

They are pretty good. 

Mr. WILLIAMS. They are good. 

The CHAIRMAN. Yes. They are very good. 

Mr. WILLIAMS. Exactly. 

The CHAIRMAN. Yes. 

Mr. WILLIAMS. They get even better when I am in his office. 

[Laughter.] 

[The prepared statement of Mr. Williams appears in the appendix.] 

The CHAIRMAN. Next, Mr. Larson, former—were you Under Secretary of State in the Bush administration? 

Mr. LARSON. Yes, sir. 

The CHAIRMAN. Clinton and then Bush administration? 

Mr. LARSON. Clinton and Bush. 

The CHAIRMAN. Clinton and Bush. So, thank you very much. The 

Honorable Alan Larson. Thank you very much. 

STATEMENT OF HON. ALAN LARSON, CHAIRMAN OF THE 

BOARD, TRANSPARENCY INTERNATIONAL USA, WASHINGTON, DC 

Mr. LARSON. Chairman Baucus, Senator Kyl, distinguished Senators, thank you for the invitation to testify. My testimony is informed by many experiences: formerly as Under Secretary of State 

for Economics during the Clinton and George W. Bush administrations, currently as senior international policy advisor at Covington 

and Burling, and currently as chairman of the board of directors 

of Transparency International USA. 

In 2009, my Transparency International counterpart—whom I 

am very pleased you had the opportunity to meet, Mr. Chairman— 

and I participated in a private sector group that prepared and subVerDate Nov 24 2008 20:42 Jul 15, 2013 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 R:\DOCS\81873.000 TIMD
13 

mitted a joint report to President Medvedev and President Obama 

entitled, ‘‘Russia-U.S. Joint Working Group on Investment and Institutional Integrity.’’ Separately in 2009, I served as co-chair of a 

private sector advisory committee that provided the administration 

with recommendations on a new bilateral investment treaty. 

My written statement describes three sets of disciplines. You 

could think of them as a triangle that forms the foundation for a 

solid rule of law framework for international business activity: 

first, trade disciplines; second, investment disciplines; and third, 

institutional integrity. 

When only one or two of those are in place, the rule of law framework for business is not as strong, nor as stable as it is when all 

three sides of the rule of law triangle are in place. I believe Congress and the administration should be partners in ensuring that 

all three sides of the rule of law triangle become firmly established 

in our economic relationship with Russia. 

In my testimony—in my written testimony—I urged that six actions be taken: one relating to trade, two recommendations relating 

to investment, and three recommendations relating to institutional 

integrity and controlling corruption. 

I believe Congress should be engaged in, and exercise continuing 

oversight on, these actions which will strengthen the rule of law for 

business. First, Congress should extend permanent normal trade 

relations to Russia. Doing so is in our foreign policy interest, and 

it is in our economic interest. 

Second, the administration and Russia should initiate, and vigorously pursue, negotiations for a bilateral investment treaty which 

both countries’ legislatures then should ratify. Russia failed to ratify an investment treaty negotiated in 1992, and, as a result, U.S. 

investors in Russia lack important rule of law protections. 

Third, the administration should advocate for U.S. investors in 

Russia and vigorously espouse the claims of U.S. investors in 

Yukos Oil, whose investments were expropriated in 2004 through 

2007. In the absence of an investment treaty, these investors do 

not have the opportunity to pursue dispute settlement through investment treaty arbitration mechanisms. 

Fourth, the administration should vigorously work to ensure that 

all parties to the OECD anti-bribery convention, including Russia, 

fully carry out their commitments under the convention to prevent 

overseas business bribery by their nationals. 

Fifth, Russia and the United States should intensify work to ensure that Russia’s customs tax administration and judiciary are 

freer of corruption. 

Sixth, Russia and the United States should cooperate to expand 

the scope for civil society organizations such as Transparency 

International to monitor, investigate, and report on suspected instances of corruption. 

I believe the executive branch and the Congress can be, and 

should be, partners in this work. I would urge the executive branch 

to present to Congress a plan to implement all of these measures 

to strengthen the rule of law. 

I would urge the Congress to exert active and continuing oversight to ensure that the executive branch presents a plan, implements that plan vigorously, and makes progress for business in 

14 

putting into place all three sides of the rule of law triangle—the 

trade side, the investment side, and the institutional integrity side. 

Thank you. 

The CHAIRMAN. Thank you very much, Mr. Larson. 

[The prepared statement of Mr. Larson appears in the appendix.] 

The CHAIRMAN. Some American businessmen tell me they do not 

want to do business in Russia, do not even try, because of corruption. It is just not worth it. In fact, I think I saw a study somewhere where an international organization ranked countries according to political corruption, and Russia was pretty close to, not 

the bottom, but it was way down near the bottom. 

So I would like to ask Mr. Allen, Mr. Pollett, or you, Mr. Larson, 

Mr. Taylor, any of you who wishes to respond, what should be done 

about that from the U.S. perspective? Does granting PNTR help or 

hurt in that effort? Mr. Allen? 

Mr. ALLEN. From our perspective, we have been doing business, 

as I indicated, for a long time and have had a significant presence 

now in the last decade. Corruption is an issue. There is no doubt 

that it exists. 

But there is corruption in a number of countries, and it is the 

company and its business conduct that is the important part of 

this. When we go to these countries, countries like Russia, we establish strong conduct guidelines, and we assure that our operations run themselves that way. We think that ends up being a 

promoter of improved conduct in the entire business community. 

I can tell you that, when you establish a reputation there, that 

way you can be effective. The plant that you visited was built in 

9 months. Nine months. That is hard to do anywhere in the world. 

People say it cannot be done in Russia because of all of the ‘‘corruption.’’ It was done ethically, all above board, and done in a 9-month 

period of time, working in conjunction with Russian government officials. 

So it is something that we have to deal with. We take it very seriously. We enforce it very seriously with our people. But no doubt 

about it, permanent normal trade relations will only continue to 

improve the climate. You will not solve it overnight, but it will improve the climate. 

The CHAIRMAN. Mr. Pollett, what do you say about that? I have 

talked to a good number of American businessmen who say, I am 

not going to go over there, it is too corrupt. 

Mr. POLLETT. Mr. Chairman, I would like to echo many of the 

comments made by Mr. Allen. We have had the similar experience 

in many markets around the world. When you work outside the 

United States, you need to be prepared to be working in different 

environments, including addressing corruption. 

At GE, of course, we work according to the rules in every country 

where we are. It does make it more challenging, probably more expensive. You have to have a lot more lawyers in Russia. 

The CHAIRMAN. What do you tell a mid-sized company, not as 

large as GE? 

Mr. POLLETT. It is more challenging, to be honest. We have a 

very large profile in the country. We have a large profile at the 

government as well, and they know who we are. It is easy for us 

to push back, to be very honest with you. But I have been there 

15 

for 13 years, and I have seen a very dramatic improvement from 

what it was like back in the late 1990s, early 2000s. 

The CHAIRMAN. So, how much will granting PNTR, or failure to 

grant PNTR, help or hinder mid-sized American companies from 

doing business in Russia? 

Mr. POLLETT. I think it would help because it brings us together 

into the WTO rules-based system. I think it is something that is 

very important that will help all American companies, not just the 

large multinationals. 

The CHAIRMAN. Will it help encourage Russia to join the OECD? 

Mr. POLLETT. Yes, it will. 

The CHAIRMAN. Why? 

Mr. POLLETT. They have already signed up to do that. There is 

a real sense, from what I see, that they do want to start doing 

some of the right things. They need foreign investment. They need 

companies to come in, and they need to be improving their operating environment. They recognize that as something they need to 

work on. 

The CHAIRMAN. All right. 

Let me ask you, Mr. Larson, about corruption and how to deal 

with it. You mentioned that a bilateral investment treaty needs to 

be negotiated. Will we be more likely or less likely to get that treaty with or without PNTR for Russia? 

Mr. LARSON. Thank you. First of all, I would like to say that I 

do think that the two corporate leaders who just spoke have organizations that have shown themselves to be very serious about 

overseas corruption, and they have, frankly, very fine track 

records. We are privileged to be able to work with them on some 

of these issues. 

Second, Senator Kyl mentioned in his remarks that Russia—as 

you did, too, Chairman Baucus—ranks very, very low on the Corruption Perceptions Index, and that reflects the fact that there is 

a widespread view among international business leaders and others 

that this is a serious problem in Russia. 

Third, I think it is a very good thing that Russia has decided to 

become a member of the OECD anti-bribery convention and has 

passed a law. They will not necessarily implement that instantly— 

a lot of western European countries did not—but it is a very good 

start that they are trying to discipline their own companies in respect to overseas bribery. 

Many, many observers say there is a very serious problem in 

Russia, especially in the customs tax administration and the judiciary. I think that the administration needs to continue to work with 

Russia on that. 

I noticed that Vladimir Putin, in an op-ed that he published in 

the Washington Post recently, said that there is a problem of systemic corruption, and he wants to, he said in this op-ed, tackle it. 

Well, we ought to take him up on it. The administration, in my 

opinion, ought to propose to Congress a plan for how they can follow up and work with the Russian government to tackle this problem to the benefit of our U.S. businesses. 

I do think that civil society organizations like Transparency 

International have a role to play. I think there should be scope for 

16 

them to report on suspected instances of corruption, to be able to 

do that. 

Finally, Mr. Chairman, you asked about PNTR and its impact on 

all this. I think PNTR is definitely a plus, not just for trade relations, but it imposes a degree of discipline in trade relations that 

is a positive step on the rule of law. It is necessary. It is not all 

we need to do, but it is very, very important. 

The CHAIRMAN. Thank you. Thank you very much. 

Senator Kyl? 

Senator KYL. Thank you, Mr. Chairman. I think we are getting 

right to the nub of the problem here, and that is, you talk about 

the three legs of the stool. When is the best time to negotiate over 

the other two legs of the stool, is it after you have granted PNTR 

or before? 

That is really the question, it seems to me. You have a little bit 

stronger hand to play if we explain that on, for example, the Bilateral Investment Treaties, we want the Duma to ratify the treaty 

that the United States has ratified. Expropriation is not something 

that in this day and age ought to be permitted among rule-abiding 

commercial nations. 

We will talk about Yukos in just a moment here, but is it not— 

rather than urging the administration to begin addressing the 

problem after PNTR—is this not the time that we would be better 

off addressing these problems, so that we could get the commitments up front, rather than trying to achieve them after we have 

granted the status? Let me ask you first, Mr. Larson. 

Mr. LARSON. Senator Kyl, I think you raise a very important 

point. It is not an easy one, to be quite honest. I think that, in my 

experience in diplomacy, it is important not to let perfect be the 

enemy of good. I think my own personal view is that we should 

seize the opportunity that is created by PNTR, extend PNTR and 

have Russia be in the WTO. 

But if we stop there, then we have only done part of the job. I 

think, as I said in my oral remarks, this is something where the 

Congress and the administration should work together. It need not 

be a partisan issue. It is something that—— 

Senator KYL. Yes. Let me just interrupt. This is not a partisan 

issue. 

Mr. LARSON. I know. 

Senator KYL. And yes, Congress and the administration need to 

work together. My question goes to when we are most likely to get 

cooperation, which, let us face it, has been very difficult coming. 

I want to ask Mr. Williams a question, if I could here. 

Mr. LARSON. But can I just—— 

Senator KYL. Sure. 

Mr. LARSON. One half-sentence to finish. 

Senator KYL. Sure. Sure. 

Mr. LARSON. All right. Thank you, sir. 

I do think it is very important that Congress seize the opportunity to ask the administration to come forward with a plan for 

how they are going to implement these other sides of the rule of 

law triangle. 

Senator KYL. Yes. Great. And I appreciate that. Our leverage is, 

we will withhold action until that plan is forthcoming, and we can 

17 

negotiate with the Russians. None of us here objects to the proposition that Russia can accede to WTO with U.S. approval. And our 

good folks doing business abroad will do even more, and that will 

help us here in the United States. There is no disagreement about 

that. 

The question is, how do you negotiate the very best situation 

with a country that has dragged its feet over and over and over? 

And again, I hope to be able to get to the Yukos situation in just 

a moment. But Mr. Williams talked about a very practical problem, 

the very practical problem of the Russian court system. 

I just want to ask you, given the track record that you identified, 

do you have concerns that granting Russia PNTR before the Russian Duma takes steps to implement the intellectual property reforms and the other WTO accession commitments, reduces the leverage that we might otherwise have? 

Mr. WILLIAMS. Absolutely. I do have concerns. I am also 71 years 

old, and I have reached that point in my life where I know that, 

when you move into an area where I lack the expertise to say one 

is better than the other, I would have to point it out that I am the 

wrong person to tell you that we need to make these adjustments 

before or after PNTR is granted. 

I will tell you, we are in the rare position at ASCAP and as 

music creators, unlike these gentlemen who have—and I understand your stance completely. We are in a position where, whether 

it is granted or not, our music is going to continue to grow, and 

movies will continue to grow in the country. 

So my specific concern, and as an organization, we do not have 

a specific stance on PNTR. I am sympathetic to it. Individually, I 

will tell you right now, I sit here and I can imagine watching the 

prospects of China stepping in if we cannot do business. 

For my organization, I have to represent them, and I would say 

that what we need is, no matter what happens with PNTR, we 

need some aggressive action from the part of the U.S. Government 

dealing with the Russian government, and dealing with the judges, 

dealing with the value-added tax that is totally unfair. Hopefully 

we will not wind up with a situation like China, where—you know, 

Senator, I get more money from Honduras than I do from China. 

It is terrifying. 

Senator KYL. And because my time is so short, that is the point 

I am trying to make here. We tried to anticipate all the things that 

we could hold China to. We had a very thick document with China. 

Yet, you saw the report that I held up. It is very difficult, after you 

have granted the status, to then get them to really fulfill the commitments that they have made. That is the concern we have about 

granting the status to Russia prior to the negotiation of these other 

two legs of the stool. 

I am not suggesting that we can have perfection at any time 

when you are dealing with an emerging country like Russia, but 

at least you ought to try to understand, when you have the best 

negotiating position, to demand those things that, after all, are 

simply matters of rule of law that other commercialized nations 

recognized long ago. 

Mr. WILLIAMS. If I may, Senator, the one element that is of 

greatest concern to us too is that the value-added tax could become 

18 

a precedent for other countries, and the damage to American music 

creators, songwriters, and composers is beyond what I could state 

here. It would be huge. 

Senator KYL. I thank all of the witnesses. I wish I had a chance 

to visit with all of you. Thank you. 

Mr. WILLIAMS. Thank you. 

The CHAIRMAN. Thank you very much, Senator. 

Senator Cornyn? 

Senator CORNYN. Thank you, Mr. Chairman. Mr. Chairman, I 

want to spend my time actually covering a subject that may or may 

not call for a response from the witnesses, but I will invite that at 

the end. On February the 5th, Russia and China blocked a U.N. 

Security Council resolution that would have endorsed an Arab 

League plan for Assad in Syria to step down. It would have supported a demand that Syrian troops withdraw from towns and start 

transitioning to democracy. 

This is just the latest incident in which Russia has, for its own 

reasons, intervened in a way that destabilizes the world and helps 

Iran, in this instance, which is the main beneficiary of the continued regime of President Assad, to stay in power. But I want to 

highlight this issue. This has to do with how President Assad is 

getting arms with which to kill innocent Syrian citizens, some 

8,000 of them according to reports from the United Nations. 

It is not only a question of Russians exporting arms to Syria to 

kill innocent civilians, it is also the fact that the Department of Defense, the U.S. Department of Defense, has a contract with that 

same Russian arms exporter. 

I sent a letter, Mr. Chairman, to Secretary of Defense Panetta, 

along with 16 colleagues, a bipartisan letter raising this issue, and 

I would like to have that made part of the record. 

The CHAIRMAN. Without objection. 

[The letter appears in the appendix on p. 43.] 

Senator CORNYN. I appreciate that. 

Well, imagine my surprise when I found that Russia is not only 

selling weapons to Hugo Cha ́vez in Venezuela and to the Mullahs 

in Tehran, also Syria, but also that we have a contract at the Department of Defense to sell a set of helicopters, the 21 dual-use MI17 helicopters for the Afghan military from Rosoboronexport. This 

is a no-bid contract awarded by the Army just last summer, several 

months after the Syrian uprising began, and it is worth $375 million. 

That is $375 million U.S. taxpayer dollars going to a Russian 

arms merchant, arming President Assad, and with which he is killing innocent Syrians. It does not require a leap of logic to conclude 

that the proceeds of this contract are helping to finance these mass 

atrocities. I should also note that Syria has a history of not actually 

paying for those weapons. 

According to press reports, during a 2005 state visit by Assad to 

Russia, then-President Vladimir Putin wrote off nearly 75 percent 

of Syria’s $13.5-billion debt to Russia for past arms sales. I think 

it is unconscionable that U.S. taxpayers would be put in this position where their hard-earned tax dollars would indirectly subsidize 

mass murder. 

19 

Yet, the Department of Defense has so far refused to cancel this 

contract, even in the face of mounting evidence that Rosoboronexport remains a key enabler of the Assad regime’s campaign of 

murder and intimidation. 

Let me just conclude by asking a rhetorical question, and any 

comment any of the witnesses would care to make would be welcomed. Sure, we want to create jobs here in America. We want to 

trade with international partners and grow the economy both in 

those trading partners’ countries and here in the United States. 

But at what point, whether it is corruption, whether it is enabling international terrorists, States like Iran, whether it is arming 

thugs and murderers like President Assad in Syria, do we say the 

cost is just too high in terms of sacrificing our basic values and protecting human rights? Mr. Allen? 

Mr. ALLEN. That is quite a set-up. 

Senator CORNYN. Well, I did not intend it as a set-up. I intended 

it as an honest question, and if you have anything you would like 

to say about it, I would appreciate it. 

Mr. ALLEN. I will try to do my best. As I was listening, those are 

all other issues out there. What I am not able to correlate is how 

PNTR status will—and preventing it—in any way, change those 

issues. Those issues still need to be solved. I would argue that giving Russia PNTR status, giving a chance for all of us to continue 

to move that country along, will be a positive. 

I think what a lot of people are not looking at right now is, this 

is not just about growing jobs. They are going into the WTO. If we 

do not go with it, it is about losing jobs because our businesses are 

all going to go down vis-a`-vis our competitors. I have real-life examples I could give you. 

The CHAIRMAN. Senator Menendez? No, Senator Kerry, you are 

next. I will let them decide between themselves who is ready. Do 

you want to wait, Senator? 

Senator KERRY. I will just wait one round, yes. 

The CHAIRMAN. All right. 

Senator Menendez? 

Senator MENENDEZ. Thank you, Mr. Chairman. I want to pick up 

on what some of my colleagues have spoken about here. I appreciate that Russia presents a tremendous business market for American companies and that WTO rules will hopefully level the playing 

field for American companies to do business in Russia. 

But at the same time, lifting Jackson-Vanik is a huge benefit to 

Russia, and I am sure all of you as business people understand the 

essence of leverage in a negotiation. That is not something that is 

abstract. I think you do that all the time in your businesses. It 

seems to me this is a moment in which there is leverage at the end 

of the day. This is a huge benefit to Russia, both politically and 

economically. 

A lot of us are not feeling like this is a good time to be rewarding 

Russia for anything. The recent elections make a mockery of democracy. Democratic governments are far better for business to operate under. Transparency, rule of law, safety of contracts, protection of intellectual property—that happens more likely in a democracy than not. The human rights situation in Russia is not improving. 

20 

The case of Sergei Magnitsky, which my colleague Senator 

Cardin has been the champion of, is not an exception, unfortunately, by any means. When we asked for help from Russia at the 

U.N. Security Council to stop Iran from acquiring a nuclear weapon, and to help prevent the killing of innocent citizens in Syria, we 

got ‘‘nyet’’ in return. 

Now, let me make the case for our business friends about how 

that affects us here. Look at what gas prices are going through because of instability in Iran, gas prices not only for consumers in 

America and drivers in America, but for the creation of products, 

when all of you use fuels that are necessary for creation of a product or the transportation and delivery of your products to the marketplace. So I look at this, and I can make real connections, not 

only on the principle of human rights, but on the economics of it 

as well, domestically. 

So what I would hope we would see from the business community, which seems to be lacking, is a dual-track approach that addresses everyone’s needs and concerns, where we find a way forward on repealing Jackson-Vanik but also find a way forward on 

trying to improve Russia’s human rights records. We need a vehicle 

like the Magnitsky bill, for example, that sends a message to Russia that we are serious about human rights and that we will deny 

visas and block assets of persons who are human rights violators. 

So I would like to ask, particularly the members of the business 

community here, do you not see the correlation between the consequences of a Russia that does these things and the domestic concerns that we have that actually affect your businesses, in addition 

to the value that you obviously see, as it relates to WTO accession? 

And can you not join in the voices that say, yes, let us remove 

Jackson-Vanik so that we can get the full benefit of Russia’s participation in the WTO, but let us also pursue these other things 

that actually have an effect, not only in terms of our legitimate interests in human rights and democracy, but also in real economic 

consequences here back at home. 

And then finally, I would like to ask that of all the business leaders. To Mr. Larson, I would like to ask, do you perceive the ability 

of Russia to eliminate the pervasive corruption that seems to affect 

all aspects of Russian life? 

Many American companies, particularly in the energy sector, 

have seen contracts broken and agreements altered by heavyhanded regulation and open-handed bureaucrats. Will the WTO 

membership actually solve all those problems? So I would like to 

get those two, quickly if we can, because I have about a minute 

left. 

Mr. ALLEN. So, my quick part, I would say, first, most people recognize India as a large democracy. We deal with every bit of the 

corruption in India that we deal with in Russia. So I think we certainly want to see that corruption change, but the culture and the 

continued movement forward is going to be a long process. It will 

not be an event-driven process. 

Senator MENENDEZ. And on the first part of my question, do you 

not see the nexus between the actions Russia takes that affect us 

here domestically, economically? You do not see that effect upon 

your company? 

21 

Mr. ALLEN. Yes, I do see those actions. There is a timing issue 

that is also—the part that I keep trying to reinforce is, they are 

going to move into the WTO, and we are going to lose any additional leverage as a result of that. They will be doing trade with 

other partners, and we will be at the disadvantage, and we will 

have less opportunity to influence them going forward as a result 

of that. 

Senator MENENDEZ. Mr. Chairman, if I could just get Mr. Larson 

to answer the latter question. 

Mr. LARSON. Thank you, Senator Menendez. What I have recommended is that, on the occasion of congressional consideration of 

PNTR, that the administration should present a plan for tackling 

some of these corruption issues: (1) making sure that Russia adheres to its obligations under the OECD anti-bribery convention, 

which it has just joined; (2) that there be serious cooperative effort 

to tackle the issue of corruption in customs, tax administration, 

and the judiciary; and (3) that there be scope for civil society organizations to report on instances of suspected corruption. 

I think all of that is part of creating a strong rule of law framework for business. I also believe that the extension of PNTR and 

repeal of Jackson-Vanik is a part of that rule of law framework. 

That also will assist, but I think we should do both. 

The CHAIRMAN. Thank you. 

Senator Kerry? 

Senator KERRY. Mr. Chairman, thank you. I want to thank you 

for your statement. I thought you hit the nail on the head, and I 

appreciate your leadership in this effort. As chairman of the Foreign Relations Committee, I think we are all, on our committee, 

pretty sensitive to the complexity of our relations with the Russian 

Federation. We held hearings recently on the subject of human 

rights and democracy in Russia, and I expect we will continue to 

do that. 

But, I would say to Senator Kyl and others who are sort of questioning this thing, we are sort of talking past each other a little bit 

here and I think missing the point. Russia is going into the WTO. 

This is not a negotiation like Panama or one of the other trade 

treaties we had, where we were opening up and lowering tariffs, 

and doing things. We are not there. We do not do anything. Russia 

is in the WTO. If we do not lift Jackson-Vanik, we are denying our 

own workers access. That is all that happens here. 

What is interesting is—I hope, Senator Kyl, you have seen the 

letter recently. It was an open letter by Russian opposition activists 

stating their strong view that the continued application of JacksonVanik to Russia is ‘‘not helpful for the promotion of human rights 

and democracy in Russia,’’ and efforts to punish Russia by retaining Jackson-Vanik restrictions only ‘‘darken Russia’s political future, hamper its economic development, and frustrate its democratic aspirations.’’ So, I think we have to listen to the folks in Russia who are on the ground fighting for some of these things, number one. 

Number two, we ought to just sort of look basically and factually 

here. Russia is going to join the WTO whether or not we grant 

PNTR. Granting PNTR is the only way American workers and producers are going to see the benefits of Russia’s accession to the 

22 

WTO. So, if we want to cut off our nose to spite our face, we can 

sit here and complain about what is happening there. It is a pretty 

simple equation. 

So let me ask Mr. Pollett, who produces in our State—and we are 

proud of what GE does up there in its aviation subsidiary—will 

failing to pass PNTR for Russia not put your workers in Massachusetts at a disadvantage when we are trying to sell into the market 

without it? 

Mr. POLLETT. It would absolutely put us at a competitive disadvantage to our European and Asian counterparts. 

Senator KERRY. And you would not have recourse to WTO arbitration, would you? 

Mr. POLLETT. Correct, Senator. 

Senator KERRY. So what are the risks of losing market share in 

Russia if we do not pass PNTR? 

Mr. POLLETT. To the tune of hundreds of millions of dollars, and 

probably several hundred U.S. jobs in the aviation industry. 

Senator KERRY. And I understand that the bilateral treaty that 

we have on the most favored nation status only applies to exports 

in goods. Is that correct? 

Mr. POLLETT. Correct. 

Senator KERRY. So even with our bilateral agreement, if we do 

not pass the PNTR, that does not deal with it, because the largest 

trade gains are probably going to be in services. Is that not correct? 

Mr. POLLETT. Also correct. 

Senator KERRY. And the only way we open that up is to lift 

Jackson-Vanik? 

Mr. POLLETT. Correct. 

Senator KERRY. Because Jackson-Vanik, which is—incidentally, I 

would say to my colleagues, we ought to do the things we say we 

are going to do. Jackson-Vanik is about emigration. Every President has signed off, since it went into effect in 1974, that they are 

dealing with emigration. We did it in order to allow the emigration 

of Soviet Jews. That has happened, and is happening. 

So we send a terrible message as we try to negotiate with people 

when we kind of pull things out and misapply them and counterapply them. We do not have any protection under the bilateral 

agreement, do we, on intellectual property rights? I think Mr. Williams spoke to that. And the dispute settlement process at WTO at 

least gives us that kind of protection, does it not, Mr. Williams? 

Mr. WILLIAMS. Well, in China WTO did not exactly solve all of 

our problems. To give that specific example, in 2001 China was admitted to WTO. In 2009, they established a rate for our music on 

radio and television. Incidentally, it was a tiny rate, and they paid 

us for that year and that year only. 

So, as I listen to you talk about the human rights issues and all 

these elements and the problems everyone is facing, you make 

amazing sense. I understand that. But for my organization, we are 

looking at a situation where WTO is simply, without really aggressive action from our government to protect—— 

Senator KERRY. Well, we need aggressive action. I mean, a lot of 

folks here, myself included, have been arguing that we need to get 

tougher. 

Mr. WILLIAMS. Yes. 

23 

Senator KERRY. And we can do more within the context of China, 

and I think we are pushing to do that. But my time is running out. 

I do not mean to cut you off, but I want to ask Mr. Larson one 

question here. 

Does the existence of Jackson-Vanik today further the cause of 

democracy and human rights in Russia in any way that we can 

measure? 

Mr. LARSON. I have testified that I think that removal of 

Jackson-Vanik and extension of PNTR is an important step in establishing a rule of law basis for our relationship. I think there are 

a lot of other things that we should do, and I am urging that we 

go forward with those as well. 

Senator KERRY. Our Ambassador to Russia has called for $50 

million of new money to be supportive of civil society development 

efforts in Russia. Given your familiarity with Russia, do you think 

we should make that money available, and could it be put to good 

use for reform efforts? 

Mr. LARSON. I think that would be a good step. We have to 

strengthen civil society in Russia. One of the things I advocate is 

that we work with the Russians to establish more space and freedom for civil society organizations, like Transparency International, 

to call out instances of suspected corruption and deal with them. 

I think strengthening non-governmental organizations such as 

those is a good thing. As I understand this proposal, that would be 

one additional tool for doing so. 

The CHAIRMAN. Your time is—— 

Senator KERRY. Sorry. My time is up. 

The CHAIRMAN. I think Senator Kyl would like to—— 

Senator KYL. Just one second. Since Senator Kerry might have 

been out of the room when I put the letters in the record, the piece 

in the Wall Street Journal by Kasparov and Nemtsov specifically 

referred to the letter that you quoted. 

As they say, of course no one in Russia is foolish enough to defend Jackson-Vanik, but we also understand it should be replaced 

with something else, and we said as much in our letter when we 

recommended the passing of the Magnitsky Act, as has been done 

in Europe. 

The CHAIRMAN. Next, Senator Grassley? 

Senator GRASSLEY. I was in and out because of other committee 

meetings. I think that, looking over your testimony and hearing 

what I heard, I do not have any disagreement with the points you 

made. 

I would like to make this point, and maybe it refers more to agriculture than it does to other aspects of our economy. But Russia 

was invited into the WTO, and, if they change their laws by a certain date in June that they have to change them, then it is our responsibility to deal with Jackson-Vanik. In various times in the 

past, I have found reason to vote to change Jackson-Vanik for particular countries. 

The thing that bothers me is that, once a country is in the WTO, 

I know we have the process of the WTO to resolve differences. It 

is kind of a very rigorous process, and one that is not very easy 

to predict what might happen, but you hope the rule of law is going 

to govern in the final analysis. 

24 

But between now and whenever we have to deal with JacksonVanik, it seems to me that the White House is not doing what they 

ought to be doing to use the pressures that we have yet to make 

sure that, particularly in agriculture and particularly with pork, 

that Russia lives up to the spirit as well as the responsibilities of 

the WTO. That is what I would call upon the White House to do, 

if they want to have smooth sailing on the Jackson-Vanik proposition. 

I will yield back the rest of my time, Mr. Chairman. 

The CHAIRMAN. All right. Thank you, Senator. 

Senator Wyden? 

Senator WYDEN. Thank you very much, Mr. Chairman. I thank 

you for holding this hearing. I think it is particularly important. 

I chair the Trade Subcommittee here at the Senate Finance Committee, and to me, really the threshold question on this whole issue 

is respect for rules. 

The question about how permanent normal trade relations for 

Russia would in effect bring about better compliance of trade 

rules—as a trade supporter, I have consistently supported these 

trade agreements. What I have tried to say is, free trade does not 

mean trade free from rules. 

I have real questions with respect to the United States using its 

WTO rights to insist that Russia comport with global trade rules, 

and I think part of what you have said in particular today, Mr. 

Williams, raises some of those concerns. That is what I want to explore for a minute. You all have talked about the challenges in 

terms of doing business in Russia. We are talking about discrimination, corruption, expropriation, a failure to enforce intellectual 

property rights, a host of issues that relate to this question about 

rules compliance. 

For me, an indicator of the administration’s appetite to enforce 

Russia WTO commitments might be found in looking to the degree 

of interest we have seen in enforcing the eligibility criteria for the 

Generalized System of Preferences, what is known as GSP. I want 

to just spend a quick minute looking at how GSP has applied to 

Russia. 

Now, GSP is a preferential program—we have looked at it on the 

Trade Subcommittee—that provides duty-free treatment of imports 

from Russia so long as Russia complies with the eligibility criteria 

that Congress established in the program. The criteria include effective protection of intellectual property, equitable access to Russian markets, and a requirement that Russia not expropriate property. So I want to ask a question of you, Mr. Williams, and you, 

Mr. Larson, because you have touched on it. 

So you have had some experience, Mr. Williams. This is not an 

abstract kind of question. You have had experience with respect to 

the intellectual property question. I would just like to ask you 

about what happened when you brought your concerns about Russia’s lax enforcement of intellectual property to the U.S. Trade Representative. What did they do about it? 

Mr. WILLIAMS. You know, this is a greatest country in the world 

to be a songwriter in. I had complete access to State, to Commerce. 

I can sit down with Victoria Espinel at the IP Enforcement Office, 

and I get an immediate response. We have used a 301 in other 

25 

areas, in China and in the Caribbean. What we are dealing with 

in Russia that is unique, I think, is that the organization that we 

are dealing with, RAO, is pretty straight-ahead. 

This is not a fly-by-night organization, but they are constantly— 

the Russian government is completely unwilling to really accept 

the fact that they represent us and that we can do business back 

and forth. 

So my problems are not with the way that we are being handled 

in the United States. I have had wonderful access. What you have 

given us today, the opportunity to really, as you look at PNTR, you 

give us the unique position of being able to come and walk into this 

room and state our position. 

So, we have had wonderful response from our own government, 

but we need more aggressive—if we are going to move forward with 

or without the PNTR, we really need more aggressive action from 

our government to the Russian government in protecting our 

rights. This value-added tax is horrific and has the potential for affecting our livelihood in the future. 

Senator WYDEN. My concern, Mr. Williams, is, if we are not seeing GSP criteria used to try to get you and others a fair shake— 

and it goes to a point Mr. Larson made as well—why would we expect it would be used on WTO rights? 

Mr. WILLIAMS. I do not know. The quick, honest answer is: I do 

not know. All I know is we have tools that can be used within the 

government, and my request is that you will honor us with that. 

Senator WYDEN. My time is up. Mr. Chairman, can Mr. Larson 

just respond? 

The CHAIRMAN. Go ahead. Did you have another question? 

Senator WYDEN. No, no, Mr. Chairman. My time is up. If Mr. 

Larson could just respond to the question. 

The CHAIRMAN. Sure. 

Senator WYDEN. Great. Thank you, Mr. Chairman. 

Mr. LARSON. Senator, my point of view is that we do need to 

make a concerted push as a country on a range of rule of law issues 

in Russia. I advocate the extension of PNTR and the repeal of 

Jackson-Vanik. But I think at the same time it would be important 

for the administration to come forward, to the Congress, with a 

plan for addressing some of the issues you just raised, some of the 

issues I raised in my testimony about the investment relationship, 

and some of the issues that we all have with the corruption environment, and to present it to the Congress, and for the Congress 

to have a process for holding accountable the administration and 

making progress to address these issues. 

This would be a path going forward that would have us working 

together, between the Congress, the administration, and Russia, to 

strengthen the rule of law. It would not interfere—I am not talking, Mr. Chairman, about a conditional extension of PNTR. I am 

just saying, let us tackle all of these problems right now as we 

tackle immediately the PNTR issue. 

Senator WYDEN. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Mr. Larson, I am glad you made that very clear, that it would 

not be conditional. I think that is a very important point you just 

made, that it not be conditional. You would like the United States, 

26 

as we all would, to negotiate a bilateral investment treaty with 

Russia. 

You would like us to grant PNTR to Russia. Ordinarily, in all negotiations with countries and businesses and whatnot, you sequence your goals and you try to leverage one against the other to 

get a mutual agreement. You would agree, would you not, that this 

is not that case? That is, there is no leverage here. I believe that 

countries generally do not grant concessions, trade concessions, altruistically out of the goodness of their heart. They do not do that. 

They only do it if there is leverage. You have to leverage a country 

to give in to something, to do something it knows it should do, but 

otherwise gets away with not doing. You need leverage. 

Now, in this case PNTR is not leveraged. There is no leverage 

here. If the United States does not grant PNTR, that does not hurt 

Russia one whit. It hurts the United States dramatically. If we do 

grant PNTR, it helps Americans. It does not help Russia, it helps 

us. As was pointed out earlier, this is not a free trade agreement 

negotiation. There is no negotiation going on here. Either we grant 

PNTR—that is, ourselves—or we do not. 

If we do not, we deprive Americans access to Russian markets, 

we deprive Americans access to the WTO procedures. We are just 

hurting ourselves; we are not hurting the Russians. I agree, we 

should talk to Russia about a bilateral investment treaty. We cannot sequence these things, because there is no leverage. There is 

no leverage here. 

The United States has no leverage over Russia on PNTR. We 

only hurt ourselves; we do not hurt them. But it is true. At the 

same time, in my judgment, we should start talking aggressively 

and seriously to Russia and to China, and every other country that 

is not following the law and the rules here. 

Mr. Larson? 

Mr. LARSON. I agree with that. But I do think we have leverage 

with Russia, but not on PNTR. 

The CHAIRMAN. Not on PNTR. 

Mr. LARSON. No. We are in agreement. 

The CHAIRMAN. And this hearing is on PNTR. 

Mr. LARSON. No, no. And all I am saying is that I think in the 

context of considering extending PNTR, it is the time to have a 

plan for tackling these other issues, and to make sure that we are 

aligned between the Congress and the administration. 

The CHAIRMAN. Right. And I think, why did Russia join the 

WTO? Well, Russia wants to join the WTO, and I guess it will if 

the Duma grants it later on this year, because it wants to be part 

of the world community, and it will help Russia’s economy as well 

as its stature if it is part of the WTO. But Russia is already going 

to be part of the WTO, irrespective of what the United States does 

here. 

So the question is, once Russia has joined the WTO, do we help 

ourselves by granting PNTR, or do we hurt ourselves by not granting PNTR? At the same time, I believe Russia very much—many 

in Russia, not all; I am sure there is a battle in Russia going on— 

does want to address a lot of the concerns we have been talking 

about. 

27 

For example, a more independent judiciary. I have spent a lot of 

time—not a lot, some time—in Russia talking about the need for 

a more independent judiciary in several ways. One is to have a 

transcript. Have a transcript of proceedings, judicial proceedings. 

There are no transcripts these days. Second, to have default to trial 

by jury, not by the judge. Third, transparency—open judicial proceedings, not closed judicial proceedings. You get all that together, 

and that is going to very much help. 

I asked President Medvedev about those three points and he, I 

will not say disagreed, but he basically agreed. Then I asked, do 

you agree with the premise of my question that these changes are 

really critically necessary for Russia to advance, and he said, yes, 

he agrees to the premise of my question. 

Then after that, too, with all the points that human rights 

groups have made over there in Russia, namely repeal of JacksonVanik helps us address our human rights causes. It does not hurt 

us, it helps us, because otherwise sometimes Putin, sometimes others, will then use the failure of the U.S. to grant PNTR as leverage, 

as a foil to attack the United States and help themselves politically. So I just think this is a no-brainer. 

At the same time, we have to work very hard to address the 

Syria issues, Iran, Magnitsky, missile defense. They are all extremely important, but we do not have leverage over Russia on any 

of those issues with respect to PNTR. We would have to find other 

ways to use leverage. 

Senator Kyl? 

Senator KYL. Well, Mr. Chairman, let me just ask a question of 

Mr. Larson. If we pass legislation for PNTR and nothing else—in 

other words, we do not deal with Jackson-Vanik—have we accomplished anything? 

Mr. LARSON. Senator, I think the way that we can accomplish 

something, and what I—— 

Senator KYL. No, this is a really simple question. I will put it a 

different way. 

Mr. LARSON. All right. 

Senator KYL. Is it not necessary to repeal Jackson-Vanik for the 

adoption of PNTR to mean anything for U.S. businesses? 

Mr. LARSON. We need to repeal Jackson-Vanik and extend PNTR 

for our businesses to get the benefit of Russia joining the WTO. 

Senator KYL. Exactly. That is why there is leverage. Nobody here 

can say that the Russians do not want repeal of Jackson-Vanik. 

They do. This is something the Russian leadership wants desperately. It is something Putin talks about. Mr. Chairman, your 

comments reflect that. So there is leverage. There is leverage with 

regard to Jackson-Vanik. 

The CHAIRMAN. Just so I am clear—because that is not what I 

said—I want to make clear what I said. I said that Putin and others used failure to repeal Jackson-Vanik as leverage. So, if we repeal it, it is no longer leverage. 

Senator KYL. The point is, in deciding whether or not to repeal—— 

The CHAIRMAN. You want leverage to help them? 

28 

Senator KYL. Mr. Chairman, if you want to argue with me—they 

need Jackson-Vanik repealed. They want it repealed desperately. 

That is beyond any argument. 

The CHAIRMAN. I disagree with that. 

Senator KYL. All right. Then we have a disagreement here on the 

dais. 

The CHAIRMAN. That is not what I found. 

Senator KYL. And I believe that the United States has leverage 

with Russia, that good Russian commercial business folks would 

like to see the United States have an opportunity to do better business with Russia. They would like to see these rule of law changes 

that all of you have identified here. They understand that corruption and the lack of an investment treaty are hurting investment 

in Russia. They understand that. 

They would like to see Jackson-Vanik repealed so that the PNTR 

would be effective, and that would help us as well. But I think it 

is absolutely erroneous to say that there is no leverage for the 

United States with respect to Jackson-Vanik. 

The question is, will it go beyond the human rights abuses, like 

the Magnitsky Act, which I presume will be a part of this, or will 

it involve other changes as well? I am simply suggesting that we 

have an ability here to get the Russians more engaged than they 

have been, and that rather than doing this without any other conditions, as you say, like the Magnitsky Act, I think we ought to 

consider that. This is not a question, but I think, Mr. Larson, your 

comment is, yes, it would be ineffective without the repeal of Jackson-Vanik, just passing PNTR. 

Mr. LARSON. What—— 

Senator KYL. And also your point, which is that there is some leverage between the two branches of government here, that Congress has an ability to engage the administration perhaps more 

than the administration has been engaged. 

Mr. LARSON. I just want to state the sentence the way I see it, 

and try not to step in between the chairman and Senator Kyl on 

this last issue. 

The CHAIRMAN. No, no, no. 

Mr. LARSON. But here is what I am advocating, Mr. Chairman. 

The CHAIRMAN. You can step in wherever you want to step in. 

Do not worry about that. 

Mr. LARSON. Here is what I am advocating. I think that it is the 

right time for the administration to work with the Congress to establish a plan for moving forward on all of these aspects of rule of 

law. They all relate to the business environment: investment, corruption, and PNTR. I think, as I have said before, that we should 

move forward. 

As part of that consideration, we should move forward with the 

extension of PNTR. I think you said, Mr. Chairman, that the Duma 

itself has to—Russia has to take its actions. I understand that intelligent observers believe that is likely to happen sometime in 

June or July. 

So I think we should be thinking about what needs to be done 

in the United States in that same time frame, one, on PNTR, but 

two, on cooperation between the Congress and the administration 

29 

on how we are going to tackle the other rule of law issues that we 

see. 

Senator KYL. Thank you. 

The CHAIRMAN. Thank you. 

Just one final point for Mr. Taylor. Watty, I might tell you that 

a few people in our State have been following this and want us to 

grant PNTR. Last weekend when I was home, I got my hair cut 

at the Capital Barbershop in Helena, MT by Larissa. Larissa is a 

Russian. She told me that she has been following this, and that she 

had written to her relatives in Russia, telling them they could expect to get more American beef, especially Montana beef. I was 

very, very pleased to hear that. 

Could you just tell us a little bit about how we can improve our 

export markets under this proposal? 

Mr. TAYLOR. Senator Baucus, going to PNTR is going to give us 

country-specific tariff rate quotas that we do not currently have 

under the bilateral agreement or Jackson-Vanik. The other thing 

that this does is, this opens us up to high-quality beef, which is 

what we are very good at producing in this country. That will go 

in under, I believe, a 5-percent tariff with no quota. I think we can 

take full advantage of this. 

To address some of these other issues, I guess what I would like 

to say is this. If we do not do it, if we are not trading with Russia, 

somebody else will. I think we want our influence to be in Russia. 

I think we want them to go to a democratic style of government. 

Our people who are sending cattle over there, and are in those 

enterprises over there, I think are a perfect example, and they can 

show these people what democracy is all about. I think that is 

something that agriculture, I think, displays very well. 

The CHAIRMAN. Thank you so much for saying that. One thing 

that struck me, and I had mentioned this already to Mr. Allen, and 

it just stuns me, is how big the potential of agriculture is in Russia. 

When your manager there, Mr. Allen, told me that in Russia—first 

of all, I was very impressed with the equipment over there. He was 

very, very careful when I asked, well, what is your Russian competition? 

He did not want to be too critical, but he was very appropriate 

in describing just the high quality that Deere has. But the main 

point I am making is, your manager over there told me that, when 

a manager of a Russian farm tells his operator where to combine, 

where to disk, where to drive his tractor, the manager tells the operator, well, you get up first thing in the morning and you just go 

straight as far as you can, and do not turn. You just go straight. 

Then midday, you stop and you turn around and come back. That 

is how big some of those fields and pastures are over there. I was 

just stunned. 

He told me also about the arable lake regions in Russia. He told 

me about the water. Irrigation is going to soon be available. How 

much water there is in Russia on a per-person or per-hectare basis 

compared with other countries—it is just tremendous potential over 

there. But I would tell you, Watty, we think we have big places in 

our State? Some of the places over there are pretty big. But thank 

you for your testimony. 

Senator Thune? 

30 

Senator THUNE. Thank you, Mr. Chairman. Thanks for holding 

the hearing. I want to thank our panelists for coming and providing your testimony and responding to questions. This hearing is 

somewhat unique in that we are actually talking about whether or 

not to repeal the law, the Jackson-Vanik amendment as it currently applies to Russia. I think a lot of people believe it has outlived its usefulness. 

I know that that will probably be a discussion that will continue 

here. But I think it is important that we do everything we can to 

provide U.S. businesses greater access to markets. There is a growing export market in Russia. 

I know that people like Mr. Williams are interested in intellectual property protections, which is something obviously that would 

be addressed when Russia does come into the World Trade Organization, with some of the disciplines that exist there. 

So I guess this is an issue where, as you look at the economics 

of it at least, it certainly looks like it is sort of a 1-way street in 

terms of the benefit to U.S. producers and exporters. 

But I wanted to just ask a question, and I guess maybe of Mr. 

Pollett and Mr. Allen. It is hard to ignore the fact that American 

companies have very little market penetration in Russia. In fact, 

right now, U.S. producers account for about 4 percent of Russia’s 

total import market, while the EU accounts for about 43 percent. 

I guess my question is, why is this the case? Then perhaps a follow-up to that, if the United States does not grant Russia PNTR 

status, do you expect this disparity to grow even larger than it is 

today? 

Mr. ALLEN. From our standpoint, maybe to frame it, we did about $800 million of business in Russia this last year. Seventy 

percent of that was products that came out of the Midwest. So, that 

is kind of the opportunity. Because of what the chairman talked 

about in terms of Russian agriculture potential, we think our market is going to grow by 4 to 5 times. 

It has not grown up to this point in time because the whole country is starting to develop and move away from the Russian-based 

equipment that is very low in productivity, to running high-productivity farm operations, but that transition is now going on. 

To answer the second part of your question, our number-one competitor over there is another western company called Claas out of 

Germany. Germany will have the benefits of WTO with Russia, so, 

if we do not pass PNTR, what is going to happen is, they immediately have a major benefit from a cost standpoint to us, and, instead of seeing our business grow 4 or 5 times, we will see our 

business shrink. 

Mr. POLLETT. Senator, I think one of the reasons why we are so 

small over there is because of historic and geographic issues. They 

are pretty far away. Germany is much closer, France is much closer, much more competitive as well. I mean, I think one of the 

things that these countries do is they very much focus on exports. 

They bring out their principals to sell their products, and that is 

something that the U.S. could do more of to help us sell more. 

I also think that the improvement of U.S.-Russia relations has 

helped to actually improve the business case, and it is going to help 

us going forward. We might say that the relationship has not imVerDate Nov 24 2008 20:42 Jul 15, 2013 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 R:\DOCS\81873.000 TIMD
31 

proved, but I think it has improved pretty much over the last several years from what it used to be, and that has helped U.S. businesses; it has helped open doors. 

Senator THUNE. If we do not grant Russia PNTR status, the second question is, do you see the disparity that exists today between—I mean, you have described what I think are some of the 

geographic advantages built in for Europe, but does that disparity 

in terms of penetration in that market grow—— 

Mr. POLLETT. We will be looked at as basically giving them an 

economic slap, and they can throw their government orders to 

other countries that would cooperate more on an economic front 

with them. I think it would have a negative reaction. 

Senator THUNE. I want to just follow up. The Senator from Montana would like to export more Montana beef. We would like to export more South Dakota beef. 

The CHAIRMAN. A little of both. 

Senator THUNE. Yes. A little of both. It is a big pie. We need to 

grow the pie. But in your testimony, and I would say this to Mr. 

Taylor, you did talk about the importance of beef producers and of 

Russia’s WTO commitments on sanitary and phytosanitary standards. 

Which of these commitments do you believe are most important 

to ensure market access for U.S. beef? How important is it for beef 

producers to have access to the WTO dispute settlement procedures 

to ensure that Russia’s commitments are enforced? 

Mr. TAYLOR. Senator, I think all these are important, simply 

from the fact that, as you go down the road, some of them always 

become protectionism. But I think trying to bring Russia in line 

with scientific data and international standards is what we seek 

from all our trading partners. That is what levels the playing field 

for all of us. 

But we most definitely have a product that, 10 years ago, was 

not even going into Russia. Today, we are exporting over 45,000 

metric tons. That is more than what we are sending to the EU. So, 

it is definitely an expanding market. From our standpoint as cow/ 

calf producers, the profit that is coming to our business is from our 

export market, whether it be Russia, Korea, or whatever. That has 

substantially helped us. We need it, to keep up with the cost of 

doing business. 

I know from my standpoint, I am not making any more money 

today than I was 5 years ago, maybe less, because it costs me that 

much more to do business than what we have been getting. 

Senator THUNE. I see my time has expired, Mr. Chairman. I do 

think that there is tremendous upside for American agriculture. If 

we are going to continue to see the types of commodity prices that 

have helped agriculture prosper in the last few years, we have to 

continue to look for ways to open up more markets around the 

world. Ninety-six percent of the world’s population, as we know, 

lives outside of the United States. So there is, I think, tremendous 

upside. You look at what we are doing in Russia today relative to 

what we might be able to do, and it certainly looks like a targetrich environment. 

Mr. TAYLOR. Senator, your State is involved in this, in the export 

of live cattle to Russia. It has been brought to my attention that 

32 

the population of cattle in Russia in 1917 was 18 million. That is 

roughly one-fifth of what we have in the United States. Today, it 

is 400,000. We will probably ship somewhere close to 50,000 head 

to Russia in the next year. 

We have a long ways to go to get Russia up to the standards they 

need to meet. We have an expanding population worldwide that we 

are going to have to feed on the same land that we have today. So, 

I think it is pretty crucial and critical to all of us to move Russia 

forward. 

Senator THUNE. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Thank you, all witnesses. You were all very, very helpful. I deeply appreciate your taking the time to come and talk to us. Thank 

you very much. 

The committee is adjourned. 

[Whereupon, at 11:47 a.m., the hearing was concluded.] 

(33) 

A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD


81873001.eps
34 


81873.002

PNTR with Russia is, simply put, a benefit to the United States rather .than an 

accommodation to Russia. Here is a concrete example. Russia has committed upon 

accession to significantly reduce its tariffs on imported agriculture equipment - from 15% to 

5%. However, it is possible that Russia would withhold the lower, WTO-negbtiated tariff 

rates from our U.S.-made products until the United States granted Russia PNTR status. 

That would place U.S. companies like John Deere at a competitive disadvantage relative to 

our foreign competitors, and with no recourse when disputes arise. And that would 

negatively impact our U.S. operations because the products we sell in Russia are closely 

connected to jobs in our facilities in the American Midwest. 

Approving PNTR with Russia will: 

Directly benefit u.s. manufacturers, service providers, agricultural producers and 

U.S. workers as our exports increase, helping to create and maintain good jobs 

here in the United States. 

Ensure that U.S. companies realize the benefits and protections of Russian WTO 

membership that our foreign competitors will. Failure to approve PNTR not only 

will penalize U.S. exporters but could well invite discrimination against U.S. 

companies with a presence in the Russian market. 

Greatly improve the environment for firms doing business in Russia by increasing 

certainty through WTO rules ranging from services regulations to agricultural 

standards to intellectual property rights. 

Subject Russia to the WTO-based adjudication process when trade disputes arise. 

There clearly is a strong bUSiness case to be made for Congressional approval of PNTR. I 

urge the Congress to carefully consider the matter but then to act quickly to ensure that 

U.S. companies, their workers and shareholders, receive the benefits from the outset of 

Russia's long-awaited WTO membership. 

Russia is one of the world's largest markets, with a nearly $2 trillion economy and a rapidly 

growing, well-educated middle class. The large and growing economy in Russia, coupled 

with PNTR, presents significant opportunities for many U.S. companies across several 

sectors to develop a strong market presence in Russia. In addition to the agriculture, 

forestry and construction eqUipment sectors, Russia'S growing consumer economy will 

create significant demand for imported products from the U.S., especially agricultural and 

food products, thus expanding opportunities for U.S. producers to participate. 

Brief Introduction to Deere and Deere in Russia 

Perhaps I can make the stakes for our company more concrete by providing some additional 

context. Deere's major product lines are agriculture, forestry and construction equipment, 

and we operate a financial services company as well as a precision irrigation business. We 

long have had a presence in the Russian market, tracing our first equipment sales there to 

more than 100 years ago. In fact, sales to Russia for payment in gold bullion during the 

Great Depression enabled our company to continue operations and allow American farmers 

to recover from the turbulent times. 
35 


81873.003

We have greatly expanded our presence in the Russian market in recent years with 

investments in two factories there, including our newest facility just outside Moscow, which 

Chairman Baucus recently visited. These facilities primarily use components produced and 

exported from our U.S. facilities in Iowa, Illinois, North Dakota and other states to produce 

agriculture, forestry and construction equipment sold in Russia. We also maintain a large 

spare parts depot near Moscow that serves our customers there and in the broader Eurasian 

market. 

The products from these facilities in Russia utilize components manufactured in Deere 

facilities in the United States and exported to Russia. This activity directly affects jobs at 

more than a dozen Deere factories, including eight in the U.S. which are supported by our 

almost 2,800 suppliers located in 45 states. 

It is clear that many Deere jobs in the United States-- including many UAW jobs -- are 

directly connected to the production of the more than a dozen product lines that are 

exported for final assembly at our Russian facilities. Some significant examples include large 

tractors and engines (Waterloo, IA); combine harvesters (East Moline, IL); motor graders, 

backhoes, 4WD loaders, and skidders (Dubuque and Davenport, IA); planters (Moline, IL); 

seeders (Valley City, ND); tillage equipment and sprayers (Des MOines, IA); and precision 

farming components from Iowa and North Dakota. The Business Roundtable has produced 

state fact sheets that provide additional examples and that show trade ties between each 

U.S. state and Russia. 

Let me also note, Mr. Chairman, that we are also exporting our Deere business values and 

standards to our Russian operations. Our facilities there are held to the same high 

standards we require in the United States - the same standards for compliance, integrity, 

safety for our workers (even using OSHA measurements) and customers, product quality 

and environmental stewardship. 

Significant Potential of the Russian Economy 

Our investments to-date reflect the enormous potential of the Russian economy. This 

potential is especially significant for our business -- Russia will make a very significant 

contribution to meeting the world's growing demand for food and forestry products as the 

global population grows and becomes more affluent. But these investments are not just in 

Russia. In fact, just two weeks ago we announced a $70 million investment in Waterloo, 

Iowa to expand our production capabilities for large tractors, with Russia being one of the 

large export markets driving this investment. 

By now, we are all familiar with the challenge of meeting the food, housing and 

infrastructure needs of a global population growing from seven billion today to well over 

nine billion by 2050 and becoming more affluent all the while. Experts tell us that we must 

double agricultural output to meet the needs of this population that will be fully 70% urban 

by 2050. And, you can imagine the infrastructure and housing needs that this will entail. 

This is challenge enough, but we also know this must be done in a sustainable way-with 
36 


81873.004

limited arable land and water resources on the planet, ever mindful of our environmental 

footprint, while taking account of the highly uncertain effects of coming climate change. 

Now, against that backdrop, consider that Russia, with but 2% of the global population has: 

9% of the world's arable land, with a significant amount still un utilized or 

underutilized; 

8% of the available freshwater; and 

23% of the world's forested area. 

Russia clearly has enormous potential to significantly and sustainably expand its agricultural 

and forestry output and to playa much greater role in global markets for those products. 

This is a stated goal of the Russian govemment. For example, with rapid modernization, it is 

not unreasonable to expect significant expansion in grain output and agricultural exports to 

the world market. Realizing the full potential of the agricultural and forestry sectors will 

require continued development of the infrastructure including investment in farm-to-market 

roads, storage, water management facilities, product processing, and rail and port facilities. 

Thus, the country offers significant near- and long-term investment potential across many 

sectors of its economy. 

The opportunities afforded Deere and many other U.S. companies can be highly beneficial to 

both our economies-it can be a "win-win" situation. But, the Congress must act quickly 

and decisively if we are to enable this potentially positive outcome to be realized, or these 

benefits will accrue only to exporters in Europe, Asia and South America. 

The Deere Experience in Russia 

let me close with a few words about Deere's business experience in Russia to date. Our 

experience has been positive-yes, with frustrations from time to time but little different 

than in other emerging markets. We understand the challenges of doing business in Russia, 

but we recognize the enormous opportunity as well. Enhancing trade relations and 

increasing business connections will certainly improve the business climate, to the benefit of 

both the American and Russian peoples. And, stronger business ties can well lead to more 

harmonious relations between our two countries generally. 

Thank you Mr. Chairman, for the opportunity to appear here today. I look forward to our 

discussion and will attempt to answer questions you and the committee may have. 

Thank you. 
37 


81873.005

FOR IMMEDIATE RELEASE 

March 15, 2012 

Hearing Statement of Senator Max 8aucus (O-Mont.) 

Regarding Permanent Normal Trade Relations with Russia and Repealing Jackson-Vanik 

As prepared for delivery 

Catherine the Great once said, "There is nothing ... so difficult as to escape from that which is 

essentially agreeable." 

Russia joining the World Trade Organization presents a lucrative opportunity for the U.S. economy and 

American jobs. We can all agree on that. We must embrace rather than escape this opportunity. 

Russia is the largest economy currently outside the WTO. It is the Sixth-largest economy in the world. 

To allow American businesses, workers, farmers, and ranchers to seize the opportunity that Russia 

joining the WTO presents, Congress must act. We must pass Permanent Normal Trade Relations, or 

PNTR, to ensure our exporters can access the growing Russian market. 

If the United States passes PNTR with Russia, U.S. exports to Russia are projected to double within five 

years. If Congress doesn't pass PNTR, Russia will join the WTO anyway, and U.S. exporters will lose out 

to their Chinese and European competitors. These competitors will expand their exports at our 

expense. 

Russia PNTR is a one-sided agreement that benefits American workers and businesses and requires 

them to give up nothing in return. Unlike a free trade agreement, the United States will not further 

open its market to Russia. We will not lower any of our tariffs or make any other changes to our trade 

laws. 

Russia, on the other hand, will lower its tariffs and open its market to U.S. exports. U.S. service 

providers will gain access to Russia's telecommunications, banking and other key markets. U.S. meat 

producers will secure greater access to the Russian market, including a generous U.S.-specific beef quota 

of 60,000 metric tons. 

And the United States will get new tools for our toolbox to hold Russia accountable to its 

obligations. These include binding legal enforcement and transparency measures. 

But in order for U.S. businesses and workers to benefit from Russia joining the WTO, Congress must pass 

PNTR and repeal the Jackson-Vanik amendment. 

Jackson-Vanik denies normal trade relations to Communist and former Communist countries unless the 

President determines that the country permits free and unrestricted emigration of its citizens. 
38 


81873.006

Congress originally passed the law in response to the Soviet Union's emigration restrictions, particularly 

with respect to its Jewish citizens. 

Jackson-Vanik served its purpose and helped millions of Jews emigrate freely, but it is now a relic of the 

past. Every President, regardless of political party, has waived Jackson-Vanik's requirements for Russia 

for the past twenty years. 

When I traveled to Russia last month, I met with Russian and American business leaders, including Ron 

Pollett who is here with us today. I also met with activists working to improve democracy, human rights 

and corruption in their country, and I met with leaders of the Jewish community. 

The message from all of these activists was clear: the United States should repeal Jackson-Vanik and 

pass Russia PNTR. In fact, earlier this week, leading Russian democracy and human rights activists wrote 

two letters calling on Congress to repeal Jackson-Vanik. I'm entering both letters into the record as part 

of this statement. 

One letter from the activists states that today the Jackson-Vanik amendment, "only hinders [the] 

interaction of the economies and peoples of the two countries and worsens the human rights situation 

in Russia." 

Repealing Jackson-Vanik weakens the ability of the hardliners in Russia to rally anti-American 

forces. The activists in the other letter explained that Jackson-Vanik is a very useful anti-American 

propaganda tool. 

As they stated, it provides a tool that helps "to depict the United States as hostile to Russia, using 

outdated cold-war tools to undermine Russia's international competitiveness." 

Repealing Jackson-Vanik takes away this tool and opens Russia to U.s. competition, ideas and 

transparency. 

These activists have all raised serious questions about Russia's human rights and democracy record. 

share these questions, but like the activists, I believe that PNTR should not be in question. 

We owe it to American businesses, ranchers and farmers who are working to increase exports to the 

growing Russia market. We owe it to u.s. workers, whose jobs depend on those exports. And we owe it 

to the Russian activists who are asking for our help in their fight for democracy. 

So let us embrace this opportunity for our economy and for American jobs. To invoke Catherine the 

Great, let us move forward with that which we can all agree. And let us work together to pass Russia 

PNTR. 
39 


81873.007

nOHE,IlEflbHHK, 12 MAPTA 2012 r. 

Remove Russia from Jackson-Vanik! 

Removal of Russia from the provisions of the Cold War era Jackson-Vanik Amendment 

has long been an issue of political debate. Although the outdated nature and 

irrelevance of the amendment is widely recognized, some pOliticians in the United 

States argue that the removal of Russia from Jackson-Vanik would help no one but the 

current Russian undemocratic political regime. 

That assumption is flat wrong. Although there are obvious problems with democracy 

and human rights in modern Russia, the persistence on the books of the Jackson-Vanik 

Amendment does not help to solve them at all. Moreover, it brings direct harm. It limits 

Russia's competitiveness in intemational markets for higher value-added products, 

leaving Russia trapped in its current petro-state model of development and preventing it 

from transforming into a modern, diversified and more hi-tech economy. 

This helps Mr. Putin and his cronies, who continue to benefit from control over raw 

materials exports and who have no real interest in diversifying Russia's economy. 

During the period of their rule, dependence on oil and gas exports has become even 

greater than before. Needless to say, hanging in a petro-state limbo prevents the 

emergence in Russia of an independent and advanced middle class, which should be 

the main source of demand for pro-democracy political transformation in the future. 

More and more talented and creative Russians are leaving the country because there 

are better opportunities for finding good jobs in hi-tech industries abroad. 

At the end of the day, those who defend the argument that Jackson-Vanik's provisions 

should still apply to Russia in order to punish Putin's anti-democratic regime only 

darken Russia's political future, hamper its economic development, and frustrate its 

democratic aspirations. 

Jackson-Vanik is also a very useful tool for Mr. Putin's anti-American propaganda 

machine: it helps him to depict the United States as hostile to Russia, using outdated 

cold-war tools to undermine Russia's international competitiveness. 

We, leading figures of the Russian political opposition, strongly stand behind efforts 

to remove Russian from the provisions of the Jackson-Vanik Amendment. JacksonYanik is not helpful in any way -- neither for promotion of human rights and democracy 

in Russia, nor for the economic interests of its people. Sanctions which harm the 

interests of ordinary Russians are unhelpful and counter-productive - much more 

effective are targeted sanctions against specific officials involved in human rights abuse 

like those named in the Senator Benjamin Cardin's list in the Sergey Magnitsky case 

(Senate Bill 1039). 

It is time to remove Russia from Jackson-Vanik! 
40 


81873.008

Sergey Aleksashenko 

Political Council member, People's Freedom Party (Parnas) 

Alexander Lebedev 

Independent businessman and politician 

Vladimir Milov 

Leader, "Democratic Choice" movement 

Alexey Navalny 

Attorney and civil activist 

Boris Nemtsov 

Co-chairman, People's Freedom Party (Parnas), "Solidarity" movement 

/lya Ponomarev 

State Duma member, Just Russia Party 

Vladimir Ryzhkov 

Co-chairman, People's Freedom Party (Parnas) 
41 


81873.009

The Honorable Harry Reid 

United States Senate 

The Honorable Mitch McConnell 

United States Senate 

The Honorable Max Baucus 

United Stales Senate 

The Honorable Orrin Hatch 

United Slates Senate 

The Honorable John Boehner 

United States House of Representatives 

The Honorable Nancy Pelosi 

United States House of Representatives 

The Honorable Dave Camp 

United States House of Representatives 

The Honorable Sandy Levin 

United States House of Representatives 

Dear Leadership, Chairmen, and Ranking Members of the House and Senate, 

In connection with the discussion in the u.S. Congress of the possibility of repealing the J-V 

Amendment and establishing PNTR with Russia, we, citizens of the Russian Federation, who are 

opposed to the political regime which exists in our country, want to express our opinion in the hope 

that it will help members of Congress make the correct decision. 

Many in the U.S. believe that repeal of the J-V Amendment would be a "gift for Putin", and thus, a 

betrayal of those in Russia who are struggling for human rights and democracy. We wish to assure you 

that this is not so. Keeping the amendment is precisely what would be a "gift"-- for conservative forces. 

In 1974 passage of the amendment became a genuine tool for the defense of human rights in the USSR 

and other communist countries. Today, however, the amendment only hinders interaction of the 

economies and peoples of the two countries and worsens the human rights situation in Russia. Its 

archaic character and disconnect from current realities -- (if anyihing, the right to emigrate is the single 

human right in our country that has not been violated now for more than twenty years) -- allow 

opponents of democracy in Russia to use it as an effective propaganda instrument. They tell Russian 

society that the U.S. is not at all a country which defends high principles; quite to the contrary, the U.S. 

maintains double standards and is prepared to ignore reality for the sake of achieving political goals. 

The amendment creates an opportunity to intensify pressure on the opposition which advocates the 

values of democracy and freedom, on human rights organizations and on other NOOs which receive 

grants from abroad, and on all those in Russia who support universal human values. Inside the Russian 
42 


81873.010

leadership the amendment strengthens the positions of those who strive for confrontation with the U.S., 

NATO, and with the West in general. We likewise do not rule out that without clear signals of the u.s. 

Congress' intention to repeal the amendment, conservative forces will succeed in voting down 

ratitication of the WTO agreements in the State Duma. 

Among the current Russian opposition and human rights advocates it is difficult to find anyone who 

would advocate retaining the amendment. In particular it damages democratic forces in Russia and 

strengthens the positions of our opponents. 

Needless to say, we would welcome continued attention by the U.S. Congress to the issue of human 

rights in our country and all over the world. Today, however, that ought not be through the J-V 

Amendment, but through some other instrument. 

Respectfully, 

Lyudmila Alekseeva, Moscow-based Helsinki Group, Chairperson 

Svetlana Gannushkina, Civil Assistance Committee, Chairperson 

Leonid Gozman, All-Russian Public Movement Union ofthe Right Forces, President 

Dmitry Oreshkin, Public Movement Citizen Observer, Initiators 

Georgy Satarov, INDEM, President 

Lilia Shibanova, Association In Support of Voters Rights GOLOS, Director 

Irina Yasina, journalist, human rights activist 
43 


81873.011

SUBMITTED BY SENATOR JOHN CORYN 

ilnitcd ~tatts ~cnatc 

The Honorable Leon E. Panetta 

Secretary of Defense 

1000 Defense Pentagon 

Washington, DC 20301-1000 

Dear Secretary Panetta: 

WASHINGTON, DC 20510 

March 12, 2012 

We write to express our grave concern regarding the Department of Defense's ongoing business 

dealings with Rosoboronexport, the same Russian state-controlled arms export fron that 

continues to provide the Syrian government with the means to perpetrate widespread and 

systematic attacks on its own people. According to the United Nations, over 7,500 Syrian 

civilians have reportedly been killed in the attacks by the desperate regime of Syrian President 

Bashar al-Assad, and we continue to receive grisly accounts that his government forces are 

summarily executing, imprisoning, and torturing demonstrators and innocent by-standers. 

Russia remains the top supplier of weapons to Syria, selling reportedly $1 billion or more worth 

of arms to Syria in 2011 alone. Its arms shipments to Syria have continued unabated during the 

ongoing popular uprising there. According to Thomson Reuters shipping data, since December 

2011, at least four cargo ships have travelled from the Russian port used by Rosoboronexport to 

the Syrian port of Tartus. Another Russian ship that was reportedly carrying ammunition and 

sniper rifles, weapons which Syrian forces have used to kill and injure demonstrators, reportedly 

docked in Cyprus in January and then went on to deliver its cargo directly to Syria. In addition, 

recent reports from human rights monitoring organizations confirm that Russian weapons such as 

240mm F-864 high explosive mortars have heen found at the site of ongoing atrocities 

committed against civilians in Homs, Syria. In January of this year, Rosoboronexport reportedly 

signed a new deal with the Syrian government for 36 combat jets. 

Even in the face of crimes against humanity committed by the Syrian government during the past 

year, enabled no doubt by the regular flow of weapons from Russia, the United States 

Government has unfortunately continued to procure from Rosoboronexport. It is our 

understanding that the DoD, through an initiative led by the U.S. Army, is currently buying 

approximately 21 dual-use Mi-17 helicopters for the Afghan military from Rosoboronexport. 

This includes the signing of a no-bid contract worth $375 million for the purchase of aircraft and 

spare parts, to be completed by 2016. Media reports indicate that the contract included an option 

for $550 million in additional purchases, raising the contract's potential total to nearly $1 billion. 
44 


81873.012

While it is certainly frustrating that U.S. taxpayer funding is used to buy Russian-made 

helicopters instead of world-class U.S.-made helicopters for the Afghan military, our specific 

concern at this time is that the Department is procuring these assets from an organization that had 

for years been on a U.S. sanctions list for illicit nuclear assistance to Iran and in the face of the 

international community's concern is continuing to enable the Assad regime with the arms it 

needs to slaughter innocent men, women, and children in Syria. Other options are very likely 

available as demonstrated by the fact that the first four Mi-!7 helicopters that the U.S. Navy 

purchased for Afghanistan came through a different firm. We ask that the DoD immediately 

review all potential options to procure helicopters legally through other means. 

U.S. taxpayers should not be put in a position where they are indirectly subsidizing the mass 

murder of Syrian civilians. The sizeable proceeds of these DoD contracts are helping to finance 

a firm that is essentially complicit in mass atrocities in Syria, especially in light of Russia's 

history of forgiving huge amounts of Syria's debt on arms sales, as occurred in 2005 during 

President Assad's state visit to Moscow. 

President Obama has called on President Assad to step down, and he has declared that 

"Preventing mass atrocities and genocide is a core national security interest and a core moral 

responsibility of the United States." As such, we urge you to use all available leverage to press 

Russia and Russian entities to end their support of the Assad regime, and that includes ending all 

DoD business dealings with Rosoboronexport, which is within your authority as Secretary of 

Defense. Continuing this robust business relationship with Rosoboronexport would undermine 

U.S. policy on Syria and undermine U.S. efforts to stand with the Syrian people. 

This is a serious policy problem, and we ask for your personal attention to help solve it. Thank 

you for your service to our nation and your dedication to the members of our Armed Forces. 

United States Senator 

KIRSTEN E. GILLIBRAND 

United States Senator 

Sincerely, 

RICHARD J. D IN 

United States Senator 

'K'~a.~ KELLY A TIE 

United States Senator 
45 


81873.013

~,/lO"---. 4~ RICHARD BLUMENTIIAL 

United States Senator 

,a~H~~ United States Senator 

DAVID VITIER 

United States Senator 

~. R BERT MENEND 

Umted States Senator 

~CA~'~' United States Senator 

~~_ (/MARK

7p 

sim'L~ ~ KIRK~ K. ~ United States Senator 

CHUCK ekJ.4-.~ GRASSLEY 

Uni S t enator 

JONKYL 

United States Senator 

CC: The Honorable Hillary Rodham Clinton 

Secretary of State 

2201 C StreetN.W. 

Washington, DC 20520 

United States Senator 

RONWYDEN 

United States Senator 

~~.-1.~ BEN] MIN L. CARDIN 

United States Senator 
46 


81873.014

STATEMENT OF HON. JON KYL 

U.S. SENATE COMMITTEE ON FINANCE HEARING OF MARCH 15,2012 

RUSSIA'S WTO ACCESSION: IMPLICATIONS FOR THE UNITED STATES 

WASHINGTON - U.S. Senator Jon Kyl (R-Ariz.), a senior member of the U.S. Senate Finance 

Committee, delivered the following opening statement today at a committee hearing 

examining the accession of Russia to the World Trade Organization (WTO): 

Thank you, Mr. Chairman. I think that I understand the message this hearing is meant to 

convey: "American businesses want access to Russian markets. We should repeal JacksonVanik and grant Russia Permanent Normal Trade Relations without delay and without 

conditions. It's a slam dunk." 

But it isn't a slam dunk. 

let's stipulate that American businesses, farmers, and ranchers should be able to sell products 

to Russia, and that free trade is important and beneficial to the United States. 

We still need to determine whether America is getting a good deal through Russia's WTO 

accession, and whether more should be done to protect our interests. For example, Russia has 

never ratified the bilateral investment treaty that the Senate ratified years ago. That treaty 

would prevent Russia from expropriating businesses, an admittedly big problem in Russia. This 

is a very basic economic right that isn't being protected. 

In addition, one of our witnesses will discuss Russia's failure to remit royalties, which is also not 

directly covered by the WTO agreements. 

And I submit that the Administration is also missing the point on the repeal of Jackson-Vanik, 

which ties most-favored nation status to freedom of emigration. While emigration may no 

longer be an issue, Russia's blatant disregard for human rights and rule of law is every bit as 

relevant today as it was decades ago. Human rights cannot be divorced from the discussion of 

our economic relationship with Russia, particularly since some of the most egregious cases of 

abuse involve citizens exercising their economic and commercial rights. 

Consider the case of Sergei Magnitsky, a young lawyer who was imprisoned, tortured, and died 

in prison because he sought to expose economic corruption at the highest levels of Russian 

government. Several of us have joined Senator Cardin in cosponsoring legislation to send a 

clear message that those who commit gross violations of human rights will not have the 

privilege of visiting or accessing the financial network of the United States. 

When the U.S. Ambassador to Russia, Michael McFaul, sl,lggests that there is no assQciation 

between a country's respect for individual liberties and its business environment, he is simply 

denying reality. 

When two parties enter into a contract, it is essential that both parties operate in good 

faith. There is scant evidence that the Russian state operates in good faith. 
47 


81873.015

Russia has a troubling pattern of intimidation, disregard for rule of law, fraudulent elections, 

human rights abuses, and government-sanctioned anti-Americanism. 

Contrary to the Administration's assertions, Russia is moving further away from international 

norms and values. In recent months, Moscow has not only blocked UN Security Council action 

on Syria, but has continued to sell arms to Assad's regime, which is responsible for the 

slaughter of innocent civilians. This is not a government that can be trusted to uphold its 

international commitments or give a fair shake to American businesses. 

And looking only at the WTO context, Russia has not even lived up to all the commitments it 

already made on intellectual property rights, for example, as a condition of joining the 

WTO. Russia remains on the U.S. Trade Representative's Special 301 Priority Watch List for IP 

violations. What makes us think it will live up to its commitments after joining the WTO? 

Yes, we would have access to a WTO dispute settlement process if we grant Russia PNTR. But 

what has that gotten us in our trade relationship with China? 

Twelve years ago, Congress repealed lackson-Vanik and authorized PNTR for China. 

How did that work out? 

Well, USTR reports to Congress annually on China's compliance with WTO commitments. The 

most recent report is 127 pages filled with problems. The U.s. has used the formal dispute 

settlement process to address these issues only a handful of cases, and one case has remained 

open since 2007. Even in the rare cases that we get justice, it isn't speedy justice. 

Despite all the structures of the WTO, China cheats and continues to get away with it. If this is 

what we get from China, which ranks 75th among all countries on Transparency International's 

Corruption Perceptions Index, what can we expect from Russia, which ranks a dismal 143rd on 

the same list? 

China was not granted PNTR "without condition and without delay." It takes only a couple 

pages of legislative text to repeal Jackson Vanik, but the bill Congress passed had six separate 

titles dealing with the U.S.-China relationship. 

Given the current problems with our trade relationship with China, it probably wasn't 

enough. It is simply unreasonable to believe that PNTR can be extended to Russia without a 

more thorough examination of the issues. 

Yes, we should have free trade. Yes, Russia should become part of the community of lawabiding commercial nations. The question is whether the proposed agreement and repeal of 

lackson-Vanik gets us there. 

Mr. Chairman, I hope this is not our last hearing on this topic. 

Thank you. 
48 


81873.016

From The Wall Street Journal 

March 15, 2012 

OPINION 

The Right Way to Sanction Russia 

With the repeal of Jackson-Vanik, it's more important than ever to hold the Russian oligarchy 

accountable. 

By Garry Kasparov and Boris N emtsov 

Moscow-On Thursday, the U.S. Senate will hold a hearing to discuss the accession of Russia to 

the World Trade Organization and the repeal of the Jackson-Vanik amendment that impedes 

American trade relations with Russia. The Obama administration has portrayed it as little more 

than overdue Cold War housekeeping while touting the imagined economic benefits for 

American farmers that could result from freer trade with Russia. 

But the reality on the ground in today's authoritarian Russia is far more complex. We support the 

repeal, both as leaders of the pro-democracy opposition in Russia and as Russian citizens who 

want our nation to join the modem global economy. It is essential, however, to see the bigger 

picture of which Jackson-Vanik is a part. 

The "election" of Vladimir Putin to the presidency is over, but the fight for democracy in Russia 

is just beginning. At both major opposition meetings following the fraudulent March 4 election, 

we publicly resolved that Mr. Putin is not the legitimate leader of Russia. The protests will not 

cease and we will continue to organize and prepare for a near future without Mr. Putin in the 

presidency. Getting rid of him and his cronies is ajob for Russians, and we do not ask for foreign 

intervention. We do, however, ask that the U.S. and other leading nations of the Free World 

cease to provide democratic credentials to Mr. Putin. This is why symbols matter, and why 

Jackson-Yanik still matters. 

The new U.s. ambassador to Russia is Mike McFaul, who has a long and accomplished career as 

a champion for democratic rights. But he's now become the principal architect of the Obama 

administration's attempt to "reset" U.S.-Russian relations after the Bush presidency, and he has 

recently been pushing the case for repealing Jackson-V anik. Earlier this week he told an 

audience at the Peterson Institute for International Economics in Washington, D.C., that there is 

"no relationship" between the repeal of Jackson-Vanik and the promotion of Russian democracy. 

"If you don't believe me," he said, "ask [Alexei] Navalny," the Russian blogger who has become 

one of the charismatic new leaders of Russia's democracy movement. 

So we asked Mr. Navalny, who, along with several other members of the opposition leadership, 

signed a letter cited by Mr. McFaul calling for the removal of Russia from Jackson-Vanik. "Of 

course no one in Russia is foolish enough to defend Jackson-Vanik," he told us. "But we also 

understand that it should be replaced with something else. And we said as much in our letter 

when we recommended the passing of the Magnitsky Act, as has been done in Europe." 
49 


81873.017

Mr. Navalny is referring to the Sergei Magnitsky Rule of Law Accountability Act of2011, 

which was introduced in the U.S. Senate last May with wide bipartisan support. Named for the 

Russian attorney who died in police custody in 2009 while investigating official corruption, the 

Magnitsky Act would bring visa and asset sanctions against Russian government functionaries 

culpable of criminal and hurnan rights abuses. 

"Such legislation is not anti-Russian," Mr. Navalny explained. "In fact I believe it is proRussian. It helps defend us from the criminals who kill our citizens, steal our money, and hide it 

abroad." 

It will not be easy to match the legacy of Jackson-V anik. On March 15, 1973, Sen. Henry 

"Scoop" Jackson introduced the amendment on the Senate floor. It focused on a specific humanrights issue-the right of Soviet Jews to leave the U.S.S.R. The amendment's greatest opponent 

was then-National Security Adviser Henry Kissinger, who worried it would upset his vision of 

detente with the Soviets and instead advocated "quiet diplomacy." In contrast, the Russian 

dissident and Nobel Laureate Andrei Sakharov praised the amendment as a "policy of principle" 

that would further detente, not hinder it. The well over one million emigres who escaped the 

repressive Soviet state would surely side with Sakharov. 

Jackson-V anik is a relic and its time has passed. But allowing it to disappear with nothing in its 

place, and right on the heels of the fantastically corrupt "election" of March 4, turns it into little 

more than a gift to Mr. Putin. Our economy, like our people, will never truly flourish until Mr. 

Putin and his mafia structure are expunged. 

Moreover, if economic engagement is the best way to promote an open society, why does the 

Obama administration not forge a free-trade pact with Iran instead oflevying sanctions? Russia 

will be joining the World Trade Organization regardless of what the U.S. does. But WTO 

membership will not undo Mr. Putin's monopolization of political and economic power. If Mr. 

Putin and his oligarchs believed for an instant that the WTO might weaken their grip, they 

simply would stay out. 

The Obama administration is not only attempting to overturn a law, but also its spirit. As Mr. 

Kissinger did 39 years ago, Amb. McFaul is trying to make the case that human rights should not 

get in the way of realpolitik and the business of doing business. He reminds us that the State 

Department already has its own secret list of banned Russian officials, and so nothing more need 

be done. But the entire object of such laws is to publicly shame and punish the rank and file of 

Mr. Putin's mob so they know the big boss can no longer protect them. 

The Sergei Magnitsky Rule of Law Accountability Act is an example of such legislation. 

Replacing Jackson-Vanik with it would promote better relations between the people of the U.S. 

and Russia while refusing to provide aid and comfort to a tyrant and his regime at this critical 

moment in history. This, too, would be a policy of principle. 

Messrs. Kasparov and Nemtsov are co-chairs of the Russian Solidarity movement. 
50 


81873.018

Strengthening the Rule of Law for U.S. Business in Russia 

Testimony of Alan Larson 

before the Senate Finance Committee 

March 15, 2012 

Chainnan Baucus, Ranking Member Hatch, and other distinguished Senators-thank you for the 

invitation to testify at this hearing. My name is Alan Larson. I am a Senior International Policy 

Advisor at Covington & Burling LLP, the Chainnan of the Board of Directors of Transparency 

International-USA (TI-USA), and a fonner Under Secretary of State for Economic Affairs 

during the administrations of Bill Clinton and George W. Bush. My testimony has been 

infonned by experiences in each of these roles, but my testimony today reflects my personal 

views and it does not necessarily represent the views of any of the organizations with which I am 

or have been affiliated. 

Russia is a proud country, a pennanent member of the United Nations Security Council, a 

military superpower and a member of essential economic policy forums such as the Group of 

Twenty (G-20) and the Group of Eight (G-8). The United States should seek to have relations 

with Russia that are grounded in mutual trust and mutual respect. 

I believe that the United States stands to benefit greatly as Russia becomes a full participant in 

those rule of law disciplines that provide a foundation for international business relations. I 

believe that three sets of such rule of law disciplines--one can think of them as three sides of a 

triangle-fonn the foundation for a solid rule oflaw framework for international business 

relations: (1) trade disciplines, including especially WTO disciplines; (2) investment disciplines, 

including those found in bilateral investment treaties; and (3) institutional integrity disciplines, 

which ensure that the rule oflaw is applied in an evenhanded manner, including arrangements 

that control corruption. These three sets of disciplines fonn an interlocking triangle. When only 

one or two sides of the triangle are in place, the rule oflaw framework is not as strong or as 

stable as it is when all three sets of disciplines are in place. I urge Congress and the 

Administration to work together with the Russian government to make simultaneous progress in 

all three areas, even as Congress moves swiftly to extend Pennanent Nonnal Trade Relations 

(PNTR) to Russia. 

It is a very good thing that Russia has completed the process of accession to the World Trade 

Organization. Russia's accession to the WTO serves the trade and foreign policy interests of the 

United States in many important ways. WTO accession means that the rule of law will apply to 

most important parts of the trade relationship between Russia and the United States, putting into 

place one side of the rule oflaw triangle. Russia's commitment to rule of law disciplines with 

respect to trade represents a very important step forward for U.S. business. 

Congress should extend PNTR status to Russia right away. Russian businesses and workers 

should obtain the access to the market of the United States that the Government of Russia 

bargained for in its negotiations to accede to the WTO. The trust on which good relations 

between Russia and the United States are premised will be reinforced when the United States 

extends PNTR to Russia. Moreover, the extension ofPNTR is necessary to allow U.S. finns to 
51 


81873.019

gain the benefits that flow from Russia's accession to the WTO. If Congress were to delay the 

extension ofPNTR to Russia, U.S. firms would find themselves at a competitive disadvantage in 

the Russian market in comparison to firms from third countries. 

WTO disciplines usually are subject to state-to-state dispute settlement. This means that if either 

Russia or the United States were to take actions that may violate its WTO commitments, the 

other party can challenge the disputed practice before a WTO dispute settlement panel. This 

ability to bring challenges before a neutral third party provides a powerful reinforcement of the 

rule of law to trade practices, protecting traders against arbitrary and mistaken national 

application of internationally agreed trade rules. Access to third party dispute settlement is an 

essential part of the international system of checks and balances that helps ensure the fair 

application of the rule oflaw within jurisdictions such as Russia. 

Resort to dispute settlement procedures by no means indicates that the parties to a dispute do not 

enjoy friendly relations. The United States enjoys excellent relations with the European Union 

and is a treaty ally of many of the European Union's member states. Nevertheless, the United 

States and the European Union regularly bring WTO dispute settlement cases against each 

other. In fact, the ability to put contentious trade disputes into a technical forum for resolution 

actually enhances the friendly relations between us by limiting the extent to which trade disputes 

become political disputes. 

Prompt extension ofPNTR to Russia is a necessary condition for the rule oflaw to be extended 

to the business relationship between Russian and the United States, but it is not a sufficient 

condition. The rule of law, including the well-established strictures of customary international 

law, should apply to investments in the United States made by Russians and Russian companies 

and to investments in Russia made by Americans and American companies. Investment 

disciplines can be thought of as the second side of the triangle that is necessary for a solid rule of 

law framework for international business. 

The most important investment disciplines are included in bilateral investment treaties or 

"BITs." BITs generally provide guarantees of non-discriminatory treatment, protection against 

unlawful expropriations, and opportunities for investors to resort, if necessary, to investor-state 

dispute settlement with independent arbitration panels. At present, the United States and Russia 

do not have a BIT governing investment relations. The two countries signed a BIT in 1992, and 

the United States Senate ratified the agreement in 1993, but the Russian Duma never followed 

suit, reportedly due in part to Russian legislators' fear that the BIT would give Western energy 

companies too much leverage over Russian natural resources and in part to domestic political 

conflict between the parliamentary majority and then-President Yeltsin. 

The absence of BIT protections has been a serious shortcoming, especially for U.S. investors in 

the energy sector. To take one example in which I have been involved as a policy advisor, the 

Government of Russia took actions between 2004 and 2007 that dismantled Yukos Oil 

Company, a privately-owned Russian oil company whose shares were available to foreign 

investors. U.S. investors, both investment funds and about 20,000 individual investors, 

collectively owned about 15 percent ofYukos. Experts on Russia's domestic politics have 

speculated that then-President Putin wanted to re-establish the control of the Russian government 
52 


81873.020

over Russia's oil sector and may have been concerned about the potential political competition 

that Yukos CEO Mikhail Khordokovsky could present. Whatever its motivation may have been, 

Russian government's actions amounted to an expropriation of the investments of U.S. and other 

foreign investors in Yukos in a manner contrary to customary international law. The total loss to 

the U.S. investors was about $12 billion. Because Russia never ratified the Russia-U.S. BIT, 

U.S. investors do not have the same opportunity to pursue investor-state arbitration as do 

investors from many other jurisdictions. In commenting on this case, a State Department press 

spokesman said at the time, "Many of the actions in the case against Khodorkovsky and Yukos 

have raised serious concerns about the independence of courts, sanctity of contracts and property 

rights, and the lack of a predictable tax regime. The conduct of Russian authorities in the 

Khodorkovsky Yukos affair has eroded Russia's reputation and confidence in Russian legal and 

judicial institutions." 

My colleagues at Covington & Burling LLP and I represent certain U.S. investors in Yukos who 

have petitioned the State Department to "espouse" their claims. Through espousal, the United 

States government would take on the claims of all U.S. investors in Yukos and would seek to 

work out a collective settlement with Russia, either through negotiation or the establishment of 

an ad hoc arbitration process established by Russia and the United States for this purpose. In 

reflecting on the predicament faced by U.S. investors in Yukos, I have seen in a new light the 

vulnerability of such investors in the absence of the dispute settlement provisions provided by a 

bilateral investment treaty. I obviously and admittedly represent an interested party in this 

particular matter, but my experience in working on it has persuaded me that the United States 

should immediately espouse the claims of the U.S. investors in Yukos, even as the United States 

moves immediately to extend PNTR to Russia. Russia and the United States each need to 

demonstrate that they are committed to the rule oflaw, especially as it pertains to U.S. 

investments and U.S. investors. 

In addition, the United States should seek immediately to initiate negotiations with Russia on a 

new, more up-to-date bilateral investment treaty. Such a treaty, once ratified by both countries, 

would provide protection for Russian investors in the United States as well as for U.S. investors 

in Russia. In doing these things, Russia and the United States would be putting into place a 

second side to the rule of law triangle for business relations between our two countries. 

On February 9, 2011, Prime Minister Putin published in the Washington Post an essay on the 

importance of stamping out official corruption. He wrote that "[t]o combat systemic corruption 

we need to unbundle power and property and to separate executive power from the system of 

checks over it. The political responsibility for the fight against corruption must be shared by the 

government and the opposition." He also called for increased salaries for government officials 

and managers of state-owned companies in exchange for "absolute transparency" regarding their 

personal finances and proposed an expansion of the court system to hear more complaints against 

corrupt officials. 

It is heartening that the Prime Minister, who has claimed victory in Russia's March 4 elections to 

select Russia's next President, acknowledges the importance of ensuring institutional integrity, 

the third side of the rule of law triangle for international business. Institutions imbued with 

integrity are essential for the functioning of the rule oflaw. Without such institutions, the rule of 
53 


81873.021

law can be distorted into a corrupt and authoritarian parody that fonner Secretary of State 

Albright once called not rule-of-Iaw but "rule Qx law." 

In 2009, TI-USA and I were part ofa private sector study group composed of Russian and 

American NGOs and business associations. We prepared ajoint report called Russia-US Joint 

Working Group on Investment and Institutional Integrity and submitted this report to President 

Medvedev and President Obama. On the margins of the July 2009 Medvedev-Obama Summit 

meeting, President Obama listened while my counterpart, the Chair of the Russian chapter of 

Transparency International, Elena Panifilova, presented our summary conclusions. 

Some of these conclusions already have been adopted. Notably, Russia has passed a law making 

it a prosecutable offense for Russian business executives to bribe foreign government officials in 

order to secure business. In addition, Russia has acceded to the Anti-Bribery Convention of the 

Organization for Economic Cooperation and Development. These are important and very 

welcome steps. 

Accession to the OECD Convention does not mean, of course, that Russia's new law will be 

instantly and comprehensively enforced. It took several years for many Western European firms 

to begin carrying out their obligations under the OECD Convention; some signatories to the 

Convention still are not carrying out their responsibilities as fully as we in TI-USA think they 

should. In fact, TI-USA has joined several business organizations and the AFL-CIO in urging 

the Administration to take vigorous action to level the international commercial playing field by 

ensuring that all signatories to the OECD Convention fully implement their obligations under the 

Convention. We believe the Administration should apply the same standard to Russia. 

Even full Russian implementation of its obligations under the OECD Convention will not 

directly address the problem of corruption within Russia, which is widely seen as infecting 

Russia's administration of tax and customs policy and its judiciary. Fonner Secretary of State 

Condoleezza Rice stated in a Washington Post Op-Ed on March 8, 2012 that, "When Putin took 

office, he reestablished the arbitrary power of the state-destroying the independence of the 

judiciary; appointing governors rather than electing them; and all but closing down independent 

television. " 

Russia and the United States apparently are working together, through the Bilateral Presidential 

Commission Working Group on Rule of Law, under the leadership of the U.S. Department of 

Justice and the Russian Ministry of Justice to address issues of the rule oflaw and controlling 

corruption. This work deserves to be given the highest priority. 

I also believe it continues to be important that representatives of civil society organizations be 

afforded opportunities to contribute to such work, as TI-Russia and TI-USA did in the Russia-US 

Joint Working Group on Investment and Institutional Integrity. Civic organizations provide an 

essential role as watch dogs, helping to ensure institutional integrity. It is important that civic 

organizations be pennitted to monitor, investigate and report on suspected instances of 

corruption. 
54 


81873.022

By vigorously pursuing full implementation of the OECD Convention, by engaging an active 

bilateral Russia-U.S. agenda on the rule oflaw and by expanding the scope for civil society 

organizations to playa watch dog role, Russia and the United States can assure increasing levels 

of institutional integrity, laying down the third side of the rule of law triangle for stable business 

relations. 

Mr. Chairman, let me summarize my recommendations: 

1. I recommend that Congress immediately extend Permanent Normal Trade Relations to 

Russia. 

2. I recommend that the Administration and Russia, with the support of Congress, 

immediately initiate and vigorously pursue negotiations for a bilateral investment treaty. 

3. I recommend that the Administration, with the support of Congress, advocate for U.s. 

investors in Russia and immediately and vigorously espouse the claims of the U.S. 

investors in Yukos, whose investments in Russia were expropriated. 

4. I recommend that the Administration, with the support of Congress, immediately and 

vigorously work to ensure that all parties to the OECD Anti-Bribery Convention, 

including Russia, fully carry out their commitments under the Convention. 

5. I recommend that Russia and the United States, with the support of Congress, 

immediately and vigorously intensify their cooperative work to ensure that their 

respective government operations and judiciaries are governed by integrity and the rule of 

law, and are resistant to corruption. 

6. I recommend that Russia and the United States, with the support of Congress, cooperate 

in immediately and vigorously expanding the scope for civil society to play an 

independent watch dog role on rule-of-Iaw issues, especially corruption. 

By taking all these actions with vigor and determination, the United States and Russia can ensure 

that Russia's WTO accession and the establishment of Permanent Normal Trade Relations 

between our two countries will mark the beginning of a new era, one that is marked by the full 

application of the rule of law to our bilateral business relations. 
55 


81873.023

Introduction 

Testimony before the United States Senate Committee on Finance 

March 15, 2012 

Ronald J. Pollett 

President & CEO, GE Russia & CIS 

Chairmon Baucus, Ranking Member Grassley, and distinguished members af the Committee, thank 

you for the opportunity to testify todoy on a subject that I feel is of critical importance: the 

opportunity to grow the US economy ond US jobs by establishing permanent normal trade relotions 

with Russia. 

Just a moment of background about me: a US citizen, I was born and grew up in New York City and 

attended Colgate University, where I majored in Russian Studies, I joined GE in July 1991 and was 

posted to the region shortly thereafter. For the past 12 years, I have been living and working in 

Russia to build our business. For the past 6 years, I've also served as Chairman ofthe Board of 

AmCham Russia, the largest and most influential foreign business association in the country; its 700+ 

active members account for $30 billion in revenues and support tens af thousands of jobs in the US 

and Russia. 

So, I have been in 0 unique position to witness firsthand the dramatic changes Russia has undergone 

in a short period of time, and I truly believe that Russia is now poised to become an even more active 

and significant player in the global economy. But I've also been in a position to observe how, on the 

whole, US businesses are underrepresented in the Russian market and underperform relative ta their 

Eurapean and Asian caunterparts, which have stronger historical ties and a bigger presence. I 

believe PNTR can change this. 

Fundamental strengths of the Russian economy 

If I have just one message ta you today, it is that Russia presents incredible oppartunities for US 

companies pravided we are afforded a level playing field. A few facts: 

Russia is a big, growing economy: its GOP has more than doubled in the past decade and is 

expected ta grow an average of 4% in the next 3 years, 

US trade with Russia is growing. In 2011, US exports were $8.3 billion, up 39% fram 2010 

and more than double the growth rate for overall US exports worldwide. But the US olso 

has a relatively small presence in the Russian market -- accounting for just 4% of Russian 

imports. By contrast. East Asia and the European Union accounted for 29% and 43%, 

respectively, of Russian imports. 

While Russia's ecanomy continues to be driven by its incredible natural resource strength, 

particularly oil and gas, metals, and minerals, the Government is very much looking to 

diversify its economy. It has an ambitious modernization plan that includes upgrading 

infrastructure, modernizing healthcare, growing its high technology sector, and diversifying 
56 


81873.024

revenue streams. It is also looking to continue to invest in raising the standard of living of its 

own people, who have a great amount of respect for American business acumen, 

GE provides a case in point of how Russia can be a great market for a company willing to engage, 

When I arrived in Russia in 1998, GE had a mere $110 million in sales. Last year, we had more than 

$1.6 billion in sales, and our industrial businesses alone saw almost $1.2 billion in US-origin orders 

fram Russia up from $410 million in 2010. Today, GE is the largest foreign industrial company 

operating in Russia, and these orders will support more than 3,000 jobs for GE and its suppliers in the 

US. Even mare encouraging, we believe that our sales in Russia could triple by 2020 with PNTR. In 

short, Russia is a profitable part of the world with enormous growth opportunities for GE as well as 

other American companies -- with the prospect for more jabs for American workers. 

Why PNTR for Russia is good for the American economy 

For US companies to take full advantage of Russia's growing market, Congress must repeal the 

Jackson-Vonik amendment, a political anachronism, and establish permanent trade relations with 

Russia -- key to US economic success in the region. 

Bringing lower tariffs, reduced non-tariff barriers, and enhanced transparency, Russia's accession to 

the WTO is a goad thing for the US economy. Again, let me offer a few examples of what it will mean 

for my own company: 

• Russia is looking to double its per capita spending on healthcare. With more than 22,000 

employees in the United States, GE Healthcare will now see tariffs on the medical diagnostic 

equipment we produce fall fram the current average of 15% to an average of 4.3%. 

• Russia is the fourth-largest electric utility market in the world. GE Energy will see average 

tariffs fall from 12% to 5% an gas turbines and from 10% to 5% an turbine parts. The 

Greenville, SC plant where we make gas turbines employs more than 3,000 workers and 

supports another 1,300 supplier jobs. 

• GE is the largest supplier of foreign aircraft engines to Russia and the largest aircraft lessor. 

GE Aviation and our GECAS leasing business stand to benefit as Russia reduces its tariffs on 

aerospace products from 20% to 8.3% and 5% an engines themselves. These GE products 

are made in Ohio, Vermont. Kentucky, North Carolina, and elsewhere in the US -- nat to 

mention the hundreds of our suppliers in 34 states. 

Russia has the world's second-largest railway system; some 10,000 locomotives will need 

upgrades in coming years -- to the tune of $10 billion. This represents an enormous 

opportunity for GE's Transportation business, which is based in Erie, PA and employs some 

8,300 workers in the US. 

And it is not simply lower tariffs. Although we have witnessed an improved business environment, 

Russia is still a difficult place to do business. Russia has come a long way, but it still has a long way 

to go. Its WTO commitments to eliminate non-tariff barriers, implement a high standard of IPR 

protection, and imprave transparency may be as or more critical for US companies -- like ours -- that 

often need to do business in partnership with local companies. Russia's accession to the WTO also 

covers trade in services, such as financial services, that are not covered under any other agreement 
57 


81873.025

the US has with Russia. While Russia joining the WTO daes not solve all the issues, it is a big step in 

the right direction. Together with Russia's recent accession ta the OECD's Anti-Bribery Convention, it 

will improve rule of law, introduce strict disciplines on IPR. and promote transparency. Moreover, the 

more American companies are able to take advantage of opportunities to do business in Russia, the 

more Russia's business climate will evolve to meet international standards. 

Simply stated, government policies matter. If the US does not grant PNTR to Russia, American 

companies and their workers will be at a competitive disadvantage relative to our global 

competitors, who will enjoy the benefits of Russia's commitments. 

As you know, there is already in force a bilateral agreement between the US and Russia that provides 

for the mutual extension af "most favored nation" benefits. But without PNTR. the US would have no 

recourse to WTO dispute settlement should disputes arise and could also face a mare challenging 

trade environment. 

Equally important. I believe, is the signal that would be sent to Russia if the US -- alone in the world --

were not to take advantage of the benefits of PNTR. At a time when export growth is key to US 

competitiveness, we would be rejecting an important opportunity while our competitars in Europe, 

Japan, and elsewhere rush to do more business with Russia. And for what gain? Russia already 

enjoys broad access to the US market because our tariff levels are already very low and our market 

is very open. It would be US businesses and US workers -- not Russians -- who would be at a 

disadvantage. PNTR is not a gift to Russia. It is about US jobs and US competitiveness. 

Conclusion 

I realize that the benefits of global markets can seem remote for many Americans. The issue may be 

particularly complicated when dealing with a foreign trading partner that. like Russia, presents 

difficulties for the US in many other spheres. But one thing is clear: Russia will join the WTO whether 

or not the US grants PNTR. The vote to accord PNTR to Russia is about one thing and one thing only. 

It is about the ability of American companies to compete, on a level playing field according to the 

same set of rules, with foreign companies eager to do business in a fast-growing economy that 

presents great opportunities. I urge this Committee and Congress to let the American economy and 

American workers reap the benefits af these opportunities. 
58 


81873.026

Testimony 

on behalf of the 

Montana Stockgrowers Association Inc. 

with regard to 

Russia's Accession to the WTO 

submitted to the 

United States Senate Committee on Finance 

The Honorable Max Baucus, Chairman 

submitted by 

Watty Taylor 

President 

Montana Stockgrowers Association Inc. 

March 15, 2012 

Washington, D.C. 
59 


81873.027

Good morning Chairman Baucus and members of the committee. Thank you for the 

opportunity to speak to you on behalf of the members of the Montana Stockgrowers 

Association (MSGA) regarding our point of view on Russia's accession to the World 

Trade Organization (WTO). My name is Watty Taylor and I am a rancher from Kirby, 

Montana. I currently serve as the President of the Montana Stockgrowers Association, 

one of the nation's oldest and most historically significant cattle ranching organizations, 

established in 1884. I, along with my wife and three sons, operate a commercial Hereford 

and Angus cow/calf operation on 30,000 acres in southeastern Montana. Ranching has 

been a vital part of my family's heritage for many years. 

96 percent of the world's population lives outside the borders of the United States. We 

must have access to the additional demand for beef from consumers that live outside the 

U.S. if we hope to remain successful. Russia was the U.S.'s fifth largest export market 

for beef in 2011. We can now achieve a significant increase in our exports to Russia, 

thanks to the provisions of Russia's WTO accession agreement. These provisions 

include a large, country-specific beef quota and lower tariffs for "high quality beef." 

This will be greatly beneficial to my family's ranch, if Congress passes PNTR legislation. 

I am confident that we can provide a significant amount of "High Quality Beef" as that is 

defined by the agreement. Montana is leading the way to produce large volumes of 

USDA quality grade "choice" and "prime" cuts of beef. We have a reputation for raising 

superior cattle genetics that perform in many different kinds of harsh environments. Our 

hearty northern tier ranch-level certified calves will meet the demand for "High Quality." 

It is also exciting that Montana is currently exporting several thousand head of our 

superior cattle to Russia to help establish a more vibrant domestic beef industry. The 

possibilities are endless. In fact, Montana ranchers are currently living and working in 

Russia to establish Western style cattle ranching enterprises. 
60 


81873.028

While Russia is a tremendous opportunity for our beef, we need to ensure that we don't 

run the risk of facing unscientific restrictions. Montana's ranchers have always 

appreciated the efforts by Chairman Baucus to move us towards trade agreements that are 

based on sound science and international standards. In particular, ensuring that Russia 

lives up to its WTO commitments on Sanitary and Phytosanitary (SPS) standards along 

with other tcchnical issues for beef is crucial. Without PNTR, we will not be able to 

enforce these commitments. 

Recognizing international science-based standards is very important. It not only creates 

less market volatility but it also encourages the safest and most prudent production 

practices. Issues that are of the most important to ranchers with regards to Russia include: 

• Tetracycline: We encourage the adoption of the Codex standard for tetracycline 

residues in beef. 

• Beta Agonists: We encourage the adoption of standards for beta agonist residues 

in beef that are based on scientific risk assessments, conducted according to 

internationally recognized methods. 

• Bacterial Parameters: We encourage the adoption of science-based standards for 

bacterial contamination in the unfortunate event that beef becomes contaminated 

with bacteria such as Salmonella or Lysteria. 

• Sanctions Policy: Once Russia has adopted science-based standards, we 

encourage them to implement a risk-based sanctions policy for U.S. beef 

shipments that do not comply with those standards. 

• Veterinary Equivalence: We encourage the use of the planned 2012 meat plant 

audits by the Russia veterinary service to make a determination of the equivalence 

of the U.S. meat inspection system. 

• USDA Food Safety Inspection Service (FSIS) as the Competent Authority: We 

encourage the recognition of FSIS as the competent veterinary authority of the 

United States. This includes recognizing FSIS's authority to approve and suspend 

U.S. beef establishments for export to Russia. 
61 


81873.029

In addition, we need to ensure that Russia fully implements the tariff and quota 

concessions they have agreed to make on beef. Extending Permanent Normal Trade 

Relations to Russia will give us the means to enforce those concessions, and give 

Montana's family ranchers the momentum we need to benefit our rural ranching 

economy at home. Exports create jobs. Our competitiveness depends on profitability and 

attracting the next generation of ranchers back into the business. Our ranch families' 

livelihoods depend on exports which are our most dynamic and vibrant opportunities for 

long-term sustainability. I appreciate the opportunity that I have been granted to present 

my testimony today and I look forward to working with you throughout the course of this 

process to secure Permanent Normal Trade Relations with Russia. I am happy to answer 

any questions that you may have. Thank You. 
62 


81873.030

HEARING BEFORE 

THE U.S. SENATE COMMITTEE ON FINANCE 

RUSSIA'S WTO ACCESSION -

IMPLICATIONS FOR THE UNITED STATES 

STATEMENT OF PAUL WILLIAMS, 

PRESIDENT AND CHAIRMAN OF THE BOARD OF 

THE AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND 

PUBLISHERS ("ASCAP") 

THURSDAY, MARCH 15,2012 

10:00 AM 

DIRKSEN SENATE OFFICE BUILDING 
63 


81873.031

March 13,2012 

Members of the Senate Finance Committee, 

It is an honor and a privilege to speak to your Committee in my 

capacity as President and Chairman of the Board of ASCAP, the American 

Society of Composers, Authors and Publishers, and on behalf of ASCAP' s 

over 427,000 songwriter, composer, and music publisher members, living 

throughout America. 

I submit this testimony not to address problems of piracy or 

corruption in Russia which have been historically addressed by other U.S. 

copyright groups.! Rather, I submit it to bear witness to the challenges 

U.S. songwriters, composers, and music copyright owners face in having 

their public performance rights in music represented through "normal" 

legal channels in Russia. 

Why ASCAP? 

AS CAP members are overwhelmingly the owners of the smallest of 

American businesses. Along with other creators, they make an enormous 

contribution to our economy. Music creators and owners depend on the 

efficiencies of performing rights organizations ("PROs") to license their 

rights and distribute royalties to them. 

For example, I have been blessed with the gift of having written 

many popular songs, but how am I, a songwriter living in California, to 

collect royalties for performances of my songs throughout the United 

States, much less in Russia? 

This is why I love ASCAP. It exists to ensure music creators and 

owners receive fair payment for the public performance of their musical 

works. To do this, ASCAP grants public performance licenses to a wide 

1 See International Intellectual Property Alliance ("lIP A"), 2012 Special 301 Report on Copyright 

Enforcement and Protection, available at: 

htl:p:llwww.iipa.com/rbcl2012/20l2SPEC30IRUSSIA.PDF (advocating that Russia remain on the 

USTR's Priority Watch List)("lIPA 2012 Special 301 Report"). 
64 


81873.032

range of music users in the U.S., such as television and radio broadcasters, 

hotels, nightclubs, universities, municipalities, and Internet services. 

Foreign PROs 

In order to collect overseas, ASCAP relies on a network of reciprocal 

relationships with foreign PROs in countries throughout the world. 

ASCAP collects and passes on to those PROs the royalties for public 

performance of their members' music in the U.S. Similarly, the foreign 

PROs collect royalties for performances in their territories, and distribute 

those royalties to affiliated PROs, including the U.S. PROs. The good 

news is that American music is extremely popular around the world. We 

have a positive trade balance in the export of the product we create. 

Due to changes in the music industry and, of course, piracy, certain 

forms of royalties, particularly for the reproduction of music, have 

declined. As a consequence, ASCAP members and those of our U.S. sister 

PROs are increasingly reliant on public performing royalties for their 

livelihoods. An ever increasing share of those royalties is from overseas; 

last year, foreign PROs paid U.S. songwriters and composers nearly twothirds of a billion dollars in royalties.2 

These foreign royalties account for well over a third of the money 

ASCAP distributes to its members. For many American songwriters and 

composers, performance royalties now make the difference between being 

a professional music creator as opposed to a plumber with a music-writing 

hobby. Indeed, it is not a stretch to say that the future of professional 

songwriting and composing, so central to American culture, depends on 

ensuring that our rights are enforced around the world. 

The Russian Authors Organization (RAO) 

Here, I am sad to report that Russia's PRO, the Russian Authors 

Organization or RAO - falls short, and it is our belief that it is largely due 

to the Russian legal system. RAO's collections are remarkably low. 

2 Foreign PROs' payments flowing into the U.S. are distributed almost entirely to individual songwriters and 

composers. U.s. music publishers tend to have affiliated foreign publishers based in the territory of the foreign PRO 

and thus, collect directly from the foreign PRO in the territory of the foreign publisher. 
65 


81873.033

While the French and Italian economies are roughly the same size as 

Russia's, performance royalties collected in 2009 in France are 11.3 times 

greater, and in Italy, 8.75 times greater, than in Russia. Denmark, with 

only 4% of Russia's population, and an economy one-tenth the size of 

Russia, collects nearly twice as much for public performances as Russia in 

dollar terms; 18 times as much per dollar of GDP; and 42 times as much 

per capita. Based on these comparisons, and on the Russian population's 

passion for American music and movies, it is clear that U.S. music creators 

are being grossly underpaid for performances of their music in Russia. 

Russian Legal & Court System 

While ASCAP depends on RAO to collect Russian performance 

royalties, the Russian legal system handicaps RAO's efforts. Russian 

courts have in recent years demanded extraordinary documentation of 

RAO's rights to represent ASCAP members' rights or worse yet, simply 

refuse to recognize the standing of RAO to represent the rights of ASCAP 

members. 

In one instance, ASCAP's Legal Department received an email 

inquiry directly from a Russian judge who did not believe that RAO had 

standing to represent ASCAP - this despite the fact that we had previously 

sent documentation to RAO confirming RAO's authority in this regard; 

and, despite the fact that RAO is fully qualified under Russian law to act as 

a collecting society for the rights of U.S music creators. RAO is not some 

newly created "self-appointed" representative, as some other U.S. industry 

sectors have unfortunately experienced in Russia. 

Further, ASCAP receives royalties from societies all over the world 

for the public performance of music in movies, exhibited in movie theaters 

- with the exception of China. Even RAO has sent such royalties to 

ASCAP in the past. And there is no doubt that American movies are 

enormously popular and widely distributed in Russia.3 For the month of 

3 "According to 'Film Business Today' (Russia), box office receipts in Russia and the other 

Commonwealth of Independent States (excluding Ukraine) set a new record in 2011 US$I.16 

billion (an 11.74% increase from 2010)." See IIPA 2012 Special 301 Report, supra, at note 1, page 

97. 
66 


81873.034

January 2012, 3 of the top 5 grossing movies in Russia were American 

movies; including the movie Hugo, the musical score for which was 

composed by ASCAP member, Howard Shore.4 However, in recent years, 

due to meritless legal challenges, RAO's authority to collect for this 

important use of U.S. music has been threatened.5 

Finally, Russian fiscal authorities require RAO to collect a "Value 

Added Tax" or VAT at a statutory rate of 18% from its royalty 

distributions. No other PRO in the world deducts a VAT in this manner 

from the royalties sent to the U.S. or elsewhere. Since 2008, this amounts 

to a loss of approximately $1.5 million that might have otherwise gone 

primarily to U.S. songwriters and composers, thus, hurting them as well as 

the American economy and our culture. Although Russia grants a VAT 

exemption for some intellectual property rights, this exemption is not 

extended to copyrights. This is just plain unfair. U.S. songwriters and 

composers cannot recover the Russian VAT, nor can they take a foreign 

tax credit to compensate for this large deduction. This is a kind of "rancid 

icing on the cake" issue for us, insult to injury if you will. 

Closing Comment 

We know there is no magic wand that our Government can waive to 

ensure American music creators and copyright owners are fairly 

compensated for public performances of music in Russia. However, 

regardless of what happens with whether to grant permanent normal trade 

relations ("PNTR") and Russia's entry into the WTO, we do think the U.S. 

Government should work with the Russian Government to better train 

4 See http://www.sras.org/russia top movies jan 2012. 

5 See page 18 of the IIP A 2010 Special 301 Report on Copyright Enforcement and Protection, 

available at http://www.iipa.com/rbc/2010/2010SPEC301RUSSIA.pdf (advocating that numerous 

provisions of Russia's Civil Code, Part IV, be amended to enable better enforcement of copyright 

owners' rights; this would include confirmation of the public performance right of music contained 

in audiovisual works and exhibited in theaters). 
67 


81873.035

judges and lawyers in the handling of foreign copyrights, change its law 

regarding the VAT, and clarify its law regarding performance rights in 

music in theatrical exhibitions of movies. 

If the Congress decides to grant PNTR, the US Government must 

aggressively use all available WTO tools to protect American songwriters, 

composers, and publishers. Based on our ongoing problems with China, 

we are under no illusions that Russia's entry into the WTO, by itself, will 

improve the predicament of ASCAP members. Agreements without 

enforcement may be worse than no agreements at all. 

Thank you again for granting me the privilege to address your 

Committee. 
(69) 

COMMUNICATIONS


81873036.eps
70 


81873.037

Approval of Permanent Normal Trade Relations (PNTR) with Russia is the American Farm 

Bureau Federation's top trade priority with Congress in 2012. 

Russia was invited by the World Trade Organization (WTO) to become a member on Dec. 16, 

2011. Long negotiations resulted in Russia committing to enact many trade-related domestic 

reforms. Russia is expected to complete the adoption of these measures and formally join the 

WTO in July 2012. 

PNTR for Russia must be enacted by Congress in order to guarantee U.S. access to the market 

opening and legal commitments that are part of Russia's WTO accession agreement. In 2011, 

the United States was the third-largest supplier in the Russian market, where imports of U.S. 

food and agricultural products exceeded $1.3 billion. 

Russia PNTR is a critical step towards ensuring the United States benefits from Russia's 

WTO Accession and remains competitive in that market. 

PNTR makes permanent the trade status thc U.S. has cxtended to Russia on an annual basis 

beginning in 1992. Normal trade relations (NTR) or most-favored nation (MFN) status refers to 

the non-discriminatory treatment of a trading partner compared to that of other countries. Title 

IV of the Trade Act of 1974 applies conditions on Russia's status, including compliance with 

freedom of emigration criteria under Section 402 - the "Jackson-Yanik amendment." Becausc of 

this, the U.S. will not be in compliance with the WTO requirement of "unconditional MFN" 

without Congress lifting the applicability of the Jackson-Vanik amendment as it applies to 

Russia. 

Due to the "Jackson-Yanik amendment," the U.S. invoked the WTO non-application provision, 

meaning that the WTO obligations from Russia's accession agreement to the WTO will not 

apply to the United States. 

Russia's Membership in the WTO will provide significant commercial opportunities for 

U.S. agriculture. 

U.S. farmers and ranchers will have more certain and predictable market access as a result of 

Russia's commitment not to raise tariffs on any products abovc the negotiated rates and to apply 

non-tariff measures in a uniform and transparent manner. In particular, Russia has committed to 

applying the WTO Agreement on Sanitary and Phytosanitary Measures, limiting its ability to 

impose arbitrary measures that have impeded trade in the past. Russia's compliance with its 

obligations, including those on tariffs and non-tariff measures, will be enforceable through use of 

WTO dispute settlement proccdures. 

Russia has a strong capacity for growth in food imports from the United States. U.S. agricultural 

exports to Russia are forecast at $1.36 billion for 2011. Russia has the potential for significant 

increases in poultry, pork and beef consumption. In 2010, per capita consumption of poultry, 

pork and beef in Russia were 21.0kg, 19.9kg and 16.6kg, respectively. Russia's meat 

consumption compared to the U.S. is low, where per capita consumption ofpouitry, pork and 

beef were 43.4kg, 27.9kg and 38.8 kg, respectively. With this potential for expanding meat 
71 


81873.038

exports, the establishment of necessary Tariff Rate Quotas (TRQ) and clear Sanitary and 

Phytosanitary (SPS) rules by the WTO accession agreement are important for U.S. agricultural 

export growth to Russia. 

Congressional approval of PNTR for Russia will result in improved market access for U.S. 

agriculture. 

Beef The United States will have access to 11,000 tons of a global TRQ for fresh/chilled beef, 

and a U.S. country specific TRQ of 60,000 tons for frozen beef. Both TRQs have an in-quota 

tariff of 15 percent. In addition to access under these TRQs, the United States will be able to 

export high-quality beef outside the TRQ at a 15 percent tariff rate. 

Poultry: Russia will maintain a 250,000 ton TRQ for chicken halves and leg quarters, with an 

in-quota tariff rate of 25 percent and separate TRQ access for commercially important turkey 

products. 

Pork: Russia has agreed to a TRQ of 400,000 tons for fresh/chilled/frozen pork and a separate 

TRQ of 30,000 tons for pork trimmings. Both TRQs will have zero in-quota rates. As of Jan. I, 

2020, Russia will adopt a tariff-only regime for pork with a bound duty of 25 percent and will 

apply this duty to all imports, including from countries exporting under Russia's tariff preference 

program. 

Apples: Russia will reduce its tariff rate for apples between 70 to 85 percent within five years, 

depending on the variety and season. 

Cheeses: Russia is reducing its maximum tariff bindings on cheese from 25 to 15 percent, with 

most reaching the final bound rate within three years. 

Soybeans, soybean meal and soybean oil: Russia will bind its tariff on soybeans at zero and cut 

its tariff on soybean meal from 5 percent to 2.5 percent within one year. Russia has also 

committed to bind its tariffs on soybean oil to 15 percent upon accession. 

Passage of PNTR is also necessary to guarantee enforcement of key commitments by 

Russia for the agriculture sector. 

Sanitary and Phytosanitary (SPS) Measures 

Russia has established the legal framework necessary to comply with the WTO SPS Agreement. 

In addition, Russia has undertaken commitments on how it will comply with the SPS Agreement 

and its other commitments affecting trade in agricultural products. These commitments will 

provide U.S. exporters of meat, poultry and other agricultural products an enforceable set of 

disciplines against trade restrictions that are not based on science and a risk assessment. Russia 

has also agreed to strong rules on harmonizing SPS measures applied in Russia with international 

standards. Russia's accession negotiations focused on ensuring that Russia would pass and 

implement laws and resolutions requiring its government agencies to follow international SPS 

standards. 
72 


81873.039

In the accession agreement, Russia has committed to develop and apply international standards 

on SPS measures through membership in the Codex Alimentarius, the World Organization for 

Animal Health (OlE) and the International Plant Protection Convention. 

While not all issues were covered in the accession agreement, including specific concerns for 

pork and dairy exports, there is continued discussion about improving the conditions of trade for 

these commodities. 

Domestic Support 

Russia has committed to bind its aggregate measure of support (AMS) of trade-distorting 

agricultural subsidies at $9 billion for 2012 and 2013, with a gradual phasc down to $4.4 billion 

by 2018. Russia has also agreed to eliminate the use of all agricultural cxport subsidies. 

Conclusion 

Farm Bureau supports other nations which wish to join the World Trade Organization as long as 

they agree to conduct themselves in accordance with WTO rules. An agricultural trading 

relationship based on international scientific standards and expanded opportunities will benefit 

the U.S. and Russia. 

Farm Bureau urges Congress to support the granting of Permanent Normal Trade Relations with 

Russia. 
73 


81873.040

FINANCE COMMITTEE HEARING 

"Russia's MO Accession - Implications for the United States" 

Date: Thursday, Man:h 15, 2012 

STATEMENT 

for inclusion in the hearing record 

by 

Dmitri Daniel Glinski, PhD. 

Yuriy Gusev, Ph.D. 

Sergey 5emenov 

Pavel Mev 

Tatiana Yankeievich 

Tania Nyberg 

Han. MAX MUCUS 

Chairman, Finance Committee, Us. Senate 

Han. ORRIN G.HATCH 

Ranking Member 

DEAR MESSRS. SENATORS: As U.S. citizens, natives of Russia, and representatives ohhe recently formed 

national not-far-profit organization, American Russian-Speaking Association for Civil 8< Human Rights 

(ARA), we would like to take this opportunity to submit this statement in advance of the Committee 

hearings. The purpose is to add our voices in support of the proposal to repeal the Jackson-Vanik 

Amendment and establish permanent normal trade relations with Russia, while balancing this decision 

with simultaneous measures that would send a strong message about the United States' commitment to 

human rights and help the people of Russia in their uphill struggle against corruption, election fraud, 

and the violation of their civil rights by their present government. The simultaneous adoption of S. 

1039, the "Sergei Magnitsky Rule of Law Accountability Act of 2011" (hereinafter referred to as the 

"Magnitsky Act"), currently pending before the U.s. Senate Committee on Foreign Relations, would 

create such balance. 
74 


81873.041

The Jackson-Vanik amendment (Section 401, Title IV of the Trade Act of 1974, P.L 93-618) is widely and 

justly credited for having played a significant role in changing the Soviet system and winning the 

freedom of emigration for Russian Jews as well as a number of other persecuted minority groups in the 

former Soviet Union. Now, twenty years after all government-created obstacles to emigration from 

Russia have been removed, the Jackson-Vanik amendment is clearly a relic from the past. Its continued 

application to Russia is also contrary to the United States interest, putting it at a disadvantage vis-a-vis 

its competitors in the Russian market. The urgency of its removal enjoys a broad consensus across the 

spectrum of Russia's society, including its civil and human rights advocates. 

That said, simply repealing the amendment and granting PNTR to Russia without additional steps would 

not be in the best interest of Russian and American people, given the difficult struggle for political and 

economic change in Russia in recent months, and is likely to be misinterpreted by both the Russian 

government and its critics, as a triumph of pure commercial interest over American values. Therefore, it 

is advisable that the decision on the Jackson-Vanik amendment and PNTR status for Russia be 

synchronized with the passage of the "Magnitsky Act" by the U.S. Senate. 

The "Magnitsky Act" is named after Sergei Magnitsky, a Russian lawyer, who discovered large-scale 

government fraud and became a whistleblower. He was punished for this by being jailed in November 

2008 and held without trial for 11 months in a Moscow prison. He died there on November 16, 2009, 

after being denied proper medical treatment, and his published diaries indicate that his detention 

conditions were made progreSSively worse as he refused the pressure by investigators to provide false 

testimony. 

The "Magnitsky Act", introduced by Sen. Benjamin Cardin on May 19, 2011, would impose visa and 

financial sanctions upon individuals believed to be responsible for the detention, abuse, or death of 

Magnitsky; persons who committed the frauds that he discovered, including those who conspired to 

defraud the Russian Federation of taxes on corporate profits; as well as those responsible for 

extrajudicial killings, torture, or other human rights violations committed against human rights 

advocates and corruption whistle blowers. The bill has currently 28 co-sponsors in the Senate, including 

15 Republicans, 12 Democrats, and one independent. 

We hereby endorse the appeal in support of the "Magnitsky Act", addressed to Hon. Harry Reid and 

Hon. John Kerry by fifteen Russian human rights defenders, scholars, artists and public figures and 

included in the Congressional Record on February 16, 2012, as part of the remarks of Sen. Shaheen. As 

their statement says, "The threat of sanctions against the perpetrators of the Magnitsky tragedy struck a 

raw nerve with the Russian officials responsible for this tragedy. The consistent implementation of 

international pressure on the corruptioneers in the leadership circles of Russia will be a significant 

support for our civil society and for those honest people within the Russian power structures who are 

trying to renew and reform government institutions." 

Such a support for Russian civil society is particularly needed now, when it has been experiencing a 

revival as a result of the repeated mass-scale protests against election fraud in Russia that were held on 

December 10 and 24, 2011, February 4, 19, and 26, 2012, and March 5 and 10, 2012, in major Russian 

cities (and, for the first time in decades, also held by Russian natives in the major cities of Europe, 

America, and Israel). This important movement is facing a protracted struggle against corruption and 

autocracy under highly unequal and unpredictable conditions, in which the government may use any 

perception of Western indifference to begin a crackdown on its opponents. In this situation, a signal 

from the U.S. Senate that the opinion of Russian human rights advocates is taken into account, will make 

a real difference - not only to those in Russia struggling for a better future, but also for those Russian-
75 


81873.042

Americans who in recent months have increasingly expressed their solidarity with this struggle, by 

joining the rallies in support of fair elections in Russia held in New York, Washington, San Francisco, 

Chicago, Kansas City, Boston, and los Angeles. The Association that we represent was born in the 

course of these solidarity rallies and reflects the mandate of their participants. 

Therefore, we call upon you, Honorable Senators, to make your decisions about the Jackson-Vanik 

amendment and PNTR in Russia in conjunction with such measures directed against the violators of 

human rights in Russia as the Sergei Magnitsky Rule of law Accountability Act of 2011. 

Respectfully, 

Dmitri Daniel Glinski (New York, NY) 

Yuri Gusev (Washington, DC) 

Sergey Semenov (Chicago, Il) 

Pavellvlev (Sparta, NJ) 

Tatiana Yankelevich (Boston, MAl 

Tanja Nyberg (Fairfax, VA) 
76 


81873043.eps

BIPARTISAN POLlCY CENTER 

Chairman Max Baucus 

Senate Committee on Finance 

219 Dirksen Senate Office Building 

Washington, DC, 20510 

March 12,2012 

Dear Chairman Baucus and Ranking Member Hatch, 

Ranking Member Orrin Hatch 

Senate Committee on Finance 

219 Dirksen Senate Office Building 

Washington, DC, 20510 

We strongly believe it is time to grant permanent normal trade relations (PNTR) status to Russia 

and modernize U.S.-Russia relations for the benefit of both countries. We applaud your decision to hold a 

hearing on this important matter and look forward to continued discussion in the weeks ahead. 

We are proud to serve as co-chairs of the Russia Task Force at the Bipartisan Policy Center. We 

authored a report, released in January 2012, that calls on Congress to enact legislation that graduates Russia 

from Jackson-V anik. As our report states in clear detail, we too believe the United States must extend 

PNTR status to take full advantage of Russia's WTO membership. This will encourage economic recovery 

by significantly expanding U.S. exports to Ruasia, creating more U.S. jobs across a range of.important 

economic sectors, and ensuring favorable market access for U.S. companies. With Russia embedded in the 

WTO's institutions and commercial laws, the United States will alSo have a stronger set of tools for 

protecting its investors and resolving trade disputes. Failing to grant PNTR status would permit Russia to 

discriminate against U.S. trade and businesses, thus hurting job creation and economic growth here at 

home. We agree the United States cannot afford to miss this opportunity. Congress must act in a timely 

fashion to graduate Russia from Jackson-V anik. 

We also support efforts to hold Russian officials accountable for human rights abuses, for the sake 

of the Russian people and its society, and because liberal values are the foundation of the United States. 

Furthermore, we recognize Congress has little appetite to graduate Russia from Jackson-Vanik without 

replacement legislation targeting human rights and the rule oflaw. Therefore, we believe Congress should 

enact legislation that promotes more effectively Russian human rights and civil society. Russia's WTO 

accession and graduation from Jackson-Vanikshould be part of a comprehensive policy framework -

crafted by the Executive and Legislative Branches together with outside stakeholders - that advances U.S. 

intllrests, builds a more constructive bilateral relationship with Russia and promotes Russian human rights, 

rule oflaw, democracy, transparency, civil society, and commercial engagements. 

As you and your colleagues on the Senate Finance Committee debate this important issue on 

March 15 and beyond, we look forward to working with you in the coming weeks on this bipartisan effort. 

Very Truly Yours, 

Secretary Donald L Evans Senator Charles S. Robb 

1225 Eye street NW. Suite 1000 Washington, DC 20005 (202) 204--2400 WWW.lITl'ARTl'SAN·PDLlCV.OlW 
77 


81873.044

Statement of Omar Ishrak 

Chairman and CEO 

Medtronic, Inc. 

Snbmitted for the Record to 

Senate Finance Committee 

Hearing on Russia's WTO Accession - Implications for the United States 

March 15,2012 

Chairman Baucus, Ranking Member Hatch and Members of the Committee, thank you for the 

opportunity to submit for the record this statement on behalf of Medtronic in support of Russia's 

accession to the World Trade Organization (WTO) and to urge Congressional approval of 

legislation granting permanent normal trade relations (PNTR) status for Russia. 

In a few short months, Russia is expected to formally become a member of the WTO. According 

to some estimates, Russia's accession to the WTO could double U.S. exports, supporting U.S. 

jobs in numerous sectors, including services, agriculture, manufacturing and technology. U.S. 

economic benefits from Russia's accession to the WTO are not automatic; however, they will be 

secured and enforceable only if Congress passes permanent normal trade relations with Russia. 

About Mcdtronic 

Medtronic was founded in 1949, in a garage in Minneapolis, Minnesota. Today, we are the 

largest independent medical technology company, employing 40,000 people worldwide --

serving physicians, clinicians and patients in more than 120 countries, including Russia. With 

over 71,000 Medtronic technologies in production, Medtronic is a global leader in medical 

technology, serving over 7 million patients each year. Medtronic innovation leads the way as 

medical technologies change the ways physicians treat patients. Every 4 seconds, a Medtronic 

product saves or substantially improves the life of someone, somewhere in the world. 

Medtronic in Russia 

Russia is one of the fastest growing regions for the medical technology industry and Medtronic is 

a key player in the Russian medical device market. Medtronic works with more than 400 health 

service provider institutions and serves more than 75 cities across Russia. Since 2005, more than 

10,000 Russian health care professionals have been trained in Medtronic technologies, and in the 

last five years, Medtronic technologies and therapies have benefitted nearly 70,000 patients 

across Russia. 
78 


81873.045

Growing Market for Medical Technology 

Home to 142 million people, Russia's population is the 9th largest in the world, but only 20% of 

Russians currently have access to quality healthcare. Russian government efforts to extend 

medical care to larger portions of the cotmtry make it a significant emerging market for 

companies like Medtronic that provide cutting-edge life science products. 

Spending on heaIthcare in Russia is on the rise. Today, Russian heaIthcare spending is four 

times higher than it was in 2001. Russian spending for 2011 is expected to reach nearly $93 

billion, a nearly 14% increase over Russia's 2010 healthcare expenditures of more than $81 

billion. The Russian heaIthcare market is almost entirely public, meaning provided by the 

Government of Russia. Thus, healthcare companies like Medtronic are entirely dependent on the 

Russian government to acquire our products. 

At the same time, the incidence of chronic disease is high in Russia, too high. Cardiovascular 

disease alone is responsible for 56% of all deaths, followed by cancer at roughly 13%. Still, 

there are too many patients in Russia today that do not have access to clinically indicated 

therapies to treat these and other chronic illnesses. 

Nearly two-thirds of Russia's medical equipment is obsolete, creating demand for new medical 

devices. Russia's spending on medical devices is projected to reach $6.4 billion for 2011, 

marking growth of nearly 17% over the previous year's total of$5.5 billion. Russia imports 60% 

of its medical devices and 20-25% of these imports come from U.S. companies, giving the U.S. 

the second largest share in Russia's imported medical device market after Germany. 

As a concession, Russia has agreed to substantial tariff reductions for imported medical 

equipment following WTO accession - Russian tariffs on these products will average 5%, giving 

U.S. medical technology companies the opportunity to realize significant expansion into the 

Russian market. Meanwhile, Russia PNTR does not require any tariff reductions or market 

liberalization by the U.S. 

Additionally, Russia's WTO commitments promise to greatly improve the climate for companies 

doing business in Russia. U.S. companies will benefit from Russia's adherence to the rules of 

international trade with regard to intellectual property rights, as well as science- and risk-based 

regulations, but only if Congress passes Russia PNTR. 

Russia PNTR is Essential for a Level Playing Field 

Approval of Russia PNTR is a critical step toward ensuring that U.S. companies like Medtronic 

can benefit from Russia's WTO accession and remain competitive in that market. IfPNTR is 

not in place by the date of Russia's accession to the WTO, Medtronic and other U.S. companies 

will not be able to take full advantage of the market opening benefits and other commitments 

made by Russia to join the WTO, nor be able to enforce them when necessary. In contrast, all 

other WTO countries - including our European competitors - will enjoy these benefits and, until 
79 


81873.046

PNTR is granted, have a competitive edge over Medtronic and other U.S. companies and 

workers in the increasingly important Russian market. 

Legislation to graduate Russia from the Jackson-Vanik amendment and establish PNTR is 

essential to ensuring that U.S. companies enjoy a level playing field and are able to compete for 

sales of goods and services in Russia with foreign competitors. Passing Russia PNTR will bring 

the U.S. into compliance with WTO rules requiring unconditional free trade between members. 

Jackson-V anik is a condition on our trade with Russia. As no other WTO member country has a 

law similar to Jackson-Vanik which imposes such conditions, all of Russia's trading partners will 

realize an immediate benefit, leaving U.S. companies on the sidelines of the Russian market, at a 

disadvantage for lucrative contracts and without the full tools of a WTO relationship. 

If Congress fails to grant PNTR, Russia will still accede to the WTO, but only U.S. companies 

will be penalized. 

As you may know, the medical technology sector is a priority sector under the President's 

National Export Initiative, indicating that this is a solid source of American competitiveness and 

jobs. Russia is one of the fastest growing markets in the world for medical technology, and 

Russia's accession to the WTO will give U.S. companies like Medtronic a significant 

opportunity to expand our exports and sales to Russia, which leads to job creation here at home, 

but only if coupled with PNTR. 

We can ill afford to forfeit this opportunity to remain competitive. Without PNTR, U.S. 

companies like Medtronic will be left behind our competitors in this growing and profitable 

market, losing ground that we may never be able to make up. I respectfully urge Congress to 

ensure that U.S. companies can take full advantage of Russia's WTO accession from day one by 

passing legislation to grant PNTR status for Russia now. 

Thank you for the opportunity to weigh in on this very important matter. 
80 


81873.047

Statement for the Record of 

Daniel Cruise 

Vice President for Global Public and Government Affairs 

Alcoa, Inc., and 

Chairman, Russia Trade Relations Task Force 

National Association of Manufacturers 

For the 

Senate Committee on Financial Services 

Hearing on 

"Russia's WTO Accession-Implications for the United States" 

Thursday, March 15, 2012 

The National Association of Manufacturers (NAM) welcomes this hearing on Russia's 

accession to the World Trade Organization (WTO). As Chairman of the NAM Russia Trade 

Relations Task Force, I appreciate the opportunity to highlight the importance of broadening 

opportunities for U.S. manufacturers overseas by granting Permanent Normal Trade Relations 

(PNTR) status to Russia. 

The NAM is the nation's largest industrial trade association, representing small and large 

manufacturers in every industrial sector and in all 50 states. Its membership includes both large 

multinational corporations with operations in many foreign countries, and small and mediumsized manufacturers that engage in international trade. The manufacturing sector employs 

nearly 12 million Americans, and is the engine that drives the U.S. economy by creating jobs, 

opportunity and prosperity. Exports are vital to the success of American manufacturing, as they 

constitute 20 percent of U.S. manufacturing production and have increased at a rapid clip in 

recent years. In fact, over the past decade, exports grew more than five times as fast as 

shipments to the domestic market-with exports growing by 48 percent while domestic 

shipments grew by only 9 percent. 

Russia is the 11 th largest market in the world, with a $1.9 trillion economy and a growing 

middle class that values high-quality goods. Russia imported $310 billion in goods in 2011, yet 

the United States accounted for only 4 percent of those imports. About 60 percent of U.S. 

exports to Russia fall into three main categories: aircraft; machinery (mostly parts for oil and gas 

production equipment); and meat. Russia's demand for heavy equipment and other capital 

goods, like construction equipment and aircraft, is strong. Russia and other former Soviet states 

will require 1,080 new planes valued at approximately $110 billion over the next two decades. 

Russia also has the world's second-longest railway network, which moves 85 percent of the 

country's freight. A significant amount of Russia's railcars and locomotives are aging and will 

require replacement in the next few years. The United States exported approximately $275 

million of oil and gas equipment to Russia in 2010, and opportunities will grow as Russia seeks 

modern technologies and introduces greater efficiencies in its extraction techniques. 
81 


81873.048

Russia offers an excellent opportunity for U.S. manufacturers, and the President's 

Export Council has estimated that U.S. exports to the country could double over the next five 

years to $12 billion. This will create manufacturing jobs in a wide variety of industries and boost 

economic growth, if Congress establishes PNTR with Russia. 

Russia was officially invited to join the wro on December 16, 2011, and will formally 

accede to the WTO upon action by the Russian Duma to ratify the agreement. The NAM 

strongly supports PNTR with Russia because it will give manufacturers better access to the 

Russian market and commit Russia to an enforceable set of international standards. 

Manufacturers in the United States will benefit from tariff reductions, Russia's commitment to 

join the Information Technology Agreement, non-tariff barrier reductions, enhanced intellectual 

property rights protection and enforcement, and loosened restrictions on services trade. Each of 

these additional protections will help American manufacturers sell more goods in Russia. 

The United States must establish PNTR with Russia before American companies can 

receive the full benefits of Russia's wro membership. To establish PNTR, Congress must 

graduate Russia from the Jackson-Vanik amendment. The Jackson-Vanik amendment to the 

Trade Act of 1974 was enacted to help facilitate Jewish emigration from the then-Soviet Union, 

and it has outlived its purpose. Russia terminated its exit fees and restrictions on Jewish 

emigrants in 1991, and Russian Jews can now freely emigrate. Since 1992, U.S. Presidents of 

both political parties have certified annually that Russia complies with the Jackson-Vanik 

amendment provisions. The United States maintains Normal Trade Relations (NTR) status with 

Russia, though it is not the unconditional PNTR required by the wrO. 

Congress must enact PNTR with Russia so the U.S. can fully enforce Russia's wro 

obligations. If Congress fails to act on PNTR, America's foreign competitors will have an 

advantage in accessing the $200 billion Russian import market. Since Russia already has open 

access to the U.S. market, and is coming into the wro with us or without us, the only 

companies hurt by failure to provide Russia PNTR would be NAM members and other U.S. 

companies. 

On behalf ofthe NAM, and the Russia Trade Relations Task Force, I strongly urge the 

Senate Finance Committee to support legislation that will graduate Russia from the JacksonYanik amendment and establish PNTR for Russia. The Russian market presents an enormous 

opportunity for American exports, and the protections that would be gained under Russia's wro 

accession are significant. Since no other wro member has a law Similar to Jackson-Vanik, the 

United States is the only country that will not immediately benefit when Russia joins the wrO. 

Russia is an important part of U.S. manufacturers' strategy to create and sustain jobs here in 

the United States by enhancing our competitiveness abroad, and American manufacturers can't 

afford to be left behind. 

I appreciate the opportunity to submit this statement on behalf of the NAM. 

Manufacturers eagerly await further Congressional action on the establishment of PNTR with 

Russia and will continue to work toward creating future export opportunities within the rulesbased global trade system. 
82 


81873.049

The Pharmaceutical Research and Manufacturers of America (PhRMA) 

950 F Street NW 

Suite 300 

Washington, DC 20004 

Submission for the Record 

Re: Senate Finance Committee Hearing on Russia's WTO AccessionImplications for the United States, March 15, 2012 

The Pharmaceutical Research and Manufacturers of America (PhRMA) appreciates the 

opportunity to provide this written submission for the record in conjunction with the Senate 

Finance Committee hearing held on March IS, 2012, to discuss repealing the Jackson-Vanik 

Amendment and establishing permanent normal trade relations (PNTR) with Russia. In this 

statement, we focus on the contributions of the research-based biopharmaceutical industry to the 

U.S. economy and to U.S. exports, as well as the importance of enhancing the global 

competitiveness of our industry through the establishment ofPNTR with Russia. 

PhRMA represents the country's leading innovative biopharmaceutical companies. The United 

States is a leader in discovering and developing innovative medicines and vaccines that enable 

patients to live longer, healthier, and more productive lives, and offering new hope to those 

suffering from life-threatening disease or disability. PhRMA member companies make 

substantial investments in research and development to understand the underlying causes and 

pathways of disease, test potential new medicines for safety and clinical efficacy, and refine 

complex chemical molecules and biotechnology processes to manufacture new medicines. In 

2010, our industry invested an estimated $67.4 billion in research and development for new 

medicines. 

In order to continue to foster economic growth in the United States and the much-needed 

medical breakthroughs that will save lives, the U.S. Govermnent must continue to pursue public 

policies that promote innovation, and that require protection of intellectual property rights and 

the removal of critical barriers to market access. Establishing PNTR with Russia will help 

address many of the concerns affecting our industry in exporting to and competing effectively in 

Russia. 
83 


81873.050

The Biopharmaceutical Industry's Contributions to the U.S. Economy and U.S. Exports 

The U.S. biophannaceutical industry is a major U.S. emplo?,er, supporting 4.0 million jobs, 

including direct employment of more than 650,000 Americans. In 2009, every direct job in the 

biopharmaceutical sector supported nearly five jobs in other sectors? Thc industry consists of 

companies ranging from large, multinational enterprises to medium and small companies. It also 

supports a network of suppliers, distributors and others who contribute to ensuring patients 

receive the medicines they need. 

PhRMA member companies are important drivers of high-quality, innovative job creation in the 

United States, investing more per employee in research and development than any other 

manufacturing sectorJ Our industry is also a significant contributor to U.S. economic growth. 

Each job in the biopharmaceutical sector contributed more than double the average contribution 

to gross domestic product (GDP) from jobs in the rest of the economy.4 For every dollar that 

biopharmaceutical companies contributed to GDP in 2008, the ripple effect of that activity 

suppbrted another $1.91 in contribution to GDP from other sectors5 

As strong as our recent performance has been, it could be even stronger. Barriers to exportation 

still remain, as do limits on the ability to market and distribute innovative biopharmaceutical 

products in particular countries. Establishing PNTR with Russia is a positive step forward in 

eliminating those barriers in Russia and creating new export opportunities that will lead to highskilled, high-value job creation in the United States. 

U.S. Congress Should Quickly Pass Permanent Normal Trade Relations with Russia to 

Protect and Bolster U.S. Biopharmaceutical Jobs and Exports 

The U.S. innovative biopharmaceutical industry supports Russian accession to the World Trade 

Organization (WTO). Russia received approval to join the WTO in December 2011 and will 

become a formal member by mid-2012. Russia's $17.5 billion dollar biopharmaceutical market 

grew at approximately 16% in 20116 and innovative medicines account for roughly 75% of the 

market in terms ofvalue 7 

If Congress fails to pass Permanent Normal Trade Relations (PNTR), the United States will not 

receive the same benefits as all other WTO members at the time of Russian accession. In short, 

the U.S. biopharmaceutical industry and all other U.S. manufacturers, service providers, and 

agricultural interests will be left behind. Extending PNTR with Russia will ensure: 

Equal treatment for U.S. biopharmaceutical exports. Many U.S. and foreign manufacturers 

operating in Russia source products from the United States. If Congress does not extend PNTR, 

1 Battene Technology Partnership Practice, The U. S. Biopharmaceuticals Sector: Economic Contribution of the Nation, July 2011. 

Battelle Memoriallnstltute. Prepared for the Pharmaceutical Research and Manufacturers of America. (Battelle Report). 

, Id. 

:J. N. O. Pham, UThe Impact of Innovation and the Role of Intellectual Property Rights on U.S. Productivity, Competitiveness, Jobs, 

Wages. and Exports," (Washington, DC: NDP Consulting, 2010). 

4 Archstone Consulting and L R Burns" The Biopharmaceutical Sector Impact on the U.S. Economy: Analysis at the National, 

State and Local Levels (Fact Sheet), (Washington. D.C.: Archstone Consulting LLC, 2010). 

, Id. 

67:fiussia: Pharmaceutical Market Growth Story Continues.~ January 17, 2012. Business Monitor International. 

7 Pharmexpert Market Research Center. (http://www.pharmexpert.ru/) 
84 


81873.051

these manufacturers will have an incentive to discontinue sourcing products from the United 

States. Instead, these companies may choose to source from countries that have PNTR with 

Russia because their products face less uncertainty and risk than those originating in the United 

States. This could result in unwarranted U.S. job losses. 

In fact, biopharmaceutical exports have grown over the past five years, supporting domestic jobs 

evcn in the midst of the current global recession. Between 2006 and 2011, the U.S. exported 

more than $248 billion in biopharmaceuticals - a 40 percent increase, from $32.1 billion in 2006 

to $45.6 billion in 2011. This made the biopharmaceutical sector the sixth largest U.S. exporting 

industry.s Our industry has shown strong export performance in the recent past, increasing 

exports by almost 150 percent in the last decade.9 

Six years of regulatory data protection for U.S. biopharmaceutical companies. Russia's new 

law to protect biopharmaceutical clinical test data a pre-condition for U.S. support for Russian 

accession - does not enter into force until Russia becomes a full member of the WTO. Strong 

regulatory data protection is critically important to the industry's ability to develop innovative, 

life-saving medicines. However, if the United States does not extend PNTR, Russia is entitled to 

withhold this accession benefit from U.S. biopharmaceutical companies. 

U.S. recourse to WTO dispute settlement proceedings against Russia. Operating in the 

Russian market can be difficult because the enforcement of laws, regulations, and guidelines is 

often inconsistent. Additionally, some current policies and laws, including a local manufacturing 

requirement for a growing list of products that was developed in a non-transparent manner and 

government pricing policies that favor domestically produced medicines over imported products, 

clearly discriminate against U.S. biopharmaceutical firms. Many of these policies could be found 

to be inconsistent with WTO rules, but the U.S. Government would not be able to raise these 

issues or initiate a WTO case against Russia without PNTR. 

Conclusion 

The U.S. innovative biopharmaceutical industry is both a leading export industry and a strong 

contributor to U.S. economic expansion through the creation of high-skilled, high-value, 

knowledge-based jobs. As such, our industry relies hcavily on the WTO to open foreign markets 

and help create new export opportunities for innovative medicines. PhRMA urges the U.S. 

Congress to move PNTR legislation forward expeditiously to ensure that the U.S. 

biopharmaceutical industry benefits from Russia's entry in to the WTO. 

Using the U.S. membership in the WTO, and U.S. trade policy broadly, to address and dismantle 

trade barriers our industry faces in overseas markets is a winning strategy that adds to the 

innovative capacity and global competitiveness of the United States, while also expanding 

valuable employment opportunities for knowledge-based workers. PhRMA looks forward to 

working with the Committee and its Members in support of the objectives outlined in this 

Statement. 

a U,S. International Trade Commission, Trade OataWeb, accessed March 9,2012, at http;lIdataweb.usitc.gov/(queryrun of U.S. 

domestic exports classified by 4-digit NAIC code 3254). 

'kL 
85 


81873.052

ON: 

TO: 

BY: 

DATE: 

100 Years Standing Up for American Enterprise • ___ .". ___ ._~ ____ • _______ ~_. ~_~ _0 __ • __ •• _____ ••• 

U.S. CHAMBER OF COMMERCE 

Statement 

of the 

U.S. Chamber 

of Commerce 

Russia's WTO Accessiou-Implications for the United States 

United States Senate Committee on Fiuanee 

215 Dirksen Senate Office Building 

U.S. Chamber of Commerce 

Thursday, March 15,2012, beginning at 10:00 a.m. 

The Chamber's mission is to ad\i.mce human progress through an economic. 

political and soda! s~ stem based on individual freedom. 

incenti\(,.:. !nitiatl\"e. Oppoltunjt~ and responsibihj"~ 
86 


81873.053

The U.S. Chamber of Commerce is pleased to submit this testimony for the record on 

Russia's accession to the World Trade Organization (WTO) and the case for congressional 

approval of Permanent Normal Trade Relations (PNTR) with Russia. The U.S. Chamber is the 

world's largest business federation, representing the interests of more than three million 

businesses of all sizes, sectors, and regions, as well as state and local chambers and industry 

associations. 

No priority facing our nation is more important than putting Americans back to work. 

Fully 8.3% of the u.S. workforce is unemployed - a figure that soars to 15% when those who 

have stopped looking for jobs and the millions of part-time workers who want to work full time 

are included. As a nation, the biggest policy challenge we face is to create the 20 millionjobs 

needed in this decade to replace the jobs lost in the current recession and to meet the needs of 

America's growing workforcc. 

World trade will playa vital role in reaching this job-creation goal. When President 

Barack Obama delivered his State of the Union address in January 2010, the U.S. Chamber and 

the rest of the business community welcomed his call for a national goal to double U.S. exports 

within five years. 

Thc rationale is clear: Outside our borders are markets that represent 80% of the world's 

purchasing power, 92% of its economic growth, and 95% of its consumers. The resulting 

opportunities are immense. 

Already, more than 38 million Americans jobs depend on trade. One in three 

manufacturing jobs depends on exports, and one in three acres on American farms is planted for 

hungry consumers overseas. 

Nor is trade important only to big companies. Often overlooked in the U.S. trade debate 

is the fact that more than 97% of the quarter million U.S. companies that export are small and 

medium-sized enterprises (SMEs), and they account for nearly a third of U.S. merchandise 

exports, according to the U.S. Department ofCommercc. In fact, the number ofSMEs that 

export has more than doubled over the past 15 years. 

The bottom line is simple: If America fails to look abroad, our workers and businesses 

will miss out on huge opportunities. Our standard of living and our standing in the world will 

suffer. With so many Americans out of work, opening markets abroad to the products of 

American workers, farmers, and companies is a higher priority than ever beforc. 

It is within this context that we should consider one of the Chamber's top trade priorities 

before the Congress this year: Approval ofPNTR and repeal of the Jackson-Vanik amendment 

with respect to Russia. (The other such priority is reauthorization of the Export-Import Bank of 

the United States.) 

On December 16,2011, trade ministers at the 8th WTO Ministerial Conference 

celebrated the conclusion of 18 years of negotiations for Russia to accede to the WTO and 

invited Russia to become the organization's I 54th member. In those negotiations, Russia 

committed to enact a host of reforms to meet its extensive commitments to the WTO, and 

Moscow is expected to complete this work and formally join the WTO in July 2012. 
87 


81873.054

That Russia will join the WTO is no longer in doubt. In fact, at this juncture, the United 

States can neither help nor hinder Russia in doing so. However, the U.S. Congress must act to 

ensure that the United States benefits from the reforms Russia undertakes as it joins the WTO. 

Specifically, Congress must pass a short and simple bill that grants Russia PNTR and 

repeals the Jackson-Yanik amendment with respect to Russia. Failure to do so will put U.S. 

workers, farmers, and businesses at a unique disadvantage in the growing Russian marketplace 

and drive new sales, expOlts, and job-creation opportunities to our European and Asian 

competitors. 

As President Barack Obama and the Russian President Dmitry Medvedev discussed in a 

meeting with the business community at the U.S. Chamber in July 2010,joining the WTO 

requires Russia to implement a host of economic reforms. The multilateral trade agreement 

goveming Russia's accession requires Moscow to open its market to U.S. goods, services, and 

investment; ensure greater respect for the rule of law; and protect intellectual property. A 

summary of the commitments made by Russia as a condition of its accession to the WTO 

appears in Exhibit I (next page). 

One little understood aspect of this process is that Congress does not vote on Russia's 

accession to the WTO and has no authority to block it. Rather, Congress must approve PNTR 

and repeal the Jackson-Yanik amendment with respect to Russia if American companies, 

workers, and farmers are to benefit from Russia's new openness as it joins the WTO. 

Under WTO rules, every WTO member must grant all other members unconditional 

Permanent Normal Trade Relations (also known as "most-favored nation" status). This 

obligation originated in the WTO's predecessor, the 1947 General Agreement on Tariffs and 

Trade, and it mandates that any advantage granted to one WTO member by another member 

must be accorded unconditionally to all other members. 

The United States will be in clear violation of this rule ifit fails to repeal Jackson-Yanik 

with regard to Russia. Russia would thus be fully within its rights to withhold the benefits of its 

accession-related reforms from U.S. companies. 

The Jackson-Yanik amendment to the Trade Act of 1974 was devised to press the Soviet 

Union to allow the emigration of Soviet Jews, prisoners of conscience, and victims of religious 

persecution. With respcct to Russia, Jackson-Yanik has fully accomplished its objective. With 

the collapse of the Soviet Union two decades ago, Russia established freedom of emigration for 

all citizens. Since 1992, U.S. presidents of both parties have issued annual certifications of 

Russia's full compliance with the Jackson-Yanik amendment. 

Because no other WTO member has a law similar to Jackson-Yanik, all of Russia's 

trading partners except the United States will immediately benefit when Russia joins the WTO in 

July. If Jackson-Yanik remains applicable to Russia, the United States will be in violation of 

WTOrules. 

Failure to approve PNTR and repeal Jackson-Yanik with regard to Russia would allow 

Moscow the right to discriminate against U.S. companies and the workers they employ and deny 

them the full benefits of Russia's market-opening reforms. Meanwhile, European and Asian 

companies will be able to build on their already significant head start in tapping the growing 

Russian market. 
88 


81873.055

Exhibit 1: 

What Does PNTR Mean for the United States and Russia? 

For the United States, all the benefits 

For Russia, all the concessions 

Which To-Do List Would You Rather Have? 

United States of America 

TO DO: 

Approve legislation providing PNTR and 

graduating Russia from the Jackson-Yanik 

certification process. 

Russian Federation 

TO DO: 

Cut tarilTs on manufactured products from 

10% to 7%, with steeper cuts on priority 

goods: 

o Eliminate duties on IT products. 

o Cut duties on wide body aircraft from 

as high as 20% to 7.5%. 

o Slash average tariff on chemicals to 

5.3%from as high as 20%. 

o Cut tarifft on combine harvesters 

ji'om 15% to 5%. 

Reduce duties on fann products to 10.8% 

from 13%, with notable gains for key 

products: 

o Expand market access for beef 

poultry, and other products at 

reduced tarifft. 

o Require use of international 

standards and enforceable disciplines 

against trade restrictions that are not 

science based. 

o Cap farm subsidies at $9 billion in 

2012 and cut them in half by 2018. 

Open services markets to U.S. firms: 

o Allow 100% U.S. ownership of 

companies in banking, securities, 

nonlife insurance, 

telecommunications, audiovisual, 

wholesale, distribution, retail, and 

franchises. 

Meet intellectual property commitments of 

the WTO TRIPS Agreement: 

o £nhance enforcement on the Internet 

and new copyright and patent 

protections. 

Cut the maximum customs clearance fee by 

two-thirds. 

Allow trade disputes to be taken to the 

WTO dispute settlement system. 
89 

Æ 


81873056.eps