Cold War chill felt in battle over changes in trade law

  • Article by: JIM SPENCER , Star Tribune
  • Updated: June 23, 2012 - 3:04 PM

As Congress weighs pros, cons of normalizing relations before Russia enters the WTO, Minnesota firms have a stake.

Erik Paulsen

WASHINGTON - U.S. Rep. Erik Paulsen looks at Russia, and the Minnesota Republican sees a red-hot emerging market for the medical devices and crops produced in his state.

U.S. Rep. Devin Nunes looks at Russia, and the California Republican sees an autocratic government that stifles freedom.

The Cold War ended a while ago. But it is about to be refought on a limited basis as the U.S. House and Senate face a late July deadline to change a 1974 law and make a new trade ally out of an old political enemy. Driving the legislative decision is a chance to give permanent normal trade relations status to a country that now boasts the world's sixth-largest economy.

The former Soviet Union is expected to formally enter the World Trade Organization (WTO) by July 23. When it does, Russia will be able to strike favorable trade deals with other WTO members that it cannot make with the United States because of an American law that restrains trade between the two countries.

"Any delay in the U.S. granting this permanent normal trade relationship with Russia is going to hurt American competitiveness," Paulsen said in an interview. "A lot of people read the headlines about abuse of human rights, et cetera. But the bottom line is if we do not do this, American companies will lose out. Russia is already going into the WTO. This is not like we have the leverage to keep them out."

Still, as Nunes pointed out in a House Ways and Means Committee hearing last week, Paulsen and others can expect opposition because of Russia's history of repression and its current support of a Syrian regime accused of slaughtering its own citizens.

"When you look at Russia over the last 12 years, you see growing authoritarianism," Nunes said. "I understand the business reasons for doing this. But people will say we're choosing big business over human rights."

Among the companies with a huge stake in the outcome of this delicate balancing act is Fridley-based medical device maker Medtronic.

The company works with more than 400 health service provider institutions and serves more than 75 cities across Russia, according to Pat Mackin, president of Medtronic's cardiac rhythm disease management division. Mackin told the Ways and Means Committee that 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 benefited nearly 70,000 patients across Russia.

But while Medtronic's business is already growing in Russia, Mackin said in an interview that the potential market is much larger. "Russia is 142 million people, and only 20 percent have access to health care," he explained. "The Russian health care market is going to explode."

So is the rest of the Russian economy, business leaders say.

Longtime trade barriers on the sale of beef, pork and poultry are about to fall as Russia enters the WTO, said Devry Boughner, a lobbyist with agribusiness giant Cargill Inc.

Cargill doesn't see the new opportunity as a choice between business and human rights, Boughner said.

"At Cargill, we treat people with dignity and respect, and that translates into the market," she said.

Whether U.S. companies ride atop Russia's economic explosion or get buried under it depends on how soon companies can make favorable trade deals.

Without a legislative change in Russia's trade status, all members of the WTO except the United States "will be eligible to receive the full benefits of Russia's market-opening concessions," Caterpillar Inc. Chairman and CEO Douglas Oberhelman told the Ways and Means Committee. If that happens, Oberhelman asserted, "American companies, farmers and worker will be left behind."

All the business representatives who spoke to the committee stressed a link between increased sales in Russia and job growth in America.

Mackin held up a Medtronic pacemaker. "Seventy percent of the supply chain for this device is in the U.S.," he said. "This is an American product. If I sell more of these, I need more people to make them. If the American people are asking for jobs, this is a way to get jobs."

But arriving late to an expanding market can be disastrous.

A 1980s trade prohibition cost Caterpillar its share of the Russian pipeline market. "Thirty years later," said Oberhelman, "our market share for pipe layers in Russia has not recovered to pre-sanction levels."

"It's this whole ecosystem," Mackin told the Star Tribune. "If it's some other company and they train and staff and get the equipment in the hospitals for six months or a year, this thing will be over ...You stay brand-oyal."

A new Senate bill introduced by Max Baucus, D-Mont., grants Russia permanent normal trade relations status and unties trade with Russia from a 1974 "freedom-of-emigration" requirement passed when Communists restricted individual liberties, especially for Jewish citizens. Russian leaders consider the restriction an "affront" and a Cold War relic, according to a Congressional Research Service report.

However, some in Congress want the new Senate trade bill considered in concert with a separate House bill, named for Sergei Magnitsky, a lawyer who died in custody after trying to expose corruption in the Russian government. The Magnitsky bill would require the State Department to publicly identify and deny visas to people responsible for human rights violations against Magnitsky and others victimized for trying to ferret out Russian corruption.

"Human rights versus business may draw more attention to the law right now," Paulsen admitted. "But we want to make sure that is separate legislation that addresses human rights. We don't want to entangle the two because this is really an economic opportunity."

But ill will between Russia and the United States stretches back more than half a century. That means getting a Russian trade bill passed by July 23 is anything but certain.

"It's going to be tough," Paulsen said.

Jim Spencer • 202-383-6123

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