GE Says U.S. Should Establish Normal Trade Relations With Russia

The Obama administration should establish normal trade relations with Russia to help companies compete in one of the world’s fastest-growing markets, Ronald Pollett, president of General Electric Co. (GE)’s Russian unit, said.

Taking such a step also help the U.S. resolve trade disputes with Russia through the World Trade Organization, Pollett said today in an interview after testifying before the Senate Finance Committee in Washington.

“It’s one of the fastest-growing emerging markets,” Pollett said. “We’re very interested in the oil and gas market, the energy market, the transportation market -- which is locomotives -- aviation and health care. Those are our five big opportunities over there and we think there’s a huge opportunity for us going forward.”

The Senate might take up legislation “within a couple of months” repealing a Soviet-era law preventing the U.S. from granting permanent normal trade relations, Senator Max Baucus, a Montana Democrat and committee chairman, said in an interview.

The legislation probably won’t pass Congress until the Russian government approves joining the World Trade Organization, which could occur in June, Baucus said.

Pollett and Samuel Allen, chairman and chief executive officer of Deere & Co. (DE), urged senators at the hearing to normalize trade with Russia.

GE, of Fairfield, Connecticut, reported $1.6 billion in sales in the nation last year, which may triple by 2020 if the nation is granted the trade status, Pollett said.

WTO Settlements

Lacking the status, “the U.S. would have no recourse to WTO dispute settlements should disputes arise, and could also face a more challenging trade environment,” Pollett said.

Deere, of Moline, Illinois, had $800 million in sales in Russia last year and expects its market share will increase fivefold, Allen said, without providing a timeline.

Russia could renege on its commitment as part of joining the WTO to lower tariffs on U.S.-made products if the U.S. fails to grant the trading status, Allen said.

Russian tariffs on Deere-made farm equipment might drop to 5 percent from 15 percent after the nation joins the WTO, Allen said.

Tariffs on GE’s aircraft engines may drop to 5 percent from 20 percent and on medical diagnostic equipment to 4.3 percent from 15 percent, Pollett said.

U.S. companies could lose out on “hundreds of millions of dollars” if trade status is not granted, Pollett added.

Jackson-Vanik

Baucus said he supports repealing the 1974 law, known as the Jackson-Vanik Act, and granting Russia permanent trade status.

Should the U.S. grant the trade status, “U.S. exports to Russia are projected to double within five years,” Baucus said. Without the status, “Russia will join the WTO anyway and U.S. exporters will lose out to their Chinese and European competitors.”

Senator Jon Kyl, an Arizona Republican, expressed caution, saying it isn’t “a slam dunk” that normalizing trade relations will benefit U.S. companies.

He said corruption exists in Russia and the government hasn’t supported international pressure to stop the Syria cracking down on dissidents.

“Russia is moving further away from international norms,” Kyl said. “It is simply unreasonable to believe that PNTR can be expanded to Russia without a more thorough examination of the issues.”

To contact the reporter on this story: Chris Strohm in Washington at cstrohm1@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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