Caterpillar, Exporters Seen Gaining on House Russia Vote

The House passed a bill to lift Cold War-era trade restrictions on Russia, an effort companies including Caterpillar Inc. (CAT) and Boeing Co. (BA) have said is needed to boost exports and assure them of lower tariffs.

The House voted 365-43 today for the bill that includes a provision to punish human-rights violators in Russia, which that country’s Foreign Ministry warned would damage bilateral ties. The Senate plans to take up the measure in the coming weeks.

The U.S. last year sent about $8.3 billion in merchandise to Russia, or about 0.6 percent of all American exports, according to the U.S. Census Bureau. Major exports included machinery, chemicals, aerospace goods, autos and electrical equipment. With improved trade status, U.S. goods and services exports to Russia, estimated by the U.S. be the world’s seventh- largest economy, may reach $22 billion by 2017, according to an April study by the Washington-based Peterson Institute for International Economics.

“If you look at the flow of trade that will be enhanced by this legislation, it’s clear that it will be beneficial to our country,” Representative Sander Levin of Michigan, the top Democrat on the House Ways & Means Committee, said during debate before the vote.

WTO Entry

Russia joined the Geneva-based World Trade Organization in August. Congressional repeal of the so-called Jackson-Vanik provision of a 1974 trade law will let President Barack Obama grant Russia “permanent normal trade relations,” a requirement for each of the WTO’s 157 members. The Coalition for U.S.-Russia Trade, a Washington-based alliance, has said the improved status will ensure that Russia honors its WTO obligations, including tariff reductions, when dealing with American businesses.

Members of the coalition include General Electric Co. (GE), Citigroup Inc. (C), Eli Lilly & Co. (LLY), Ford Motor Co. (F), Cargill Inc. and Microsoft Corp. (MSFT)

The legislation to lift trade restrictions includes provisions to impose financial and travel sanctions on Russia for human rights violations, such as those that allegedly led to the death of Sergei Magnitsky in 2009. The 37-year-old lawyer for London-based Hermitage Capital Management was arrested after accusing officials of embezzlement and died after guards allegedly beat him and denied him medical treatment.

“The Magnitsky Legislation was added here in part in recognition that when you talk about trade, you have to look at a fuller picture,” Levin said.

Russia’s Foreign Ministry said Congress had ignored warnings that the legislation would harm bilateral relations and promised a “harsh” response.

“There should be no illusions: a response from our side will follow and the responsibility for this lies entirely with the U.S.,” the Moscow-based ministry said in a statement.

The bill is H.R. 6156

To contact the reporter on this story: Brian Wingfield in Washington at bwingfield3@bloomberg.net

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

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