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Was Russia’s WTO Membership a Mistake?

A couple of years ago I was having a discussion with a critic of Putin’s Russia–who was expelled for his trouble–who noted with alarm the Russian-owned gas companies dotting American highways. I said I saw that as a good sign: at the very least the economic integration meant Russia had more skin in the game, and would probably be less abusive to Western companies doing business in Russia.

In the broader sense, though, the benefits were potentially endless, in large part because the more that Russian citizens dealt directly with Americans the better for both countries. My interlocutor saw it differently, because America will play by the rules whether Russia does or not. I thought of his warning, and dismissed it, in the debate over Russia’s accession to the World Trade Organization. Russia’s membership in the WTO, I argued repeatedly, was overdue and would benefit American companies, and the increased trade would restrain Putin’s ability to manipulate American policy while boosting American leverage over Russia.

I was sure I was right. I’m not so sure now. But it’s not because Russia doesn’t “deserve” to be in the WTO or that the benefits were a mirage. And it’s not because of the push to “punish” Russia for its invasion of Ukraine–though sanctions are surely appropriate. It’s because the economic integration of Russia has done precisely the opposite of what it was expected to do in one crucial regard: the recent events in Ukraine and the West’s unsteady response indicate Russia’s increased leverage instead. Today’s New York Times story on the Obama administration’s internal debate over Ukraine demonstrates this perfectly.

It reveals that there are two sides in the administration: those who want to swiftly punish Russia and those who want to show extreme caution toward something that could reverberate throughout the economy. That’s why, the Times explains, “Obama has the power to go much further even without new legislation from Congress” but hasn’t done so. And the roster of administration advisors line up pretty much exactly where you’d expect them to on this, with those like Victoria Nuland supporting more aggressive sanctions and Treasury Secretary Jack Lew opposed. The Times continues:

But American businesses are warning against overreaction. Representatives of groups like the U.S. Chamber of Commerce, the National Association of Manufacturers and the United States-Russia Business Council have been holding meetings at the White House or in Congress to share their views.

They are urging policy makers to be sure that any sanctions would actually have an impact on Russian behavior, that the costs not outweigh the benefits and that they be multilateral. “We are working closely with policy makers on both sides of the aisle to safeguard manufacturing employees and manufacturers’ investments around the world,” said Jay Timmons, president of the manufacturers association.

Although the United States does only $40 billion in trade with Russia each year, American businesses argue that the amount understates the real economic ties. Ford, for instance, has two assembly plants in Russia that make cars with material that comes from Europe, so that would not be reflected in import-export figures.

Boeing has sold or leased hundreds of planes in Russia and projects that the republics of the former Soviet Union will need an additional 1,170 planes worth nearly $140 billion over the next 20 years. Moreover, the company has a design center in Moscow, has just announced new manufacturing and training facilities in Russia and depends on Russia for 35 percent of its titanium.

“There’s no doubt that key economic groups, especially energy, don’t want us to act,” said James B. Steinberg, a former deputy secretary of state under Mr. Obama and now dean of the Maxwell School of Citizenship and Public Affairs at Syracuse University.

I’m not suggesting that U.S.-Russia trade suddenly materialized out of nowhere when Russia joined the WTO–of course that’s not the case. But it does raise questions about authoritarian actors joining international institutions that don’t require more sturdy political liberalization (like NATO). I’ve written in the past about “reverse integration,” James Mann’s theory of how China could take advantage of economic integration not to play by international rules but to weaken the threshold for rogue regimes to be granted increased international legitimacy and thus dilute, not enhance, global democracy.

That is not quite the concern here with Putin (or at least not the main concern). Russia’s membership in the WTO doesn’t seem to be de-democratizing economic institutions here or abroad. Rather, Putin has taken advantage of economic integration with the U.S. to dull any American response to his adventuresome foreign policy. Because that response already had virtually no military component, weakening or greatly delaying any financial sanctions would tie both the West’s hands behind its back while he did what he wanted.

There has been some talk of how a more proactive energy policy, in terms of American production and export, could have already put a more effective sanctions infrastructure in place. But it’s also worth pondering if, with the best of intentions, we’ve not only depleted our own sanctions arsenal but bolstered Putin’s.


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