Letter to Ambassador Ron Kirk, United States Trade Representative
Letter
Today, U.S. Senator Charles E. Schumer urged United States Trade Representative Ron Kirk to ensure that the U.S.-Russia bilateral WTO accession agreement currently under negotiation, and the final WTO Working Party Report, reflect an unequivocal commitment by Russia to join the Information Technology Agreement (ITA) and to implement its ITA commitments as soon as possible. Schumer stated that Russia's membership in the ITA is critical to New York companies in the Information Technology (IT) sector, especially firms like IBM, because ITA member countries must eliminate import duties on a wide range of information technology (IT) products, including computers, telecommunications equipment, semiconductors and software.
Once these tariffs are eliminated, New York companies like IBM, which already does about $14 million in direct hardware sales to Russia annually, would see a massive expansion in this market over the next several years. Schumer also warned that if Russia evades joining the Information Technology Agreement (ITA), companies like IBM could be forced to move manufacturing facilities overseas to Russia, in order to remain competitive in the booming Russian market. If Russia joins the ITA, IBM estimates that growth in the tens of millions of dollars will be generated over the next five years, which means high-tech job growth for New York.
"It is essential that the Administration forges free trade alliances with Russia that are set on a level playing field for American high-tech firms, that allows them to compete fairly in the booming Russian market," said Schumer. "During tough economic times, it is critical that growing information technology companies like IBM continue to invest in New York, and are not forced to ship good-paying jobs overseas because of barriers to trade. As the Administration negotiates with Russia on accession to the World Trade Organization, we cannot let Russia go back on its critical commitment to join the Information Technology Agreement, which would provide American IT companies like IBM in New York duty-free access to the emerging Russian market for products like computers, telecommunication equipment and more. If the Russians want the best technology the world has to offer, they need to tear down these trade walls. I am urging Ambassador Kirk to hold Russia to its commitment to free trade, which would pave the way for increased exports to this fast-growing market, and keep IBM's investments in New York facilities and jobs."
Schumer is urging USTR Ron Kirk to hold Russia to its commitment to join the Information Technology Agreement, pointing to the risk imposed on American IT companies and their employees if high tariff barriers to trade are not eliminated. Currently, Russia is not an ITA member, and imposes high duties on U.S. Information Technology companies that sell into the Russian market. This barrier to free trade is both a cost of millions to companies like IBM, and an impediment to deploying growth strategies in Russia, which is otherwise an ideal market for IT investment.
In 2006, Russia pledged to become an Information Technology Agreement (ITA) member upon accession to the World Trade Organization, but in the Administration's efforts to wrap up negotiations with Russia on accession to the WTO, Russia may be permitted to back out of its commitment to join the ITA. Schumer warned that this could allow Russia to become a member of the World Trade Organization while still imposing tariff barriers to trade with U.S. companies, potentially forcing them to open manufacturing plants in Russia to avoid paying millions of dollars in import duties. Schumer stated that these high tariff rates must be eliminated as previously planned, so that American jobs at companies like IBM are not in danger of being shipped overseas. Russia has been working on negotiating its accession to the WTO (and its predecessor the GATT) since 1993.
Schumer pointed to the importance of Russia's participation in the Information Technology Agreement in relation to New York's growing information technology (IT) sector and job-creating companies like IBM. If Russia joins the ITA upon accession to the World Trade Organization, this would mean that Russian tariffs would be eliminated on a wide range of U.S.-made information technology products, including computers, telecommunications equipment, semiconductors and software. Elimination of Russian tariffs on IT products would expand and create significant new market access opportunities for IBM and other U.S. technology exporters in Russia, a large and underserved market. Schumer noted that duty-free access to the Russian market would mean an increase in jobs ranging from manufacturing at IBM's semiconductor plant in East Fishkill, to innovation jobs in the cutting-edge research and development focused on supercomputers and mainframe development.
Schumer noted the positive economic impact that IBM has had on New York's economy, which would only be amplified with free trade in the IT sector with Russia. Since 2000, IBM has invested over $6 billion in its East Fishkill semiconductor facility and, in September 2011, IBM announced that it will invest an additional $3.6 billion over five years in NY to advance its semiconductor leadership. Last year, IBM alone exported over $3 billion in IT hardware -- over half of all the hardware that it manufactured in the U.S., linking thousands of jobs in production facilities in NY to the global market. These jobs range from hardware design and manufacturing to planning, accounting and logistics. IBM is already one of the largest U.S. exporters of software, which helps make software engineering IBM's largest job category in the U.S. Schumer pointed to this strong platform for exports, and stated that significant increases in demand are expected once Russia implements its ITA commitments to reduce and eliminate tariffs, meaning short and long term job growth for IBM and other IT companies in NY.
A copy of Senator Schumer's letter to U.S. Trade Representative Ron Kirk appears below:
The Honorable Ron Kirk
United States Trade Representative
600 17th Street, NW
Washington, DC 20508
Dear Ambassador Kirk,
I write to express concern about reports that Russia is backing away from a commitment to join the Information Technology Agreement (ITA) as part of its World Trade Organization accession agreement with the United States. Failure to ensure Russia's commitment to join the ITA is anathema to the Administration's goal of doubling U.S. exports and will cost U.S. technology companies dearly in terms of lost commercial opportunities to sell into Russia's expanding technology market. I urge you to ensure that the U.S.-Russia bilateral accession agreement, as well at the final WTO Working Party Report, reflect an unequivocal commitment by Russia to join the ITA and implement its ITA commitments as soon as possible after accession.
The largely untapped Russian market is critical for the continued growth of U.S. technology manufacturers like New York's IBM. As you know, under the ITA, participants must eliminate import duties on a wide range of information technology (IT) products, including computers, telecommunications equipment, semiconductors and software. Elimination of Russian tariffs on IT products would expand and create significant new market access opportunities for IBM and other U.S. technology exporters in this major, underserved market.
Without a commitment from Russia to join the ITA, U.S. jobs are at risk. Other major economies that are not ITA members are known to use high tariff rates to restrict imports and boost indigenous innovation. High tariff rates force U.S. manufacturers that want to do business in such markets to set up shop in those countries to avoid having to pay millions of dollars in import duties. While I support increased U.S.-Russian economic ties, those ties should not come at the expense of American jobs. Russia committed to join the ITA in 2006. The United States should hold Russia to that commitment.
I understand the Administration is working feverishly to wrap up its negotiations with Russia on accession to the WTO. However, the rush to conclude these negotiations must not outweigh the fundamental obligation to ensure any accession deal furthers, not undermines, economic opportunities for U.S. manufacturing and exports. A Russian commitment to join the ITA, therefore, should be a requisite condition of any deal.
Mr. Ambassador, I respectfully request that USTR raise this issue during the ongoing negotiations and work to ensure that the U.S.-Russia bilateral accession agreement, as well at the final WTO Working Party Report, reflect an explicit commitment by Russia to join the ITA, as well as a specific timeframe to implement ITA commitments. Thank you for your attention to an issue of critical importance to U.S. and New York technology manufacturers. Please keep me apprised of developments.
Sincerely,
Charles E. Schumer
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