Keynote Remarks at the Annual Meeting of the U.S.-Russia Business Council
Thank you for that kind introduction. I’m delighted to be here in Chicago, Moscow’s sister city, and one of the world’s leading commercial centers. And I’m delighted to be speaking again to the USRBC, a group of people with whom I’ve greatly enjoyed working in the past, and for whom I have great respect.
Let me acknowledge at the outset my own abiding interest in relations between Russia and America. During the course of my checkered diplomatic career, including my most recent posting in Moscow, as U.S. Ambassador from 2005 until 2008, I have seen many ups and downs in our relationship. Along the way, I have no doubt made my own share of missteps and misjudgments. I have learned that few things come quickly or easily in our relationship; that interactions between Russia and America are often an uneasy mix of competition and cooperation; and that navigating past the mistrust and misapprehensions of the past takes considerable time and effort, from both of us. But I have also learned to deeply respect Russians and their history, culture and language; to realize how much we have to gain by working together on the main challenges of a new century; and to understand that the opportunities unfolding before us far outweigh our differences. Rarely has there been a moment when getting relations right between our two countries, and between our two societies, mattered more than it does today.
Before I offer a few thoughts on the road ahead, and especially about the significance of our economic agenda, let me first take a quick look backward.
Where We have Been: The Origins and Results of Reset
By the end of 2008, in the wake of the Russia-Georgia war, relations between the United States and Russia were as sour as they have been in more than twenty years. Mutual frustration obscured mutual interest. Americans believed that Russians were too quick to assume the worst about American motives, and prone to bully their neighbors. Russians believed that Americans were too quick to lecture and preach, and prone to double standards. While U.S. and Russian officials rightly noted that there was no ideological basis for a “new Cold War”, we lacked the diplomatic architecture, the political and economic ballast, and most of all the basic trust, that might have helped manage differences and preserve perspective. It was, all in all, an unhappy mix.
We’ve come a long way since then. When President Obama and President Medvedev first met in London two and a half years ago, they agreed to make a fresh start, to “reset” our relations. That effort has brought practical benefits for both of us, and for the rest of the world.
We signed the New START Treaty. We brought into force a 123 agreement on civilian nuclear cooperation, and agreed to dispose of enough weapons-grade plutonium for 17,000 nuclear warheads. We reached a military transit accord on Afghanistan that has so far allowed over 1500 flights across Russian airspace, carrying more than 225,000 U.S. military personnel to the region. Our law enforcement agencies have stepped up information sharing and conducted joint operations to stop the flow of narcotics. We have cooperated in unprecedented ways to counter Iran’s failure to meet its international non-proliferation obligations. We worked together at the United Nations to counter the Qadhafi regime and open up a new era for the people of Libya.
Instead of a new Cold War, together we achieved a new opening -- one whose gains have already extended beyond security and global politics to touch the daily lives of Americans and Russians. Last July, Secretary Clinton and Foreign Minister Lavrov signed an agreement to build trust and transparency on the sensitive issue of inter-country adoption. They also approved a reciprocal visa agreement to make it easier for business people and tourists to travel between our countries. And through the U.S.-Russia Bilateral Presidential Commission and its 20 working groups, we have built new partnerships and engaged our citizens, businesses and non-governmental institutions in areas such as health care and energy efficiency that would have been hard to imagine in the not-too-distant past.
In a spirit of mutual respect, we’ve built a solid foundation for future cooperation. Mutual respect does not mean, however, that we cannot speak plainly about our disagreements. We can, and we must, speak plainly about human rights, and about our conviction, as President Obama said during his visit to Moscow in July of 2009, that “the arc of history shows that governments which serve their own people survive and thrive … governments which serve only their own power do not.” We can, and we must, speak plainly about differences in Russia’s neighborhood, where we will continue to urge that Russia show respect for Georgia’s sovereignty and territorial integrity. We ought to be able to continue to build on shared interests while not pulling our punches on differences, and take steps that benefit both of us without grand bargains or tradeoffs that come at the expense of others.
Where We Go From Here: Moving Beyond Reset And Strengthening Our Economic Agenda
So where do we go from here? Managing big, complicated Great Power relationships is a little like riding a bike; if you don’t keep pedaling forward, you’re likely to fall over. Our challenge today is to move beyond the reset, to find new ways to propel and organize our relationship, to widen the arc of our cooperation. Nowhere is that task more important in 2011 and the years beyond than in deepening our economic ties. The truth is that this remains one of the most under developed areas of our relationship, and it’s time to consider a more ambitious approach.
After a decade of growth, an emerging generation of Russians aspires not just to see their country a wealthy nation -- but a nation with a strong and connected middle class; a nation whose economy can compete in an intensely competitive 21st century global marketplace; a nation that is not just a great power but a global innovator. Russians want to take part in and shape the world’s knowledge economy. Today half of Russians over age eighteen are on the Internet. Three million Russians are blogging. Russians made over thirty-six million trips abroad last year. More Russians received visas to travel to the United States than ever before -- twice as many as came just seven years ago.
Russia’s realization of these aspirations can have profound importance for Americans. I don’t need to tell you that this is a moment when American foreign policy needs to be a force for economic renewal at home. In the last year, we have seen major business deals such as Boeing’s sale of 50 aircraft to Aeroflot as well as last week’s agreement to sell 40 planes to Russian airline UTAir; the recent ExxonMobil-Rosneft joint venture to explore the oil and gas fields of the Arctic; and two major Russian joint ventures announced by General Electric and Rostechnologii and Inter-RAO just last month.
And yet this audience knows better than anyone that these deals only hint at the potential of our economic relationship. Two-way trade flows grew last year, but still they reached just $31 billion -- less than one percent of our total trade. Russia is the world’s seventh-largest economy, but it is our 37th largest export market. Today, Russia is the only member of the G20 -- the only one of the world’s twenty-five largest economies, in fact -- that has not joined the World Trade Organization.
Russian WTO membership would deepen its investment in the success of the global economy and in the rules of open, free, transparent and fair competition that we believe create wealth for everyone. It would create exciting opportunities for the Russian people.
But our interest in Russia’s accession is far more direct. The simple fact is that Russia’s accession matters to the U.S. economy. It will create new markets for American exporters in one of the world’s fastest growing markets.
If we want to meet President Obama’s goal and double U.S. exports by 2015 -- if we want to put more Americans back to work -- then WTO membership for Russia must be a part of our strategy. By one independent estimate, Russia’s WTO accession would allow U.S. exports to Russia to more than double (from $9 billion in 2008 to $19 billion annually).
Here in Illinois, for example, global exports support over 145,000 jobs. Illinois exports to Russia grew by over 90 percent last year, faster than its exports to the rest of the world, thanks to companies like Boeing, John Deere, Caterpillar and Case New Holland. As a WTO member, Russia would be bound to lower its average tariff rates on agricultural equipment and other goods. That means that companies like John Deere can sell more tractors at more competitive prices in Russia and employ more people in Moline -- proving that our foreign policy can create jobs for the American people.
Nor is it just the John Deeres and Boeings who stand to benefit. A predictable, rules-based system with recourse to dispute resolution will also help small and medium-sized businesses that lack the reach and resources to compete in a more uncertain environment. Respect for WTO rules can unleash a new wave of business activity in Russia -- not just from American businesses but from businesses around the world.
For the first time, Russia would be bound to honor the WTO rules that underlie open, free, transparent and fair global economic competition. Russia would be required to provide predictable tariff rates and adhere to an enforceable dispute resolution mechanism.
Of course, I should add that Russia’s WTO membership will do U.S. exporters no good unless Congress also terminates the application of the Jackson-Vanik Amendment and extends permanent normal trading relations to Russia. Otherwise, Russia’s markets will open, but U.S. companies will remain shut out as our partners benefit. Jackson-Vanik long ago achieved its historic purpose by helping thousands of Jews emigrate from the Soviet Union. Four decades after Jackson-Vanik was passed, a vote to grant Russia PNTR is a vote to create jobs in the here-and-now.
The business community has a vital role to play in making this case. When you speak to Congress, you bring to the table a unique credibility to speak about the jobs your companies could create with greater access to Russian markets.
Russia has missed a number of opportunities to achieve accession over the last 18 years, but now is the time, with strong American support, to finally get this done. While a lifetime of diplomacy has taught me that each country will be the judge of its own interests, the real benefits for Russia in WTO accession are unmistakable. World Bank economists have estimated that gains to Russia from eliminating barriers to the establishment of foreign service firms could reach 3.7 percent of GDP.
To reach its potential, to fully modernize, Russia will have to move beyond its dependence on hydrocarbons. For the great economies of the 21st century, what will matter most is not what’s in the ground, but what’s in the minds of their citizens. To tap into its remarkable pool of talent, and to attract the critical mass of investment needed to diversify its economy, Russia must also provide firms -- both foreign and Russian -- with a level playing field, including better legal protections and transparent, predictable rules. Russia’s ratification of the OECD anti-bribery convention will be a step in the right direction and we welcome systemic reforms such as those proposed last spring that would protect whistleblowers who expose official corruption. These steps would send strong signals to investors about Russia’s commitment to rule of law. Other tools like a Bilateral Investment Treaty should also be explored. The protections and reassurance that Bilateral Investment Treaties bring would encourage Russians and Americans alike to invest in each other’s economies.
I’ll make just a few final points. This is obviously a moment of intense domestic preoccupation in both Russia and America, when election-year decisions and political personalities dominate the headlines. It’s easy for both of us to become totally transfixed by the “who” questions: Who will lead our countries? Who will be shaping the choices that matter so much to the future of both our societies?
The “who” questions matter. Personalities and leaders matter, enormously, and it makes little sense to pretend otherwise. But it seems to me that it’s at least as crucial to keep a steady focus on the “what” questions. What is each of our countries going to do at this profoundly consequential moment? What is America going to do to create jobs, fix our deficits, rebuild our infrastructure, renew our educational and health care systems, develop clean energy and ensure our energy security?
What is Russia going to do to move beyond dependence on hydrocarbons and diversify its economy? What is Russia going to do to cultivate its remarkable human strengths, its young tech-savvy entrepreneurs and innovators, who need only a strong and predictable rule of law to thrive in the global economy? What is Russia going to do to fight corruption, a cancer in any modern economy which can only be cured with an independent judicial system and an independent media able to hold people and governments to account? What is Russia going to do to foster a healthy and independent media, when the killers of courageous journalists like Anna Politkovskaya and Paul Klebnikov are not brought to justice? What is Russia going to do to foster a healthy and independent judicial system, when courageous lawyers like Sergey Magnitsky die in pre-trial detention without those responsible being held to account?
These are all hard questions. They are questions that only Russians can decide. I know that Russians generally contain their enthusiasm for American lectures or free advice, which we’re generally pretty uninhibited about offering. So I’ll simply restate the glaringly obvious: how those questions are answered, by Russians themselves, will shape whether Russia takes advantage of the historic window for modernization which is still wide open, but which won’t stay open forever. It remains deeply in the interest of the United States to see a strong Russia continue to re-emerge, a peaceful, prosperous and modernizing Russia fully integrated into the global economy, a Russia which respects the rights of its citizens and realizes their extraordinary potential.
Fifty-four years ago tomorrow, Sputnik, the first-ever manmade satellite, was launched into space. Sputnik came to symbolize the intense competition between the United States and the Soviet Union, a competition which summoned the best energies of citizens in both countries, a competition which produced capacities to destroy unmatched in human history, as well as unrivalled advances in science and technology.
Maybe it’s time today for a new and very different kind of “Sputnik moment” -- a moment in which each of us can renew our capacities for innovation, bring out the best in our peoples, compete in a modern global economy, and work together on the great common challenges before us. We are on the cusp of such a moment today, with Russia’s WTO accession and so much else so clearly within reach.
It’s time, despite all the hard challenges and differences and unsettled questions before us, to stay focused on the possibilities which lie ahead. It’s time, mindful of the tangible progress we’ve made together over the past two and a half years, to keep trying to widen the arc of our cooperation. It’s time, for both of us, to seize the moment.