U.S. trade relations with Russia

U.S. Trade with Russia

The United States of America and Russia are both major players in the international context, including the trade of merchandize or the circulation of capital, labour force and technologies. The U.S. is half the size of Russia and the second largest economy of the globe, after that of the European Union, and it is the eight, in terms of gross domestic product. But what are the exact features that characterize the trade operations between the two global powers? A first glance reveals tense relationship between the two countries and these can easily be explained by the long disputes held on numerous accounts, such as the involvement in international wars, the Russians fear that the Americans desire to control their natural gas resources and more recently, the expansion of NATO. In terms of commerce, Russia is not a significant import nor export partner of U.S.; the U.S. is not a primary destination of the Russian goods, but in 2006, American imports accounted for 4.7% in the total amount of imported merchandise to Russia. This represented a 21% increase as compared to the previous year, signalling an improvement in the international commerce operations. Russian exports to the United States occupied the 33rd position on the export partners list, with a net value of $19.8 billion - a 29% increase as compared to 2005. But the countries still have a long way to go; and what are the microeconomic forces that generated such tense relationships between two countries located in relative vicinity?

A most important force is given by Kremlin's reaction to market liberalization and globalization. In this particular sense, the Russian authorities still continue to implement wide series of protections policies which enclose the country to free international trade. The main barriers in U.S.' path to successfully trading with Russia refer to legal boundaries and numerous import barriers, such as high taxes on import commodities or state subsidies for the national products, which are then sold at low and uncompetitive prices. The most common barriers include "tariffs and tariff-rate quotas; discriminatory and prohibitive charges and fees; and discriminatory licensing, registration, and certification regimes."

Another major point interfering in the trade relationships between the United States and Russia is given by the underdeveloped technologies used in the European country. In this instance, the America audio-visual industry has reported numerous losses due to increased rates of piracy and a poor legislature in regard to the protection of intellectual rights. The two countries have reached a bilateral agreement regarding the improvement of intellectual property rights and this refers to "fighting optical disc piracy; fighting Internet piracy; protecting pharmaceutical test data; deterring piracy and counterfeiting through criminal penalties; strengthening border enforcement against piracy and counterfeiting; bringing Russia's laws into compliance with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) and other international IPR standards; and continuing training and bilateral cooperation on IPR protection."

Then, also due to poor technologies, the Russian products often fail to comply with the quality standards forwarded by the international community. The European country continues to negotiate numerous terms of agreements with the global organizations and is increasing its efforts to align its technologies to those required in the international context.

Another impediment in the path to successful trade between the United States of America and Russia is given by the rampant legislature. Take for instance the case of an American entrepreneur who would like to open a new business subsidy in Moscow and conduct import and export operations. He would have to go through an estimated number of 20 to 30 governmental agencies and acquire somewhere between 50 and 90 licenses.

A following reason for the tense relationships between the countries is revealed by different approaches in financial regulations. Whereas the United States promote an open circulation of capital, the officials at Kremlin deny it. As a consequence, Russian entrepreneurs have limited access to funding and investments on both national and international markets. This then results in limited capability to produce and deliver high quality products and services, unable to comply with the international regulations and failing to attract the interest of Americans and other potential partners.