BACKGROUND REPORT

New coalition's goal: to graduate Ukraine from Jackson-Vanik provisions

U.S.-Ukraine Foundation

WASHINGTON - Ukrainian President Victor Yushchenko announced after his inauguration in January that Ukraine's graduation from the provisions of the U.S. Jackson-Vanik Amendment would be at the forefront of his economic and foreign policy objectives for 2005.

Last April, following their Washington meeting, U.S. President George W. Bush joined President Yushchenko in expressing support for "immediately ending application of Jackson-Vanik to Ukraine."

And just last month during a visit to Kyiv, U.S. Sens. Richard Lugar and Barack Obama announced that bills had been introduced in Congress to formally graduate Ukraine from the Jackson-Vanik provisions.

Why is Ukraine's graduation from the provisions of the Jackson-Vanik Amendment on everyone's agenda?

The 1974 amendment, named for Sens. Henry "Scoop" Jackson and Charles Vanik, imposed trade restrictions on the Soviet Union in response to its poor human rights policies, particularly restrictions on the emigration of religious minorities.

However today, more than 30 years later, Ukraine has built a strong record of allowing open emigration and has created conditions for religious minorities to pursue their beliefs freely. Ukraine is a success story for Jackson-Vanik and it now merits graduation from the amendment's provisions.

In June of this year, government officials, members of the Verkhovna Rada and Congress, representatives of non-governmental organizations, the media and business community members met in Washington for the U.S.-Ukraine Foundation's Policy Dialogue Working Session.

Engaged in action-oriented, focused discussion of issues and problems in U.S.-Ukraine relations and Ukraine's democratic reform, the working session produced "action plans" of policy recommendations for both U.S. and Ukrainian government officials.

The action plans repeatedly call for the U.S. Congress to graduate Ukraine from the Jackson-Vanik Amendment. For this reason, the U.S.-Ukraine Foundation has declared October and November "Jackson-Vanik Graduation Months."

The Jackson-Vanik Graduation Coalition, headed by former U.S. Ambassadors to Ukraine Steven Pifer and William Miller, is working to achieve Ukraine's graduation from the Jackson-Vanik Amendment before the December congressional recess.

We invite the public to participate in the coalition's campaign to have Ukraine graduated from Jackson-Vanik by the end of this year.

Historical background

The Jackson-Vanik Amendment, as contained in Title IV of the 1974 U.S. Trade Act, was a response to the discriminatory emigration policies of the former Soviet Union and other Communist states. Communist restrictions had the most serious impact on religious minorities, particularly on the ability of Soviet Jews to emigrate.

From the perspective of the United States, these restrictions on the free movement of persons were actionable human rights violations that justified harsh U.S. trade consequences.

The Jackson-Vanik Amendment stated that non-market economies that continued to impose emigration restrictions on their citizens would not be granted permanent normal trade relations or "most favored nation" status by the United States.

Ukraine is still waiting to be formally graduated from Jackson-Vanik, despite the fact that President Bill Clinton in 1997 found Ukraine to be in full compliance with the amendment's freedom of emigration requirements. Several former Soviet states have already been graduated, including Georgia and Kyrgyzstan in 2000 and Armenia in 2004.

Various non-governmental groups, including the National Conference on Soviet Jewry, the Euro-Asian Jewish Conference and the Heritage Foundation, agree that over its 30-year lifespan Jackson-Vanik has served the important purpose of securing freedom of emigration for religious minorities.

However, they also believe that Ukraine has demonstrated its full compliance with the amendment's objectives and therefore should be graduated from the trade restrictions it imposes.

Today's Ukraine, colored by the democratic Orange Revolution, has been applauded by President Bush and Congress for its free-market reforms and open-governance policies.

Ukraine's graduation from Jackson-Vanik, therefore, is an important affirmation of Ukraine's successful democratization and President Yushchenko's global economic agenda.

The Heritage Foundation's Dr. Ariel Cohen has said, "The U.S. has supported the triumph of democracy in Ukraine and is interested in a Ukraine that is stable, prosperous and integrated in Euro-Atlantic structures. Washington should demonstrate unwavering support for Ukraine's pursuit of its democratic aspirations."

Before the House International Relations Committee in July, Ambassador Daniel Fried, assistant secretary for European and Eurasian Affairs, U.S. State Department, testified that:

"Ukraine has complied with the provisions of the Jackson-Vanik Amendment to the Trade Act of 1974 for over a decade. This administration strongly supports Ukraine's immediate 'graduation' from Jackson-Vanik.

"As the Ukrainian people look for tangible signs of our new relationship, they are perplexed that Ukraine remains tainted by the legacy of Jackson-Vanik. We urge congressional action on this matter."

The U.S.-Ukraine Foundation and the Jackson-Vanik Graduation Coalition believe that graduating Ukraine from the Jackson-Vanik Amendment this year is precisely how the U.S. should demonstrate its unwavering support of Ukraine.

The trade restrictions

In addition to the historical human rights concerns that prompted the 1974 amendment, it is also important to consider the current political and trade implications of Jackson-Vanik's continued application to Ukraine.

Since President Clinton's 1997 finding of full compliance, which was highlighted in a July 1998 joint statement by the U.S.-Ukraine Binational Commission, led by U.S. Vice-President Al Gore and Ukrainian President Leonid Kuchma, Ukraine has received normal trade relations status under the full compliance provision of the Jackson-Vanik Amendment.

However, as early as 1992, President George H.W. Bush exercised his presidential waiver authority to extend normal trade relation treatment to Ukraine.

Non-normal trade relations status allows the U.S. to impose higher tariffs on imports as well as non-tariff barriers such as quotas.

However, the 1992 presidential waiver of the amendment's trade restrictions and the 1997 finding of full compliance have meant that Ukraine's import and export sectors have nonetheless enjoyed normal trade relations status and have not been directly harmed by U.S. tariffs or barriers resulting from Jackson-Vanik.

However, one important reason for desiring permanent normal trade relations status, as would be achieved by graduation from the Jackson-Vanik provisions, is the significance of permanent status to the global trade community.

Economists show that permanent normal trade relations status, much like market-economy status, improves foreign investment opportunities and the bargaining power of domestic business in trade negotiation.

This is mainly because permanent normal trade relations and market-economy status both indicate domestic economic stability and the fact that the country abides by the global trade rules.

Political implications

Ukraine's current status - in full compliance, but still subject to Jackson-Vanik - also carries a negative political connotation. Continued application implies that Ukraine has not met the requirements of Jackson-Vanik. This is distressing to Ukrainians and friends of Ukraine who believe, correctly, that Ukraine has fully met the amendment's requirements.

This is why Jackson-Vanik graduation has figured so prominently on President Yushchenko's agenda with the United States.

Peter Savodnik, in his September 29, article in the Wall Street Journal (Europe), "A Step Towards Normalcy," wrote: "Delaying an end to Jackson-Vanik - for whatever reason - would hinder the democratic transition by depriving Mr. Yushchenko of a much-needed political win. By lifting Jackson-Vanik this year, before the parliamentary campaign begins in earnest, Washington would let everyone know that the Ukrainian president is not alone."

Congressional response

Six bills have been introduced in the 109th Congress to graduate Ukraine from Jackson-Vanik, including S. 410 by Sen. John McCain, S. 632 by Sen. Richard Lugar, H.R. 885 by Rep. Henry Hyde and H.R. 1053 by Rep. Jim Gerlach.

But some in Congress seem unwilling to move on the issue of Ukraine's graduation, apparently believing that maintaining the amendment's application to Ukraine allows the U.S. to retain leverage when challenging certain trade issues, including Ukraine's importation of American poultry.

Another concern in the U.S. Congress has been Ukraine's historically weak intellectual property protection laws. In 2001 such concerns led the U.S. to designate Ukraine as a "Priority Foreign Country" under its Special 301 process, which placed Ukraine on a list of the biggest violators of intellectual property standards. The U.S. subsequently withdrew certain trade benefits from Ukraine.

However on August 2, the Verkhovna Rada passed a laser-readable disk law, which significantly strengthened the intellectual property regime in Ukraine. (The law also meets crucial WTO membership requirements by creating enforcement mechanisms to counter the illegal production of CDs and DVDs.)

As a result, on August 31, U.S. Trade Rep. Rob Portman announced that all tariff sanctions that had been placed on Ukrainian exports to the United States were now being lifted.

Mr. Portman commended President Yushchenko and Prime Minister Yulia Tymoshenko for "their personal involvement in securing passage of these amendments, which is expected to improve Ukraine's protection of intellectual property rights."

To get involved

The U.S. Congress is currently considering bills to graduate Ukraine from Jackson-Vanik, S. 46 in the Senate, introduced in January 24, by Sens. Carl Levin (D-Mich,), Richard Lugar (R-Ind.) and Debbie Stabenow (D-Mich,) and H.R. 1170 in the House, introduced on March 8, by Reps. Sander Levin (D-Mich.), Candice Miller (R-Mich.), Vic Snyder (D-Ariz.) and Eliot Engel (D-N.Y.).

S. 46 has been referred to the Senate Finance Committee, chaired by Sen. Charles Grassley (R-Iowa) and H.R. 1170 has been referred to the House Ways and Means Committee, chaired by Rep. Bill Thomas (R-Calif). Both bills are awaiting committee consideration.

The U.S.-Ukraine Foundation and the Jackson-Vanik Graduation Coalition believe that now is the appropriate time for Congress to graduate Ukraine from Jackson-Vanik.

The coalition is currently expanding its network of support and developing an action plan for working with Congress to achieve the goal of Ukraine's graduation by the end of this year. The U.S.-Ukraine Foundation is also encourating the public's participation in the Jackson-Vanik Graduation Coalition.

For more information on participating in the coalition, readers may call the U.S.-Ukraine Foundation, (202) 347-4264, or contact Alana Malick, fellow at the U.S.-Ukraine Foundation, at alana@usukraine.org.

The article above is reprinted from the Action Ukraine Report, published and edited by Morgan Williams, who is a member of the organizing committee of the Jackson-Vanik Graduation Coalition in Washington.

Copyright © The Ukrainian Weekly, November 6, 2005, No. 45, Vol. LXXIII

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