An Obsolete Amendment

In the next few days, a repeal of the Jackson-Vanik amendment will be discussed. This time, it will be in tandem with discussions of passing the “Magnitsky Law,” which would prevent Russian bureaucrats implicated in the case of the aforementioned dead lawyer from receiving American visas. The Magnitsky affair is an unconnected and complex story, and we will concentrate on the legendary amendment and its role.

In modern times, the conditions under which the so-called Jackson-Vanik amendment ended up attached to the Trade Act seem slightly unbelievable. But 38 years ago, all interested parties certainly were not laughing. This amendment was a political lever used on the political leadership of the Soviet Union and other socialist countries to try to force them to soften restrictions on emigration. The plight of Jews was one of the main concerns, but far from the only one.

These conditions, created by a variety of factors, certainly were very stark. Mass emigration from the USSR was a powerful blow against the image of the socialist system, which Soviet ideologues had long proclaimed the best in the world. But then the question arose: Why would people emigrate in mass numbers from the supposedly best system in the world? Why leave for systems with a lower quality of life?

Economics were another reason why emigration was restricted. A mass exodus of qualified specialists would have caused serious damage to the national economies of the socialist countries. This damage took many forms.

The first factor was that the industrial and research sector of the economy lost important specialists, and the public sphere (especially medicine) lost highly-qualified workers.

The second factor was that the economic damage was linked with the way education was financed. Although socialism formally dictated that education was free, in reality it was assumed that after receiving their diploma, a specialist would “work off” the money spent on their education. But this system only could work effectively in a closed economy. After the beginning of emigration, licensed specialists no longer paid back the funds spent on them (and these funds were not small).

The third factor was a specifically Soviet one. Some of the potential emigrants worked in branches of the military-industrial complex, which operated under a regime of strict secrecy, and so in principle could not be allowed to flee from the USSR. Even if they were allowed, it was only after leaving the defense industry and waiting many years, so that their knowledge about Soviet military and technical capabilities was severely out of date. This argument was often used to refuse emigration for valuable people even when they did not truly have access to government secrets.

It is not hard to guess that if highly-qualified specialists leave a country, it will cause significant economic damage. On the other hand, the country which absorbs these immigrants will garner additional economic benefits. They immediately gain access to cadres of high-quality workers, without having to spend money, time or teachers on their education. In any case, they are ready to utilize the workers’ skills. (Many immigrants then and later complained that they were not needed.)

Although the previously listed reasons would be sufficient to understand why emigration from the USSR was a very difficult issue, they nevertheless are not a complete explanation. In addition to these domestic political issues, there also were foreign ones.

On the foreign policy front, the basic reason for limiting the emigration of Jews was the extremely negative attitude of Arab countries to the growth in the population of Israel. Arab leaders believed that growth in Israel’s population would lead to the growth of its economic and military potential, as well as make it less vulnerable to future attacks. So, Arab leaders actively pressured the USSR to limit (or altogether forbid) Jewish emigration.

As a matter of fact, Soviet leadership agreed with their Arab counterparts on this point. If there had not been different opinions, there likely would not have been any emigration (let alone mass levels of it). But it wasn’t just Arabic countries pressuring the USSR on this; the political leadership of Western countries, most of all the U.S., also did. In all their meetings and negotiations with Soviet leaders, American representatives pressed for the removal of all existing barriers on emigration.

It must be noted that freedom of emigration was not just empty noise for the Americans. The American nation was, at its core, the product of immigration from different countries. So, the right to exit was always considered one of the most fundamental rights of a citizen, and forbidding or limiting it was received very poorly. Pressure from domestic Jewish groups who refused to soft-pedal or drop the issue also played a role.

It is certainly clear that Soviet political leadership could use this opportunity to play different camps against each other. If the American side pressured too aggressively, the USSR would let someone leave, but not without gaining some bonus concessions from the U.S. A reaction from the Arab countries would quickly follow, and emigration would again be halted for some time. It would be halted until one of the Arab regimes (progressive or conservative — it was not important) took some action that the Soviet political leadership did not like. Then, the gates would once again be lifted.

Besides the aforementioned demands of state secrecy, Soviet leaders created powerful financial barriers. In 1972, it was dictated that people with higher education who wanted to emigrate were obligated to compensate the state for the funds spent on their university education. For example, a graduate of Moscow State University would have to pay 12,200 rubles (when the average salary in the country was 130-150 rubles).

This policy raised bitter protest from the West. The Jackson-Vanik amendment was one of the consequences of these protests. Support of this small amendment led to the following: Congress granted the president the right to forbid products made in countries with a non-market economy from being imported into the U.S. Besides this, the president received the right to exclude these countries from credit programs, credit guarantees and investment guarantees provided by the U.S. government.

The president determined the list of countries with non-market economies and the start and end dates of sanctions leveled against them on the basis of whether or not the country had restrictions of emigration.

Thus, the sum total of sanctions that the U.S. administration could level on countries blocking emigration [included]: raising custom taxes and not providing governmental guarantees on credit and investments.

It is almost impossible to judge the damage from these sanctions. 1974 was still the Cold War, and so economic relations between the USSR and U.S. were very limited. It would have taken time to make these links more meaningful, but history did not provide it. In 1979, Soviet forces entered Afghanistan, which raised a new wave of economic sanctions against the USSR. Against this background, the Jackson-Vanik amendment loses much of its color. It is fair to say that the real impact of the amendment was close to zero and that passing it was largely an act of propaganda.

The propaganda character of the amendment has continued to the present. It is perfectly clear that the Russian Federation does not violate either of the conditions specified in the amendment. The U.S. and E.U. formally acknowledged in 2002 that Russia is a market economy. As for restrictions on emigration, Russia, with its new educated government, has never enacted them.

Understanding this situation, American presidents, starting with the elder Bush, have put a moratorium on using the Jackson-Vanik amendment in relations with Russia; now this moratorium is automatically renewed every year. That is, sanctions have never been leveled against Russia over the past 20 years, and so the Jackson-Vanik amendment has virtually no purpose.

Attempts to repeal the Jackson-Vanik amendment through congressional action have run up against difficulties in bargaining with the president. And the amendment is clearly not the most pressing issue which the American administration must deal with. Although a variety of Russian and international Jewish organizations have lobbied for a repeal of Jackson-Vanik, they have not dragged the issue into the realm of actual conflict.

The attempts of several Russian officials to achieve a repeal of Jackson-Vanik appear somewhat strange. It is not clear why they seek this, since it has never actually been used against Russia. If there are countries that are in danger of falling under the amendment’s restrictions, let them fight for a repeal of it.

However, the amendment creates some difficulties for American businesses working with Russia; they will suffer a competitive loss after our country completely enters the World Trade Organization. But again, this is not a Russian problem. This is true, of course, only if our officials do not decide in the near future to turn the country into a non-market economy with emigration restrictions. And so, to escape the future damage from this, a quick repeal of the hostile amendment must be achieved. But that will be too late.