Is Russia a Friend to American Manufacturers?
Boeing (NYSE:BA) has secured a commitment from state-run Russian Technologies Corporation, also known as Rostech, to purchase 35 Boeing 737 MAX airplanes. The deal is valued at over $3 billion, and marks the first commitment from Russia for the 737 MAX.
“Russian airlines will gain an advantage on global markets and will be able to increase their activity both within the country and internationally,” said Rostech CEO Sergey Chemezov in a press release.
Ray Conner, CEO and president of Boeing Commercial Airplanes, said that Russia is “one of the commercial aviation industry’s fastest-growing regions.”
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Boeing is joining a growing list of manufacturers eying the Russian market for export. U.S. exports to the country were up about 29 percent in the first 8 months of 2012 compared to a year ago, and are expected to top $10 billion for the year.
Caterpillar (NYSE:CAT), Deere & Company (NYSE:DE), AGCO Corporation (NYSE:AGCO), and International Paper Company (NYSE:IP) have all expanded production in the country, or made investments related to exports. General Electric (NYSE:GE) estimates that the U.S. Congress, expected to normalize trade regulation in the spring of 2013, could cut aerospace tariffs by as much as half. However, the current political climate could easily delay any legislation.
According to the Association of Equipment Manufacturers, Russia bought $405 million worth of construction equipment alone from the United States in the first half of 2012. This is a 27 percent increase from a year ago.
As it stands, archaic Cold War-era laws stand in the way of a level trading field between the U.S. and Russia. As the American economy fights for growth, manufacturers will make the case that permanent and normal trade regulations with the country will spur growth in America’s manufacturing industry.