From Iowa To Russia, Tractors Build Economic Bridge Russia has one of the world's 10 biggest economies, but it isn't even among the top 30 U.S. trading partners. A new John Deere plant there shows the complications of that relationship. To avoid tariffs, tractors and combines are built in Iowa, then taken apart and shipped to Russia, where they're reassembled.

From Iowa To Russia, Tractors Build Economic Bridge

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Russia has one of the 10 biggest economies in the world, but it's not even among the top 30 trading partners of the United States. Both countries want to fix that. And American firms are now welcome in Moscow, as Peter van Dyk reports.


PETER VAN DYK, BYLINE: The green is unmistakable. These Russian workers are putting together a John Deere tractor. But the roughly 90 employees here don't make the tractors. David Larson, general director of John Deere Russia, explains.

DAVID LARSON: They're built in Waterloo, Iowa. That includes the engine, the drive train and the tractor itself. It's tested, and then it is disassembled. We crate it, and we send it to Russia on an ocean-going container. And then we reassemble it here, test it, and distribute it to the Russian market.

VAN DYK: Local assembly means lower tariffs than for importing a finished tractor. The Central Europe and former Soviet region accounted for 5 percent of John Deere's total sales last year - that's $1.4 billion. This plant, a big box of a warehouse near Domodedovo, half an hour's drive south of Moscow, started operations two years ago. Despite Russia's reputation for red tape and corruption, Larson says it took just nine months to get up and running.

LARSON: That amount of time would be very good in any market in the world.

VAN DYK: It may have been fast, but it wasn't necessarily easy.

LARSON: We had more than 240 different certifications and inspections that we had to go through, to build that factory. As long as you know what needs to be done and in what sequence, the bureaucracy here really is pretty effective.

VAN DYK: Many Russians might say officials here are most effective at padding meager state salaries with bribes. John Deere is the subject of an SEC investigation for allegedly breaking the Foreign Corrupt Practices Act, in Russia and neighboring countries. Deere says it is cooperating with the Securities and Exchange Commission, and says the probe does not mean it has done anything wrong.

Deere did have high-level government support when setting up this $50 million facility, its second in Russia.

Modernizing agriculture is an important part of Russia's efforts to diversify its economy away from oil and gas. On farms in the former Soviet Union, modernization means machines. Deere's tractors and combines come with the latest GPS satellite tracking.

ADAM FLECK: Already, to date for 2012, we've seen tractor sales up 50 percent.

VAN DYK: Adam Fleck studies this sector for Morningstar Analytics. He says Deere's big tractors are a good fit for Russia's big and increasingly hi-tech farms.

FLECK: What's really great, I think, from Deere's perspective on the Russian markets, is that it offers a lot of growth in the high-horsepower tractors as well. And it's a very under-invested country, historically. So I think there's a lot of opportunity to re-mechanize farmland there.

VAN DYK: And 300 million acres of farmland needs a lot of tractors. Russia is also home to a quarter of the trees on Earth. Deere assembles forestry and construction equipment here as well. American officials see U.S./Russia trade as the latest stage of President Obama's reset with Russia.

Commerce Department Deputy Undersecretary Michelle O'Neill led a recent trade delegation of automotive sector firms.

MICHELLE O'NEILL: Now, with WTO accession and President Obama's reset, much more interest in, you know, what's happening in the Russian market. Where are the opportunities and how do I, as a U.S. company, take advantage of those?


VAN DYK: Russia's imminent entry into the World Trade Organization will increase opportunities. But trade is not just about dollars and cents. Companies like Deere bring U.S. business practices, too. Mikhail Andriyukhin is a team leader on the tractor assembly line. He's young, like most of his colleagues, and embraces the Western work ethic.

MIKHAIL ANDRIYUKHIN: (Through Translator) At a Russian manufacturer, I think they let through a lot of defects, compared with American companies. Here, you don't hide things. And if something is broken, you need to come and say it's broken.

VAN DYK: That sort of thinking is a shift for Russia. Andriyukhin may not wear a suit and tie at a Moscow investment bank, but he is part of the new Russian economy, too.

For NPR News, I'm Peter van Dyk in Moscow


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