The United States (US) has threatened to revoke Russia’s “market economy” status, a move that revives a trading weapon not used since the 1990s.
Without the market economy status, the US can levy special duties on exports from Russia to the rest of the world, making its goods uncompetitive and giving it more leverage than other usual trade barriers.
The US stated that the review of Russia’s status would be based on: “The convertibility of the Russian ruble, government ownership of companies, labour laws and wage settlements, state control over the allocation of resources as well as the status and role of foreign investment and corporations in Russia.”
A report by The Moscow Times mentioned that the “sweeping consultation” for the revocation of Russia’s market economy status came after a complaint by an Oklahoma-based company. According to a statement in the US Federal Register, the company claimed that Russian fertilisers, almost worth a billion, are being sold to the US annually “at less than fair value...and that such imports are materially injuring and threaten to injure an industry in the United States.”
Earlier, Russia was denied the market economy status by the US in the 1990s towards the end of the Cold War. The US believed that Russia “subsidised energy and other inputs into the production of goods that in effect were part of a pseudo-centrally planned economy that gave Russian goods an unfair advantage.” Post the Cold War and Russia’s eventual socio-economic transformation, it was granted the status in 2002. Consequently, the two countries traded effectively in the formative years of Russian president Vladimir Putin’s administration.
However, bilateral relations have deteriorated between the two countries over the past few years over cyberhacking and election interference scandals, pushing the Biden administration to undertake punitive measures against Russia, including sanctions, the expulsion of diplomats, and now the revocation of its market economy status.
The market economy status yielded several benefits for the Russian economy, with fewer anti-dumping import taxes and penalties against its exports. The status also allowed Russia to make an additional $1.5 billion in trade and facilitated the country’s much-awaited entry into the World Trade Organization (WTO) in 2012. Removing the status means that the US can now impose taxes and penalties on Russian exports more freely as the former believes that the export products are being sold cheaper, much below their production cost.
It remains to be seen how the Russian administration responds to the decision and what that entails for the global trading community.
US Threatens To Repeal Russia’s ‘Market Economy’ Status
Biden administration revived a trading weapon unused since the 1990s and threatened to revoke Russia’s ‘market economy’ status.
August 18, 2021
SOURCE: REUTERS