US Congress agrees to revoke Russia’s trade status. And now? | International Trade News

As the US Congress votes to suspend normal trade relations with Russia and ban Russian oil imports, President Joe Biden’s push to tighten US pressure on the Russian economy may now intensify.

Congress voted overwhelmingly on Thursday to revoke Moscow’s ‘most favored nation’ trade status and ban oil imports, stepping up the US response to Russia’s invasion of Ukraine amid growing reports more on atrocities.

Along with European and other key allies, Biden moved last month to revoke Moscow’s normal business status. He also took executive action to ban US imports of Russian oil, liquefied natural gas and coal. Also prohibited are imports of seafood, alcohol and Russian diamonds.

Biden can now sign the new legislation, clearing the way for the United States to impose higher tariffs on various imports, such as certain steel and aluminum products, among other measures.

In itself, the downgrading of Russia’s trade status will not have an immediate effect on the Russian economy, but combined with other sanctions imposed by the United States and its allies, the aim is to intensify the pressure on Putin and force a retreat. of his Russian forces.

Here’s a look at what it all means.

What is “most favored nation” status?

The idea behind MFN status is to equalize the trade treatment of import tariffs and quotas for all of a country’s trading partners.

Suppose, for example, that the United States levies a 13% tariff on imported leather gloves. MFN status means that gloves imported from France, China, Brazil and Russia would all be taxed at the same rate.

MFN status has been a benchmark for global trade, ensuring that countries within the World Trade Organization are treated equally, with a few exceptions that allow, for example, preferential treatment for countries in development.

Over the years, the United States has revoked the MFN status of more than two dozen countries – usually for political reasons, with the Cold War bringing the sanction against the then Soviet Union and other communist countries, for example.

With the exception of Cuba and North Korea, the privileged status of these nations was eventually restored. This was done, for example, after the thaw of the Cold War in Eastern Europe and the opening of US-China relations after the visit of President Richard Nixon.

What about the actual effect versus the symbolism?

For the United States, the removal of most-favoured-nation status is essentially a symbolic gesture.

The US ban announced last month on Russian oil, gas and coal imports has already eliminated about 60% of all US imports from Russia. Import bans on alcohol, seafood and diamonds account for only about $1 billion in revenue, according to White House figures.

Russia supplied less than 1% of all US vodka imports in December, according to the United States Distilled Spirits Council, and less than 2% of US seafood imports by volume, according to federal statistics.

But symbolism can be important in times of war.

During a debate on the legislation on Thursday, Democratic Rep. Richard Neal said innocent Ukrainians were being slaughtered even as lawmakers convened. “We have no time to waste and must immediately punish Vladimir Putin further,” Neal said.

The six-week-old Russian invasion failed to quickly take the Ukrainian capital, Kyiv, and following this failure and heavy casualties, Russia focused on the Donbass region.

Ukraine’s foreign minister again asked NATO for arms on Thursday – and the Western alliance agreed, spurred into action by the atrocities revealed following the Russian withdrawal from areas around kyiv. Ukrainian officials said hundreds of civilian bodies had been found, many of them lying on the streets, in towns around the capital.

What else does the United States import from Russia?

The United States primarily buys natural resources from Russia for which existing tariffs are mostly low or zero — oil and metals such as palladium, rhodium, uranium and silver.

Imports also include chemicals, semi-finished steel products, plywood and, ironically, bullets and casings.

Since imports from Russia are primarily natural resources, they will generally see little to no increase in tariffs due to the loss of MFN status, noted Ed Gresser, Director of Trade and Markets. worlds at the left-leaning Progressive Policy Institute. online publication.

To replace current tariff rates, U.S. buyers of Russian goods would pay import taxes established under a 1930 U.S. law that disrupted trade during the Great Depression. It would still suck for metals. But rates would skyrocket — to levels seen as punitive — for raw aluminum, plywood and semi-finished steel, among other products.

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