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EXPLANATION: Russia is not a “most favored nation”. And now? | Economic news

By MARCY GORDON, AP Business Writer

WASHINGTON (AP) — Stepping up U.S. push to squeeze Russia’s economy, President Joe Biden decided on Friday, along with European and other key allies, to revoke Moscow’s “most favored nation” trade status. . His administration also banned imports of Russian seafood, alcohol and diamonds.

And the United States is also cutting off the flow in the other direction: it is banning the export of expensive American watches, cars, clothes and other luxury goods to Russia.

Congress should move quickly to pass legislation formalizing Moscow’s downgraded commercial status. The US revocation of Russia’s long-standing most favored trade status is just the latest in a series of economic and financial sanctions that have been imposed on Russia in response to its brutal war on the Ukraine.

In itself, the downgrading of its commercial status will not have an immediate far-reaching effect on the Russian economy. But combined with the other sanctions imposed by the United States and its allies, the idea is to intensify the pressure on President Vladimir Putin and force a withdrawal of his Russian forces.

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The idea behind MFN status is to equalize trade treatment in terms of customs duties and other conditions of all trading partners of a country. Suppose, for example, that the United States levies a 13% tariff on imported leather gloves. MFN status means 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. With this latest decision, Russia will join the ranks of these two communist countries that do not have MFN status with the United States.


For the United States at least, the removal of most-favoured-nation status is essentially a symbolic gesture. The US ban announced this week on Russian oil, gas and coal imports has already eliminated about 60% of all US imports from Russia. The new import bans announced Friday represent 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.

“Putin is an aggressor,” Biden said from the Roosevelt Room at the White House. “And Putin must pay the price. It cannot pursue a war that threatens the very foundations… of international peace and stability.

Russia expanded its offensive into Ukraine on Friday, two weeks into the invasion, hitting airfields in the west and a major industrial city in the east. A huge armored column that had been stuck outside Kiev for more than a week was on the move again, deploying near the capital.


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 semi-finished chemicals and 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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