The United States has opened a review of its designation of Russia as a “market economy” in a technical move that could further complicate the already strained trade relationship between the two countries.
Washington has treated Russia as a market economy since 2002, when it reward the designation as recognition of Russia’s economic and political transformation during the 1990s.
The designation has actually limit anti-dumping import taxes and penalties that the United States may impose on Russian exporters. Russia said it unlocked an additional $1.5 billion in trade after winning the coveted designation and also paved the way for Moscow to join the World Trade Organization (WTO) in 2012 – a body that imposes the maximum rate of import taxes that members can charge each other on different sets of goods.
Removing the label would mean the United States could treat Russia as a “non-market economy.” This would allow the US to more aggressively counter Russian export products which it believes are being artificially underpriced – below their market cost of production – due to subsidies or Kremlin support, thus giving them an unfair advantage over US producers or other global producers. .
Only 11 countries in the world are currently treated as non-market economies — China, Vietnam and nine former Soviet republics.
The wide-ranging consultation was sparked by a complaint from an Oklahoma-based company which claimed that some Russian fertilizers – nearly $1 billion of which are sold in the United States each year – are “sold or likely to be sold in the United States at less than fair value…and such imports cause material injury and threaten to harm an industry in the United States,” a statement said. published in the federal register of the United States government.
The survey will examine several factors to assess whether Russia should retain its market economy status, including the convertibility of the Russian ruble, public ownership of companies, labor law and wage agreements, state control over resource allocation; and the status and role of foreign investment and business in Russia.
When calculator anti-dumping tariffs to be imposed on companies from non-market economies, the United States selects the benchmark producer prices of a third country to estimate the cost of the product in the market. This is considered a stricter interpretation and may result in higher penalties than for market economies, where the United States uses the country’s own production costs.
Washington argues that in non-market economies, the scope and complexity of state support provided to domestic producers is so “pervasive” that it is “impossible to establish” an accurate market price.
Russian exports to the United States totaled $24 billion in 2020, the vast majority of which were industrial products and hydrocarbons.
Despite the country’s controversial privatization drive in the 1990s, Russia’s economy remains heavily dominated by the state and state-controlled enterprises. Alexei Kudrin, a longtime former finance minister and now head of the Accounts Chamber, recently lamented that only four of the country’s 10 largest companies are private, and noted that only 25% of Russia’s privatization plan had been completed.