EXPLAINER: Russia is not a “most favored nation”. What now? | national politics

By MARCY GORDON – AP Business Writer

WASHINGTON (AP) — With Congress voting to suspend normal trade relations with Russia and ban imports of its oil, President Joe Biden’s action to escalate U.S. pressure on Russia’s economy may now intensify.

The action by the US House of Representatives and Senate on Thursday to remove Moscow’s trade status as “most favored nation” and ban oil imports intensifies the US response to Russia’s invasion of Ukraine amid mounting reports of atrocities. Legislators showed overwhelming support for measures against Russia’s economy as the two separate bills each passed the Senate 100-0 and achieved near unanimity in the House of Representatives.

Last month, Biden, along with European and other key allies, moved to scrap Moscow’s normal trade status. He has also taken executive action to ban US imports of Russian oil, liquefied natural gas and coal. Imports of Russian seafood, alcohol and diamonds are also banned.

Biden can now put the new law into effect. The bill to end normal trade ties with Russia opens up the possibility for Biden to impose higher tariffs on various imports such as certain steel and aluminum products, further weakening Russia’s economy under President Vladimir Putin. It also ensures that Moscow ally Belarus receives less favorable tariff treatment.

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And the US is also cutting the flow in the other direction: it has blocked the export of expensive watches, cars, clothing and other American luxury products to Russia.

The US revocation of Russia’s longstanding trade status was one of several economic and financial sanctions imposed on Russia in response to the brutal war on Ukraine that began on February 24.

Merely the trade status downgrade will not have an immediate large-scale impact on the Russian economy. But along with the other sanctions imposed by the US and its allies, the aim is to increase pressure on Putin and force a withdrawal of his Russian forces.

WHAT IS THE MOST POPULAR NATION STATUS?

The idea behind the MFN status is to align the trade treatment on tariffs and import quotas for all trading partners of a country. For example, suppose the US imposes a 13% tariff on imported leather gloves. MFN status means that gloves imported from France, China, Brazil and Russia are all taxed at the same rate.

Most-favoured-nation status was a basis for world trade to ensure countries were treated on a similar basis within the World Trade Organization, with some exceptions allowing, for example, preferential treatment for developing countries.

Over the years, the US has revoked the MFN status of more than two dozen countries – generally for political reasons, with the Cold War bringing sanctions on the then Soviet Union and other communist countries, for example.

With the exception of Cuba and North Korea, these nations’ privileged status was eventually restored. This happened, for example, after the Cold War thaw in Eastern Europe and the establishment of US-China relations following the visit of President Richard Nixon. With these latest moves, Russia joins the ranks of those two communist countries that lack MFN status with the US

WHAT ABOUT REAL IMPACT VS. SYMBOLISM?

For the US at least, lifting most-favoured-nation status is a mostly symbolic gesture. The US import ban on Russian oil, gas and coal announced last month has already eliminated about 60% of all US imports from Russia. Bans on alcohol, seafood and diamonds add up to just about $1 billion in revenue, according to White House figures.

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

But symbolism can be important in war.

In Thursday’s debate on the legislation, Rep. Richard Neal, D-Mass., said innocent Ukrainians would be slaughtered while lawmakers convened.

“We have no time to lose and must immediately continue punishing Vladimir Putin,” Neal said.

Russia’s six-week invasion failed to quickly take the Ukrainian capital of Kyiv, and after that failure and heavy casualties, Russia has shifted its focus to Donbass, a predominantly Russian-speaking industrial region in eastern Ukraine. Ukraine’s foreign minister on Thursday again asked for NATO weapons – and the Western alliance agreed, spurred by atrocities uncovered after Russia’s withdrawal from areas around Kyiv.

Ukrainian officials said hundreds of civilian bodies were found in towns around Kyiv, many lying on the streets.

DIAMONDS, VODKA, KING CRAB. WHAT ELSE IS THE US IMPORTING FROM RUSSIA?

The US mainly buys natural resources from Russia, for which existing tariffs are mostly low or zero – oil and metals such as palladium, rhodium, uranium and silver bullion. Imports also include chemical products and semi-finished products made of steel, plywood and, paradoxically, bullets and cartridge cases.

Because imports from Russia are mostly natural resources, they will generally face little or no tariff increases due to lost MFN status, noted Ed Gresser, director of trade and global markets at the left-leaning Progressive Policy Institute a solid online posting.

To replace current tariff rates, US buyers of Russian goods would pay import taxes set under a 1930 US law that disrupted trade during the Great Depression. For the metals it would still be zero. But rates – including for unmachined aluminum, plywood and semi-finished steel – would soar to levels seen as punitive.

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