With the US Congress voting to suspend normal trade relations with Russia and ban imports of Russian oil, President Joe Biden’s move to tighten US pressure on Russia’s economy may now intensify.
Congress voted overwhelmingly Thursday to revoke Moscow’s “most favored nation” trade status and ban oil imports, intensifying the US response. invasion of Ukraine amid mounting reports of atrocities.
With key European and other allies, Biden last month moved to revoke Moscow normal business status. It 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 prohibited.
Biden can now sign the new legislation into law, opening the way for the US to impose higher tariffs on various imports, such as certain steel and aluminum products, among other measures.
On its own, the downgrading of Russia’s trade status will not have an immediate far-reaching effect on the Russian economy, but combined with the other sanctions The United States and its allies have imposed, the goal is to intensify pressure on Putin and force the withdrawal 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 trade treatment in import tariffs and quotas for all trading partners of a country.
Let’s say, for example, that the United States applies a 13 percent tariff on imported leather gloves. MFN status means that gloves imported from France, China, Brazil and Russia would be taxed at the same rate.
MFN status has been a foundation for global trade, ensuring that countries within the World Trade Organization receive similar treatment, 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, usually for political reasons, with the Cold War bringing sanction against the then-Soviet Union and other communist countries, for example.
With the exception of Cuba and North Korea, those nations’ preferential status was eventually restored. This was done, for example, after the thaw of the Cold War in Eastern Europe and the opening of relations between the United States and China following the visit of President Richard Nixon.
What about actual effect versus symbolism?
For the US, removing most-favored-nation status is a largely symbolic gesture.
The US ban announced last month on imports of Russian oil, gas and coal has already eliminated about 60 percent of all US imports from Russia. Import bans on alcohol, seafood and diamonds add up to only about $1 billion in revenue, according to White House figures.
Russia provided less than 1 percent of all US vodka imports in December, according to the Distilled Spirits Council of America, and less than 2 percent of US seafood imports. by volume, according to federal statistics.
But symbolism can be important in war.
In Thursday’s debate over the legislation, Democratic Rep. Richard Neal said innocent Ukrainians were being massacred even as lawmakers met. “We have no time to waste and we must immediately punish Vladimir Putin,” Neal said.
Russia’s six-week invasion failed to quickly take Ukraine’s capital, kyiv, and in the wake of that failure and heavy losses, Russia has shifted its focus to the donbas region.
Ukraine’s foreign minister again pleaded Thursday for weapons from NATO and the Western alliance. agreed, spurred into action by the atrocities revealed in the wake of the Russian withdrawal from the areas around kyiv. Ukrainian officials said hundreds of bodies of civilians were found, many lying in the streets, in towns around the capital.
What else does the United States import from Russia?
The United States 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 chemicals, semi-finished steel products, plywood and, paradoxically, bullets and cartridges.
Because Russia’s imports are mostly natural resources, they will generally face little to no increase in tariffs as a result of losing MFN status, said Ed Gresser, director of global trade and markets at the left-leaning Progressive Policy Institute. , in an online publication.
To replace the current tariff rates, US buyers of Russian goods would pay import taxes established under a 1930 US law that disrupted trade during the Great Depression. It would still be zero for metals. But tariffs would skyrocket, to levels considered punitive, for raw aluminum, plywood and semi-finished steel, among other products.