U.S. Downgrades Russia to Nonmarket Economy

The Commerce Department said on Thursday that it has reclassified Russia from a market economy to a non-market economy, aiming to further reduce bilateral trade and isolate Russia amid the ongoing war in Washington-Ukraine.

The department said the decision followed a significant increase in Moscow’s interference in economic activity since last year, which it said had “unprecedented and distorted” its economy, including currency markets, labor relations and foreign investment.

Russia joins 11 other countries that the US classifies as nonmarket economies for dumping tariff calculations. The list includes China, Vietnam and former Soviet Union republics. Russia left the list in 2002 as it pursued measures to liberalize its economy.

The Russian Embassy in Washington did not immediately respond to a request for comment.

The change could lead to higher tariffs on some Russian imports, making it more difficult for Russian companies to sell products like steel and aluminum in the US, but the impact would be limited as US imports from Russia have fallen sharply. In recent months due to trade restrictions and other sanctions.

Between January and September, the US imported $12.5 billion in Russian goods, according to Commerce Department data.

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The Biden administration’s decision followed bipartisan pressure from lawmakers. “The Putin regime should not enjoy the privileges of market economy status,” Sen. said Sherrod Brown (D., Ohio). “The Russian government owns up to 70% of its economy—it’s not a market economy.”

Since the department reviewed Russia’s position last year and invaded Ukraine in February, Moscow has scaled back its market-opening efforts while reversing policies on currency convertibility and foreign investment.

“This backtracking includes a demonstrable increase in government control over the economy; an increase in government control over prices; a decline in rights associated with freedom of information; and the ability of workers to freely bargain with employers for wages,” the department said.

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The Commerce Department has “charted” several countries from the nonmarket list to market economies, but this is the first time any country has been given the reverse treatment, said Jeffrey Kessler, a WilmerHale attorney and former assistant secretary of state. Department of Commerce.

“This is a sign of Russia’s gradual withdrawal from the community of nations,” he said. “Countries always want to be designated as a market economy.”

Write to Yuka Hayashi at [email protected]

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