Russia is no longer a market economy – US decision

Russia will now be subject to numerous anti-dumping investigations and additional duties and sanctions. This occurs as a result of the United States Department of Commerce canceling the designation of a nation having a market economy. 

As a result of the “extensive” governmental interference in the Russian economy, it was determined to revoke the market status.

U.S. decisions on the Russian market

This decision is an essential acknowledgment of the rise of Russian state influence in their economy, which puts U.S. industries at a disadvantage when trying to compete globally.

Commerce’s analysis found that extensive government involvement in the economy has led to distorted prices and costs in Russia, which do not accurately reflect whether Russian companies are reasonably pricing imports into the United States. 

As a result of today’s decision, in future cases involving imports from Russia, Commerce will apply an alternative methodology to calculate the A.D. duties on imports from Russia, using market-based prices and costs from a country at a comparable level of economic development that produces similar merchandise.

This will enable Commerce to address Russian unfair trade practices – the U.S. Department said. Now, American financial institutions will view Russia as a nation with a non-market economy model.

Russia does not follow the market economic model

The state must achieve specific requirements stated in the 1930 American law on tariffs to be classified as a country with a market economy in the U.S.

In 2002, the U.S. recognized Russia as a nation with a market economy. Numerous American trade prohibitions on foreign countries do not apply to nations with this status. It is more challenging, for instance, to impose anti-dumping duties on them. 

In addition, Russia’s 2012 entry into the World Trade Organization (WTO) was significantly influenced by its status as a state with a market economy.

For the first time in nearly 20 years, the U.S. Department of Commerce proposed removing Russia from its designation as a country with a market economy in 2021, but this status was later confirmed. And then it went into effect after a year.

The USA does not recognize the Russian market economy

Since its previous review of Russia’s status last year and the invasion of Ukraine in February, Moscow has backtracked in its market-opening effort while reversing policies in currency convertibility and foreign investments.

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

The Commerce Department has “graduated” a number of countries from the nonmarket list to market economies, but this is the first time any country was given a reverse treatment, said Jeffrey Kessler, a WilmerHale lawyer and a former assistant secretary for enforcement and compliance at the Commerce Department.

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

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