Russia Welcomes Free-Market Status Recognition by the U.S.
Russia welcomed the news Thursday that the U.S. has designated it a “market economy,” a move that should help Russian exports and ease the country’s entry into the World Trade Organization.
“This is of principal importance for moving Russian goods into American markets,” exulted German O. Gref, Russia’s minister of economic development and President Vladimir V. Putin’s chief economic advisor.
“We will be getting the same possibilities to protect our rights in the United States as any other U.S. trade partner,” Gref told Russian television.
Putin learned of the decision from President Bush, who phoned him Thursday afternoon.
According to Gref, the lack of free-market status had allowed U.S. regulators to impose tariffs and other sanctions without Moscow being fully able to defend itself because Russia was considered a state-controlled economy. The change will especially affect the nation’s steel and chemical fertilizer industries, he said.
Announcing the decision in Washington, Commerce Secretary Don Evans said Russia met the necessary criteria and its new status shows “the tremendous economic changes that Russia has made over the last decade.” The changed designation was backdated to April 1.
Putin chided U.S. officials during a state visit by Bush here last month for not offering free-market status earlier. At the time, Evans explained that the Commerce Department committee in charge of the matter had not completed the necessary reviews.
That explanation did not sit well with many Russian commentators. Some had complained that their nation’s shift toward the West, its newly forged political and military ties with the North Atlantic Treaty Organization and its support for the war against terrorism had not been reciprocated with a big economic payoff.
Last week, four days after Bush’s departure from Russia, the European Union surprised Putin and came through with its own determination granting market status.
As a result of the American announcement, Gref said, he would not be surprised if the United States eventually became Russia’s largest trading partner, replacing the European Union.
Andrei V. Kortunov, a political analyst and president of the Russian Science Foundation, a Moscow-based research organization, told The Times in a telephone interview that the decision has three advantages for Russia: It will revitalize foreign investment, spur trade and raise the nation’s standing with international economic groups, especially the World Trade Organization, or WTO.
“At the least, this decision can be presented as a sign of more healthy and mutually beneficial relations between our countries,” he said.
As a market economy, Russia gains some tariff benefits, but it will also be subject to U.S. trade laws such as the countervailing duty laws. This allows the Commerce Department to take action against Russian companies accused of dumping subsidized goods into the U.S. economy.
But far more important, this brings Russia a key step closer to joining the WTO, the powerful Geneva-based group that regulates global commerce. To be eligible for membership, Russia has to be recognized as a market economy by major trading partners.
It still faces a tough road in that bid, however. Congress must grant Russia permanent normal trade status, which is given to most U.S. trading partners.
To do that, Russia needs an exemption from the Jackson-Vanik Amendment of 1974.
The law, which tied access to U.S. trade privileges to the level of Jewish emigration from the Soviet Union, still exists, though the Soviet Union is gone and Jews now may freely leave Russia.
Though Russia’s support for the war on terrorism has boosted that nation’s popularity on Capitol Hill, its efforts to join the WTO won’t be smooth sailing. In May, congressional leaders from both parties wrote Evans urging him not to grant Russia market economy status, maintaining that Moscow has a poor record on human rights and the rule of law. Some critics also are angry at what they see as ongoing state dominance of business in Russia.
Rich Edlin, a New York attorney representing SPI Spirits Group, which bought the rights to the Russian state brand Stolichnaya vodka a decade ago and now faces a government effort to take back the name, disagreed with giving the nation market status now.
“The fact of the matter is, Russia has shown a complete lack of respect for the rule of law and a complete disregard for private property rights,” the attorney said. “It would be a disaster to essentially promote Russia when it hasn’t demonstrated that it has met the requirements that all of the countries have met.”
Russia’s economic woes and political turmoil have kept it in the minor leagues of global trade, accounting for just 1% of U.S. global commerce. Last year, U.S.-Russia trade contracted by 8% to $8.8 billion, largely because of the slowdown in the U.S. economy.
But Russia’s size and rich natural resources make it one of the 10 fastest-growing markets for U.S. products, which is why many leading American corporations support its bid to join the WTO. Poultry, manufacturing equipment and high-technology products top the list of U.S. exports to Russia, while the leading imports are mostly raw materials such as platinum, oil and aluminum.
U.S. firms argue that membership in the world’s leading trade group will force Russia to do away with protectionist trade barriers such as steep tariffs and convoluted customs regulations. As a WTO member, Russia would also be required to address the widespread piracy and other intellectual property violations that have placed it on the Commerce Department’s “priority watch list.”
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Daniszewski reported from Moscow and Iritani from Los Angeles. Sergei L. Loiko of The Times’ Moscow Bureau contributed to this report.
