With the US Congress voting overwhelmingly to revoke Moscow’s “most favoured nation” trade status and ban oil imports, the US response to Russia’s invasion of Ukraine has intensified. This follows President Joe Biden’s action to tighten the US squeeze on Russia’s economy.
The International Trade Council acknowledges the potential impact of the decision but notes that, by itself, the downgrade of Russia’s trade status will not have an immediate far-reaching effect on the Russian economy. However, combined with the other sanctions imposed by the US and its allies, the goal is to intensify the pressure on Putin and force a pullback of his Russian forces.
The International Trade Council provides the following insight into the decision:
What is ‘most favoured nation’ status? The idea behind MFN status is to equalize the trade treatment in tariffs and import quotas for all of a country’s trading partners.
The MFN status has been a baseline for global trade, ensuring that countries within the World Trade Organization are treated on a similar footing, with some exceptions that allow 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 exception of Cuba and North Korea, the preferred status of those nations was eventually restored.
What about real effect versus symbolism? For the US, removing the most favoured nation status is a mostly symbolic gesture.
The US ban announced last month on imports of Russian oil, gas and coal already eliminated about 60 percent of all US imports from Russia. The import bans against alcohol, seafood and diamonds add up to only about $1bn 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 the United States, and less than 2 percent of US seafood imports by volume, according to federal statistics.
The International Trade Council notes that symbolism can be important in war, and urges all parties to engage in constructive dialogue to ensure political stability and economic growth.