WASHINGTON—The Commerce Department said Thursday it has reclassified Russia as a nonmarket country from a market economy, a move aimed at further reducing bilateral trade and isolating Russia amid its continued war in Ukraine.
The department said the decision follows significant increases in Moscow’s intervention in economic activities since last year that have made its economy unpredictable and distorted, including in currency markets, labor relations and foreign investments.
Russia joins 11 other nations that the U.S. classifies as nonmarket economies for the purpose of antidumping tariff calculation. The list includes China, Vietnam and former Soviet Union republics. Russia had moved off the list in 2002 as it pursued measures to liberalize its economy.
The Russian Embassy in Washington didn’t immediately respond to a request for comment.
The change could result in higher tariffs on some Russian imports, making it more difficult for Russian companies to sell products such as steel and aluminum in the U.S. The impact, however, will be limited, given that the U.S.’s imports from Russia have fallen sharply in recent months because of trade restrictions and other sanctions.
Between January and September, the U.S. imported $12.5 billion of Russian goods, almost half of the level a year earlier, according to Commerce Department data.
The Biden administration’s decision follows a bipartisan push from lawmakers. “Putin’s regime shouldn’t get the privileges of a market economy designation,” said Sen.
(D., Ohio). “The Russian government owns as much as 70% of its economy—that’s not a market economy.”
The department said 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.”
Write to Yuka Hayashi at [email protected]
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