Russia savors its new market-economy status
The on-and-off process of integrating Russia into Western markets took a step forward last week when the U.S. Department of Commerce recognized the country's status as a market economy.
Jun 17, 2002
The on-and-off process of integrating Russia into Western markets took a step forward last week when the U.S. Department of Commerce recognized the country's status as a market economy.
"I congratulate Russia for their designation as a market economy under the U.S. law- this decision reflects the tremendous economic changes that Russia has made over the last decade," Donald Evans, U.S. Secretary of Commerce, said in an official statement.
This decision will allow Russian prices and production costs to be used in negotiating trade issues, including future antidumping investigations, instead of the current practice of using surrogate-country prices. It should also relieve Russia from U.S. countervailing-duty laws, which impose extra duty on imports the U.S. believes are unfairly subsidized.
However, the decision will not have any retroactive effect on antidumping cases initiated before April 1, the U.S. Department of Commerce said.
As expected, the decision to acknowledge Russia's compliance with U.S. benchmarks for a free-market economy received a thumbs-up from the Russian political establishment.
According to official sources, Prime Minister Mikhail Kasyanov expressed deep satisfaction, while Economic Development and Trade Minister German Gref hailed the decision as recognition of the Cabinet's ongoing market-reform policies.
"This recognition means direct access to the U.S. market for Russian companies and more employment opportunities for our citizens. All this will create new possibilities for boosting GDP," Gref added.
Others hope the new status will help smooth Russia's ties with the world's major economies, facilitate WTO entry and remove other trade barriers.
"This decision is a remarkable step with positive political and economic implications for the Russian economy," Igor Urgens, first vice president of the Russian Association of Entrepreneurs and Industrialists (RSPP), told The Russia Journal.
The RSPP's members include local business heavyweights, often referred to as the "pillars of the new Russian economy" for their strong influence on vital economic polices.
"The cumulative economic gains for Russia are quite obvious," Urgens said.
He said these include easier WTO entry procedures and revoking - or, at least, reducing -antidumping discriminatory tariffs. It also means fewer lawsuits to resolve dumping disputes, which drain Russian steel, chemical and aluminum exporters of about $1.5 billion annually.
An opinion sampling conducted last week by Interfax showed other business representatives also view the new status positively.
"This is more or less a political decision, as it's clear to everybody that Russia has long been a country with a free-market economy," said Vladimir Mau, the rector of the Academy of Economics, a Russian government-affiliated institution.
Several experts cited Kazak-stan as proof of the political nature of the decision. The country already held free-market economy status even though its market reforms are no further ahead than Russia's.
"From future perspectives, the decision will be very important in revitalizing the economy, moving ahead with structural [economic] reforms and breaking the dominance of oil and other natural commodities on our exports," Mau added.
Severstal CEO Alexei Mordashyov said the designation of Russia as a country with a free-market economy will now provide Russian smelters with a potent lever to protect their interests on the U.S. steel market. Severstal, one of Russia's major smelters, has been repeatedly hit with antidumping tariffs by the U.S market regulators, citing the non-market status of the Russian economy.
Many experts believe the recognition will bode well for the Russian economy in the long run.
"Investment-rating agencies will definitely consider this new economic status and reflect it on Russia's market profile, and this will boost the country's investment attractiveness," Interfax quoted experts as saying.
Consequently, this will give a large impetus to economic growth in Russia, as investors will now be more interested in shifting parts of their capital here to take advantage of the positive market forecasts, they added.
Several top State Duma deputies also weighed in with further praise.
Vladimir Pekhtin, leader of the pro-government Unity faction, said the decision would lay the needed foundation for a faster integration of Russia into the global economy.
"This means Moscow is now in the same group with the world's most developed economies. It also shows [their] readiness to cooperate and treat Russia as an equal," he said.
"I think this decision can be interpreted as an acknowledgment of the strengthening of economic stability in Russia," said Gennady Raikov, the leader of the People's Deputy faction.
Meanwhile, members of the political and business elite said the recognition of market status is only the first step in a long process of removing trade barriers between Russia and the rest of the world.
RSPP's Urgens said that for the new status to apply to Russian exporters in practice, the U.S. Commerce Department would now have to sign a countervailing-duty agreement with the Russian government, exempting Russian exports from U.S. antidumping tariffs.
Other concrete steps to make the new status more meaningful should also include helping Russia to enter the WTO in the nearest future as well as repealing the Jackson-Vanik Amendment, another discriminatory vestige from the Soviet-era, Raikov said.
"I congratulate Russia for their designation as a market economy under the U.S. law- this decision reflects the tremendous economic changes that Russia has made over the last decade," Donald Evans, U.S. Secretary of Commerce, said in an official statement.
This decision will allow Russian prices and production costs to be used in negotiating trade issues, including future antidumping investigations, instead of the current practice of using surrogate-country prices. It should also relieve Russia from U.S. countervailing-duty laws, which impose extra duty on imports the U.S. believes are unfairly subsidized.
However, the decision will not have any retroactive effect on antidumping cases initiated before April 1, the U.S. Department of Commerce said.
As expected, the decision to acknowledge Russia's compliance with U.S. benchmarks for a free-market economy received a thumbs-up from the Russian political establishment.
According to official sources, Prime Minister Mikhail Kasyanov expressed deep satisfaction, while Economic Development and Trade Minister German Gref hailed the decision as recognition of the Cabinet's ongoing market-reform policies.
"This recognition means direct access to the U.S. market for Russian companies and more employment opportunities for our citizens. All this will create new possibilities for boosting GDP," Gref added.
Others hope the new status will help smooth Russia's ties with the world's major economies, facilitate WTO entry and remove other trade barriers.
"This decision is a remarkable step with positive political and economic implications for the Russian economy," Igor Urgens, first vice president of the Russian Association of Entrepreneurs and Industrialists (RSPP), told The Russia Journal.
The RSPP's members include local business heavyweights, often referred to as the "pillars of the new Russian economy" for their strong influence on vital economic polices.
"The cumulative economic gains for Russia are quite obvious," Urgens said.
He said these include easier WTO entry procedures and revoking - or, at least, reducing -antidumping discriminatory tariffs. It also means fewer lawsuits to resolve dumping disputes, which drain Russian steel, chemical and aluminum exporters of about $1.5 billion annually.
An opinion sampling conducted last week by Interfax showed other business representatives also view the new status positively.
"This is more or less a political decision, as it's clear to everybody that Russia has long been a country with a free-market economy," said Vladimir Mau, the rector of the Academy of Economics, a Russian government-affiliated institution.
Several experts cited Kazak-stan as proof of the political nature of the decision. The country already held free-market economy status even though its market reforms are no further ahead than Russia's.
"From future perspectives, the decision will be very important in revitalizing the economy, moving ahead with structural [economic] reforms and breaking the dominance of oil and other natural commodities on our exports," Mau added.
Severstal CEO Alexei Mordashyov said the designation of Russia as a country with a free-market economy will now provide Russian smelters with a potent lever to protect their interests on the U.S. steel market. Severstal, one of Russia's major smelters, has been repeatedly hit with antidumping tariffs by the U.S market regulators, citing the non-market status of the Russian economy.
Many experts believe the recognition will bode well for the Russian economy in the long run.
"Investment-rating agencies will definitely consider this new economic status and reflect it on Russia's market profile, and this will boost the country's investment attractiveness," Interfax quoted experts as saying.
Consequently, this will give a large impetus to economic growth in Russia, as investors will now be more interested in shifting parts of their capital here to take advantage of the positive market forecasts, they added.
Several top State Duma deputies also weighed in with further praise.
Vladimir Pekhtin, leader of the pro-government Unity faction, said the decision would lay the needed foundation for a faster integration of Russia into the global economy.
"This means Moscow is now in the same group with the world's most developed economies. It also shows [their] readiness to cooperate and treat Russia as an equal," he said.
"I think this decision can be interpreted as an acknowledgment of the strengthening of economic stability in Russia," said Gennady Raikov, the leader of the People's Deputy faction.
Meanwhile, members of the political and business elite said the recognition of market status is only the first step in a long process of removing trade barriers between Russia and the rest of the world.
RSPP's Urgens said that for the new status to apply to Russian exporters in practice, the U.S. Commerce Department would now have to sign a countervailing-duty agreement with the Russian government, exempting Russian exports from U.S. antidumping tariffs.
Other concrete steps to make the new status more meaningful should also include helping Russia to enter the WTO in the nearest future as well as repealing the Jackson-Vanik Amendment, another discriminatory vestige from the Soviet-era, Raikov said.