Portman and colleagues urge Commerce Secretary Raimondo to reconsider Russia’s status as a market economy

May 3, 2022

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WASHINGTON DC- Today US Senator Rob Portman (R-OH) led a bipartisan group of colleagues in a letter urging Commerce Secretary Gina Raimondo to reconsider Russia’s status as a market economy under the Antidumping Act (AD) of the Tariff Act of 1930. Although the Commerce Department has classified Russia as a a market economy in 2002, Russia has in recent years retreated towards a less and less free market economy. Today, after its invasion of Ukraine, Moscow has taken further steps to centralize control of the Russian economy. Classifying Russia as a non-market economy would likely increase the anti-dumping duties imposed on Russia in future anti-dumping cases.

“Russia imposes restrictions on eight of the eleven types of capital transactions tracked by the International Monetary Fund, and since Russia’s invasion, converting the ruble has only become more difficult. Recently, the Central Bank of Russia announced that it would prevent banks from selling foreign currency to Russians and limit the amount of foreign currency that individuals can withdraw from their accounts. These decrees are explicitly designed to restrict access to foreign currency,” said the senators.

The senators continued, “The Russian economy is also marked by government ownership and control of production. According to Russian government sources, the state’s share in the Russian economy could reach 70%. This growth in Russian government economic intervention follows the rapid expansion of state-owned enterprises (SOEs) in Russia. According to the International Monetary Fund, Russia has the third highest number of state-owned enterprises per capita in the world.

Along with Portman, Senators Sherrod Brown (D-OH), James Lankford (R-OK), Mike Braun (R-IN), Angus S. King Jr. (I-ME), Todd Young (R-IN), Chuck Grassley (R-IA), Richard Blumenthal (D-CT), Jack Reed (D-RI), Bill Cassidy (R-LA ), Susan Collins (R-ME), Bill Hagerty (R-TN), Cynthia M. Lummis (R-WY), Steve Daines (R-MT), Lisa Murkowski (R-AK) and Roger Wicker (R-MS ) also signed the letter.

You can read the full letter here and below:

Dear Secretary Raimondo,

We are writing to urge you to reconsider Russia’s status as a market economy within the meaning of the Anti-Dumping Act (AD) of the Tariff Act of 1930. In light of the unprovoked invasion of Ukraine by Russia, as well as facts about the Russian economy, we ask you to reconsider this question and see that Russia is not a market economy country.

Over the past two decades, Russia has gone from a nascent market economy to one without a free market. In its 2002 decision classifying Russia as a market economy, the Ministry of Commerce noted that economic decentralization was the “hallmark of market economies”. Yet under the leadership of Vladimir Putin, Russia has become marked by corruption, weak rule of law, labor exploitation and human rights abuses. When the facts of this decline are applied to the relevant legal criteria, there is no doubt that Russia should be classified as a non-market economy country.

Among the six statutory criteria for determining whether a country is a non-market economy, we believe it is important, and decisive, to highlight two in particular: currency convertibility and state control over the economy. It is clear that the ruble is not freely convertible into the currency of other countries. Russia imposes restrictions on eight of the eleven types of capital transactions tracked by the International Monetary Fund, and since Russia’s invasion, converting the ruble has become even more difficult. Recently, the Central Bank of Russia announced that it would prevent banks from selling foreign currency to Russians and limit the amount of foreign currency that individuals can withdraw from their accounts. These decrees are explicitly designed to restrict access to foreign currencies.

The Russian economy is also marked by state ownership and control of production. According to Russian government sources, the state’s share in the Russian economy could reach 70%. This growth in Russian government economic intervention follows the rapid expansion of state-owned enterprises (SOEs) in Russia. According to the International Monetary Fund, Russia has the third highest number of state-owned enterprises per capita in the world.

Russia’s invasion of Ukraine – a loathsome final step in its year-long campaign to undermine order and democracy in Eastern Europe – has earned it unique status as a crook international. Therefore, we strongly encourage the administration to seize this opportunity to hold the Russian Federation and Vladimir Putin accountable for their continued attempt to circumvent international norms, economic or otherwise, to their own advantage. Specifically, we note that under the anti-dumping statute, the Department of Commerce “may make a determination [of non-market economy status] at any time.”

We believe the time is right and the facts clearly support this reclassification. Thank you for considering our request and we appreciate your attention to this important matter.

Sincerely,

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