Biden Vows To End Russia's 'Most Favored Nation' Status

Law360 (March 11, 2022, 5:29 PM EST) -- President Joe Biden committed to revoking Russia's status as a "most favored nation" on Friday, which would open the door for higher tariffs on Russian goods, as he unveiled a series of economic measures punishing Russia for invading Ukraine.

Biden said he was working closely with Congress on legislation that would end most favored nation treatment for Russia, and announced that the remainder of the G7 countries and the European Union were also moving to deny Russia preferential trade treatment.

As the countries account for more than half of the global economy, the coordinated action is "another crushing blow for" Russian President Vladimir Putin, Biden said.

Known as Permanent Normal Trade Relations in the U.S., the most favored nation status allows Russia to enjoy the best possible trade terms that the U.S. offers and can only be revoked through an act of Congress.

In the wake of Russia's invasion of Ukraine, U.S. lawmakers from both political parties have called to end that trade designation and introduced legislation doing so. On Friday, Biden vowed to sign a bill into law, saying he had held off on the measure until the U.S.' top allies came onboard.

"The free world is coming together to confront Putin, our two parties here at home are leading the way. With that bipartisan cooperation, I look forward to signing into law the bill revoking PNTR," he said.

Biden also signed an executive order cutting Russia off from U.S. luxury goods imports, including designer watches and luxury cars. The order additionally bans imports of signature Russian products, such as vodka and diamonds, and authorizes the U.S. Department of Treasury to issue future bans on other Russian goods, according to a fact sheet issued by the White House.

Since Russia invaded Ukraine, the U.S. and its top allies have pummeled Moscow with heavy sanctions targeting the country's largest banks and Putin directly and imposed sweeping export bans keeping Russia from importing sensitive technologies. On Tuesday, the U.S. and the U.K. struck at the "main artery" of the Russian economy and banned Russian oil and gas imports.

The U.S. imports a relatively low volume of goods from Russia, with most of the imports being mineral fuels and metals. In 2020, Russian imports into the U.S. totaled $22.2 billion, as opposed to the $450.4 billion worth of goods the U.S. imported from China, its top importer, according to the U.S. Trade Representative.

The measures that the Biden administration unveiled Friday build on the punishing sanctions and export curbs the U.S. has relied on thus far. However, Lee Smith, who leads Baker Donelson's international trade and national security practice, described the vow to withdraw Russia's most favored nation status as a blow against the entire Russian economy.

"It's going after your regular economic considerations, regular trade, as opposed to banks and trade in military or dual-use goods," he said.

Smith also pointed out that even if Russia were to leave Ukraine, it would be more difficult to redesignate Russia as a most favored nation than to withdraw the sanctions or export curbs. Only Congress can grant most favored nation status, he said.

"This certainly sends a signal, and essentially it's saying, 'Even if you were to withdraw from Ukraine, right now…, we still don't want to be interacting with you economically,'" he said.

--Additional reporting by Daniel Wilson. Editing by Emily Kokoll.

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