House to Vote on PNTR Next Week; Trade Experts Consider What It Presages for WTO

The U.S., Japan, the United Kingdom and the European Union announced together that they no longer will give Russian goods the same tariff treatment as other members of the World Trade Organization. Canada, the other member of the G-7, had already hiked tariffs on all Russian goods to 35%.

In the U.S., this requires legislation, and House Speaker Nancy Pelosi tweeted March 11, "When the House returns next week, we will take up legislation to formalize this revocation, and it is our hope that it will receive a strong, bipartisan vote. This measure builds on the bipartisan package the House passed on Wednesday that bans Russian oil & energy products."

That bill had started out as a move to deny permanent normal trade relations to Russia, but President Joe Biden asked Democrats to hold off so that allies could move at the same time. On March 11, he announced he would sign a bill removing PNTR for Russia.

Senate Finance Committee ranking member Mike Crapo, R-Idaho, said, "The President’s announcement today makes it clear that the Senate needs to immediately pass strong legislation that bans Russian energy imports, revokes favorable trade relations with Russia and Belarus, and provides the Administration with authority to raise tariffs on the other nearly half of imports that Russia sells to the United States. The ban must continue until Russia ceases its aggression, stops threatening our NATO allies and partners, and recognizes a free and independent Ukraine, including with respect to the ability of its people to choose their own government."

House Republicans criticized the administration's decision to wait for other allies to come along. Rep. Adrian Smith, R-Neb., the top Republican on the Ways and Means Trade Subcommittee, said, "It’s good to see the President has finally recognized we must suspend Russia’s PNTR status. While I appreciate President [Joe] Biden joining our efforts, Congress has jurisdiction over PNTR and we had a bicameral, bipartisan agreement ready days ago. In times like these, time is of the essence. President [Volodymyr Zelenskyy] has made it clear Ukrainians need our support now, and it’s disappointing President Biden wasted valuable time on this important step in support of Ukraine."

Senate Finance Committee Chairman Ron Wyden, D-Ore., who was part of that bipartisan agreement, said the president was right to move in concert with our allies. "Vladimir Putin doesn’t get to tear down the international order, brutalize the Ukrainian people with his unjust war and then benefit from normal trade relations," he said.

Biden also issued an executive order banning the import of Russian spirits, seafood and non-industrial diamonds, and announced a number of export and investment related restrictions.

Former longtime Office of the U.S. Trade Representative staffer Wendy Cutler, and former National Foreign Trade Council CEO Rufus Yerxa, who was a deputy director-general at the World Trade Organization, wrote that the moves to strip Russia's eligibility for most-favored nation tariffs have major implications for the WTO, which is built on that principle.

They alluded to the old saw that two countries with McDonald's had never gone to war with each other, and said that the invasion of Ukraine has thrown that linkage between trade and peace into doubt.

They asked, "Does the WTO continue to drift towards irrelevance as Cold War rivalries reemerge and divisions between competing economic systems intensify? Or can the market-oriented democracies that created the WTO find a new unity of purpose and forge a common agenda that challenges the growth of authoritarianism and addresses China’s economic model?"

While no country is considering removing MFN from China, they wrote that China will see these actions as a message that countries are "increasingly frustrated with [the] WTO status quo."

They said it would be much more difficult to isolate China, given its economic ties with most countries and its status as the second-largest global economy. "But China’s WTO relations become harder, not easier, as a result of Russia’s war, especially since Xi Jinping has maintained political alignment with Russia in spite of Putin’s behavior. As political divides grow, so too will the disaffection of the WTO’s major democracies with the idea that China should be a leading player in defining WTO rules," they wrote.

They said the war "creates new headwinds to an already existing state of sclerosis" in the short term, but they think that it could be a "powerful incentive for the United States and other democracies to overcome their long-standing disagreements, as occurred recently in the U.S.-EU aircraft dispute, and put collective pressure on economies like China to play ball. Indeed, the current crisis may lead the United States and like-minded members to chart a new trade future outside of the WTO framework, not necessarily abandoning the WTO entirely, but creating a new multilateral structure with deeper commitments among countries dedicated to free-market democracy. This may be the only leverage available to change the status quo."