Russia now a market

["Ian Murray" <seamus2001@xxxxxxxxx>]

U.S. Grants Russia Market Economy Status


By Martin Crutsinger
AP Economics Writer
Thursday, June 6, 2002; 1:22 PM


WASHINGTON -- The Bush administration announced Thursday that it will
grant Russia the status of a "market economy," delivering a major
economic prize that Russian President Vladimir Putin hopes will lead to
full membership in the World Trade Organization.

The decision, by the Commerce Department's Import Administration, was a
key goal Putin had hoped to win during President Bush's visit to Russia
last month.

The designation means Russia will now receive the same treatment as
other major U.S. trading partners in trade disputes.

In a statement, Commerce Secretary Don Evans said the new designation
"reflects the tremendous economic changes that Russia has made over the
last decade."

The decision by the United States follows by a week a similar
designation by the European Union. It represents a recognition of the
progress Russia has made in transforming its economy following 70 years
of communism.

President Bush relayed the U.S. decision to Putin in a phone call
Thursday, according to Russia's press service.

"Putin welcomed this step toward Russia, which is really a country with
a market economy, noting that it will give a strong impulse to the
development of bilateral economic ties. Both sides expressed
satisfaction with the progress in principally important questions of
cooperation," the press service said.

The Russian government had hoped to win the "market economy" designation
during Bush's trip last month. But administration officials stressed
that the issue had to be resolved according to U.S. law, which required
a finding from the Commerce Department that Russia had met a number of
criteria that showed its economy operating in accordance with
free-market principles.

Russian Economics and Trade Minister German Gref said on state-run RTR
television Thursday night that Russia had lost $1.5 billion in annual
export sales in recent years because of America's resistance to
recognizing Russia as a market economy.

"For Russian producers it means better access to the U.S. market. For
the Russian population it means creation of new jobs, for the Russian
economy it means new opportunities and new possibilities for the GDP,"
Gref said.

Gref said Russia's metallurgy industry, nuclear fuel producers and
fertilizer and titanium producers had suffered most and were best poised
to benefit from the U.S. decision.

"It's a sign, a symbol acknowledging the reforms that have been going on
in Russia," he said. "It's good for investment because it makes
investment (in Russia) more predictable."

The U.S. action followed a nine-month investigation conducted by
Commerce's Import Administration.

Russia views the designation as an important milestone in its quest to
gain membership in the WTO, the Geneva-based organization that sets the
rules for global trade.

WTO Director General Michael Moore has predicted Russia could achieve
WTO membership by the fall of 2003, a timetable Evans last week termed
realistic.

However, WTO membership for Russia will depend on the country's striking
agreements with the United States and other WTO members over the
commitments Russia will make to lower trade barriers, a process that can
prove arduous. China gained WTO membership last November after a 14-year
effort.

The most immediate impact for Russia from the market economy designation
in the United States will be in the country's treatment in trade
disputes involving charges it is selling goods to Americans at unfairly
low prices, a practice known as dumping.

Because of the new designation, which the government said would be
retroactive to April 1, Commerce will have to use actual Russian price
data on the costs of production to make a determination that Russian
exports are being sold in the United States at unfairly low prices.
Before, Commerce was required only to estimate what Russian production
costs would be if the nation were a market economy.