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Here’s what the ‘most favored nation’ status means — and why Russia still has it

<i>Patrick Semansky/AP</i><br/>
Patrick Semansky/AP

By Anneken Tappe, CNN Business

Trade is about to become a key element of the global response to Russia’s invasion of Ukraine following the array of sanctions that have already been imposed.

On Friday, President Joe Biden announced that the United States, along with the G7 nations and the European Union, aim to strip Russia of its “most favored nation” status. Biden can’t do this alone, he requires Congressional approval.

But what does it mean to be a “most favored nation” and why does Russia still have this status?

As a member of the World Trade Organization, Russia is treated as a most favored nation, which gives it equal access to all of the WTO members’ markets and guarantees equal tariffs.

In short, the label is like a rubber stamp for permanent normal trade relations. Should Congress vote to approve its removal, normal trade with Russia will effectively end, paving the way for higher tariffs.

It’s also about anti-discrimination, according to the World Trade Organization, and means countries can’t discriminate against their trade partners. The clause allows for some exceptions, including separate free trade agreements or special market access for developing counties.

This wouldn’t be the first time a country has lost its most favored nation status. India revoked Pakistan’s label following a 2019 bomb attack that killed 40 Indian paramilitary personnel.

Last week, Ukrainian President Volodymyr Zelensky urged US lawmakers to revoke the status for Russia. Zelensky also said halting purchases of Russian oil and gas would be the most powerful sanction possible.

On Wednesday, the House of Representatives passed a watered-down bill to ban imports of Russian oil, natural gas and coal into America. An earlier version of the legislation had included a provision that would suspend permanent normal trade relations for Russia and Belarus.

CNN reported Thursday that bipartisan talks taking shape in the Senate would include more aggressive action on Russia’s trade status.

As of 2019, Russia was America’s 26th largest global trade partner, totaling $28 billion in goods trade and $6.9 billion in services, exports and imports, according to the Office of the US Trade Representative.

In terms of exports, Russia ranks 40th on the list of US export markets, but it was the 20th largest supplier of goods imports in 2019, with fuel, precious metals, iron, steel and fertilizers at the top of the list.

CNN’s Kaitlan Collins and Manu Raju contributed to this report.

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