From Bill Reinsch / the Center for Strategic and International Studies.
The other part of the emerging debate is over what else the United States might do. That has produced a variety of proposals, some sincere, some creative, some designed primarily to capture media attention for their authors, and some poorly conceived. This week I want to talk about two of them that appear to be attracting more than token support: altering Russia’s trade status and blocking Russian oil imports.
Altering Russia’s trade status involves two actions—removing its Permanent Normal Trade Relations (PNTR) status and throwing it out of the World Trade Organization (WTO). PNTR is the term we use to indicate that Russia has most favored nation status under international trade rules; that is, that the United States applies the same tariffs to Russia that it applies to all 164 WTO members. Removing that status would make Russia subject to substantially higher tariffs left over from the Smoot-Hawley Act of nearly 100 years ago, which would significantly limit its access to the U.S. market on a wide range of products.
This proposal has ignited a small legal debate over whether the president can take that action on his own or whether it would require an act of Congress. Russia was given PNTR status by an act of Congress in 2012, and some argue that it would require another act of Congress to take it away. Congressman Earl Blumenauer (D-OR) and Senators Rob Portman (R-OH) and Ron Wyden (D-OR) have separately made proposals to do just that, although they differ in detail. My own view, and that of people I consulted who are smarter than I am, is that the president has the authority to do it via the International Economic Emergency Powers Act (IEEPA), which, of course, does not preclude Congress from acting anyway.
That does not mean, however, that it is a good idea. As long as Russia is a member of the WTO—hence the other half of the proposal—we would be violating our obligations if we deny a member PNTR tariffs. This puts the move in the “two wrongs don’t make a right” category, although, admittedly, Russia’s “wrong” is very large and ours would be very small. It nonetheless would be another blow to the international rules-based trading system. The United States has compiled a growing list lately—Section 301 tariffs and Section 232 tariffs on steel and aluminum left over from Trump, and Buy American and electric vehicle tax credit proposals from Biden—and our lack of respect for the rules further undermines the organization and encourages others to do the same.
That is probably why these proposals also call for expelling Russia from the WTO. If that happened, we would have no obligations toward them and could raise tariffs as we wished. The main difficulty with that is that the WTO has no process for removing members. Former congressman and appellate body member James Bacchus has proposed a complicated way to do it by arranging a vote to change the rules and then expelling Russia if it failed to go along. That would require a supermajority to approve it in an organization that historically has always operated by consensus and does not normally vote. The other approach, which the European Union is considering, is to use the “national security” exception in Article XXI as justification for removing WTO benefits from Russia. That would technically not expel them, but it would achieve the same result, at least as far as EU tariffs were concerned.
The main issue here, to borrow a line from last week’s column, is whether the juice is worth the squeeze. U.S. direct trade with Russia is relatively small, so higher tariffs would not do much damage to them but could raise costs for our manufacturers who rely on them for key raw materials. The additional damage this does to the trading system, while not immediate, could be significant. Ignoring the rules has a cumulative effect, and the longer our list of infractions gets, the weaker the WTO becomes and the more other countries are encouraged to do the same thing.
Banning Russian oil exports would expose a different policy dilemma. It would be a blow to Russia, but, while the quantity is not large—currently around 200,000 barrels per day—and can be replaced, the action would further roil markets and increase prices, particularly at the pump, which the administration has been loath to do. It will also lead to more calls to permit more exploration and drilling in the United States, which runs counter to the administration’s climate mitigation goals. The more important argument against this so far, however, has been that it would interfere with the administration’s thus far very successful effort to mount a coordinated strategy on sanctions, particularly with Europe, where Russian oil and gas exports play a much larger role. Any action we take should be done in coordination with European countries in order to maintain allied unity. maintain allied unity.
These proposals are not simply attention-seeking from fringe members. They are sincere and well-motivated ideas. That does not, however, mean they are cost-free, and in both cases I think we are better off not pursuing them, however tempting they may be.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
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