U.S. designates Russia a market economy

WASHINGTON -- More than a decade after the collapse of the communist Soviet Union, Russia won a long-sought economic prize from the United States on Thursday -- designation as a market economy.

President Bush personally relayed the decision to Russian President Vladimir Putin in an early morning telephone call from the White House.

Commerce Secretary Don Evans, whose agency made the determination, said the action reflected "the tremendous economic changes that Russia has made over the last decade."

The determination will give Russian companies more protection to fight off charges that they are selling products in the United States at unfairly low prices, a change that Putin's government estimated could boost Russian exports to the United States by $1.5 billion annually.

The decision, which was made by the Commerce Department's Import Administration, represented a further step in Bush's campaign to strengthen economic ties, symbolizing that relations between the United States and its former Cold War foe have entered a new era.

For his part, Putin has actively pursued closer ties with the West as a way to bolster his country's efforts to recover from 70 years of communist central planning and lift the country's economic fortunes. He also viewed the designation as a reward for Russia's support since Sept. 11 of the U.S.-led war against terrorists.

Putin had hoped to win the "market economy" designation from Bush during the president's trip to Russia last month. However, administration officials stressed that the timing on the announcement was determined by law and could only go into effect once Commerce Department officials had completed their nine-month investigation.

Russia hopes that winning the market economy designation from the United States, the world's largest economy, will strengthen its case for membership in the World Trade Organization.

, the Geneva-based organization that sets the rules for world trade.

WTO Director General Michael Moore has said that Russia could complete all its negotiations to lower trade barriers and be ready for membership by the fall of 2003.

The U.S. market economy designation follows by a week a similar announcement from the 15-nation European Union, Russia's biggest trading partner.

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 it lacked this designation in the United States. He predicted a boost for Russian manufacturers of steel, nuclear fuel, fertilizer and titanium products.

"For Russian producers it means better access to the U.S. market. For the Russian population, it means creation of new jobs," Gref said.

Representatives of companies in the United States that compete against Russian products contended during the Commerce hearings that the Russian government still heavily subsidizes its own industries.

But U.S. companies eager to do business in Russia hailed Thursday's announcement, saying it would put U.S.-Russian economic ties on a more permanent footing.

"One by one, we need to be removing all the vestiges of the Cold War from our trade books," said Z. Blake Marshall, executive vice president of the U.S.-Russia Business Council.

The biggest immediate effect for Russian companies will be in the handling of antidumping cases, in which American companies petition the Commerce Department for the imposition of penalty tariffs for products they contend are being sold in the United States at prices below the cost of production in the home market.

With the new market designation, Commerce will be required to use actual data on production costs in Russia in determining whether to impose penalty tariffs. Before, the government had latitude to simply estimate those production costs based on calculations of what they should be if Russia was a market economy.

In making the ruling, Commerce officials had to rule that Russia's decade-long effort to transform from a state-run economy to one operated by private enterprise had been a success.

A Commerce official, who briefed reporters on condition of anonymity, said the U.S. investigation found that private companies now account for 70 percent of Russia's economic output; Russia's currency, the ruble, is set by market forces; and the country is open to foreign investment.

In order for Russia to win WTO membership, the United States must remove the country from the requirements of the 1970s Jackson-Vanik law, which ties Russia's tariff privileges to an annual congressional review of the country's record on Jewish immigration and human rights.

The administration had hoped to win repeal of the Jackson-Vanik requirement from Congress this year, but that effort was put on a back burner after Russia upset many members of Congress this spring by imposing a temporary ban on imports of American chicken parts.

Russia is the largest foreign market for U.S. chicken producers.