This is a guest post from GW professor Susan Ariel Aaronson
Policymakers around the world are searching for ways to punish Russian leaders for their aggression in Ukraine. Generally, they have relied on economic and financial sanctions, but sanctions are an imperfect tool. While sanctions can be effective at punishing targeted individuals and activities in Russia, they can also lead to higher prices and limited supplies of various goods and services in the home market. Moreover, sanctions may not change Russia’s behavior over time. But the US and its allies can use trade policy more creatively to alter Russia’s behavior, as it did towards the former Soviet Union in the 1970s. The US and its allies can deny normal trade relations (most-favored nation status) to Russia, as Representatives Lloyd Doggett and Earl Blumenauer have proposed.
At first glance, it may seem unfair to deny Russia its right to be treated fairly in trade. Both Russia and the US are members of the world’s largest most important trade agreement—the 164 member WTO. Under WTO rules, countries cannot discriminate between their trading partners by providing or denying them a benefit (a tariff cut). Members must treat their fellow members in an equivalent manner.
However, the architects of the WTO and other trade recognized that there are times when nations must breach the rules to achieve essential domestic policy goals or to protect national security. Hence it provided member states with two outs -- temporary waivers or exceptions under the rules. Should another WTO member view such an action as unfair, it can challenge a member’s use of such waivers or exceptions in a trade dispute.
Ironically, the Russian Federation already uses the national security exception to block Ukrainian trade. In 2014, Russia claimed that Crimea and the Donbas region were Russian territories and in an act of war, seized control. Soon thereafter, Ukraine asserted that the Russian Federation was blocking the movement of Ukrainian goods that needed to move through Russia to third countries. After consultations with Russia failed, it initiated a trade dispute against Russia at the WTO in 2016. In 2019, the dispute settlement body sided with Russia, noting that only domestic officials could determine what is a national security threat and how to address such a threat. Hence, if others were to take action against it now, Russia could not argue that denying Russia normal trade relations (most favored nation status) is unfair or extraordinary.
Moreover, the US and its Western allies have a long history of linking trade and human rights, particularly towards Russia. After the second World War, Soviet officials undermined the human rights of many citizens, denying them freedom of speech, movement, and association. In 1974, Congress decided that carrots might work better than sticks to change the country’s behavior towards its citizens. During this period, many Communist countries were not members of the GATT (the precursor to the WTO). Under the Jackson-Vanik Amendment, Congress required the president to provide or restore nondiscriminatory treatment (trade benefits) if a country allowed its citizens freedom of immigration. Members of Congress used hearings to bring attention to human rights problems in Communist nations. Jackson Vanik also became a major tool to hold China accountable for its respect for human rights, as it sought to join the WTO.
But after the fall of the Berlin Wall, many once Communist countries including Russia wanted to use trade to grow their economies. They sought to join the WTO. The WTO requires each member to accord newly acceding members “immediate and unconditional” most-favored-nation status. The US had to comply. So legislators created a new mechanism that could keep Russia on a short leash. In 2012, Congress also passed the Sergei Magnitsky Act in honor of the Russian anticorruption campaigner who died in a Russian prison camp. It required the President to identify and impose sanctions on any person determined to have been involved in the detention, abuse, or death of Magnitsky and required the President to identify any person determined to be responsible for gross violations of human rights against individuals who seek to expose corruption or defend and promote “internationally recognized human rights and freedoms” within Russia. In 2017, Congress passed the Global Magnitsky Act, which provided the United States with tools to impose some measure of accountability against foreign perpetrators, particularly when relevant foreign governments are unable or unwilling to do so.
The Magnitsky Act inspired other nations to adopt a similar approach. According to a recent study, by the EU Parliament, these key trading nations have identified human rights concerns in Belarus, Saudi Arabia, Russia, Myanmar and China and enacted sanctions to link trade to human rights.
Denying Russia normal trade relations is not an ideal solution to the ongoing violence. It will take time to pass legislation in the US, EU, UK and Canada to deny Russia normal trade relations-time in which Russia can continue to wage war in Ukraine. Moreover, as with sanctions, the price of Russian goods will rise in these markets. But we need to use every opportunity to remind Russia’s leader that when you undermine the rule of law, you can’t expect the rule of law in trade. Russia should be a trade pariah.