The Trade and Income Effects of NTR Status for Russia

In November 2006 the United States and Russia completed a bilateral market access agreement on the terms for Russia’s accession to the WTO. As Russia moves towards full membership in the WTO, the U.S. Congress will vote whether to grant Russia permanent “normal trade relations” (NTR) or “most­favored­nation” (MFN) status. Russia has received extensions of its current NTR status regularly since 1992 with little opposition in Congress. In the absence of NTR status, Russia would face non­MFN duties as it did prior to 1992. This paper examines the trade and income effects of these regular renewals of NTR status for Russia and provides an estimate of its annual economic value, or opportunity cost. We use an applied general equilibrium model to simulate the effects of an increase in tariffs from MFN to non­MFN duty rates. The trade­weighted, average ad­valorem rate facing U.S. imports from Russia increases from 0.4 percent to 7 percent. U.S. imports from Russia decline by approximately 35 percent, and both the United States and Russia experience declines in real income, with the Russian economy experiencing a much larger decline of approximately $550 million.