Russia-U.S. Trade in 2020

How did Russia-U.S. trade fare in 2020 and what can the United States do to boost economic cooperation in 2021?

The year 2020 did not bring significant foreign trade profits to the United States nor to the Russian Federation. The general commodity turnover in Russia shrank from $668.8 bln USD to $567.8 bln USD, diminishing by 15.1%. The export figures returned to the level of 2016 and comprised 336.4 bln USD. As for the US, in 2020 it struggled with the highest trade gap since 2008 and the lowest exports since 2010. The given figures demonstrate the common vulnerability of two top-10 world economies in the face of a global crisis.

From the CBR experts’ point of view, the current level of the Russian commodity turnover decline, however, turned to be a positive sight - mainly because of dire forecasts that were predicting an even worse situation, with a trade deficit recurring and export reaching 250 bln USD. The pessimism of the given predictions derived from connecting Russia’s economic prosperity with the oil prices which suffered a major fall to the level of 2004 in January and even turned negative in April. These forecasts did not materialize - not only for the reason of the oil prices recovery but also due to the diversification of the economy - in 2020 the export of fuel composed only 49.6%, while the other half of the goods exported consisted primarily of chemical industry products, metals (including precious ones) and agricultural products. The growth of agricultural export, as well as the ability for self-restructuration during the global recession, demonstrates the qualitative improvements in the Russian economy.

Nonetheless, these improvements still demonstrate limitations of the Russian economic growth that have both domestic and international factors involved. The given limitations are distinctly visible in the case of US-Russia bilateral trade. During the first quarter of 2020, the bilateral commodity turnover rose to 11,1% with exports increasing by 24.9%. This surge encouraged Russian officials but lost sustainability in the long-term and fell into a general negative trend. By the third quarter, the general commodity turnover of the ¾ of the year slipped down, having lost 9% of the 2019 commodities value. It became evident by the end of the year that the total sums of goods bought and sold would not reach the preceding year levels. According to the US Census Bureau, in 2020 the Russia-US export lost 900,7 mln USD in comparison with 2019, while the difference between Russia-US import in 2020 and in 2019 composed 5416,4 mln USD. This decline crucially affects economic relations. 2020 became the first year since 2016 that a stable increase in bilateral commodity turnover did not take place. However, this breakdown correlates with the global shrink of the world export and import.

That said, there is another factor worth mentioning - the qualitative characteristics and sorts of goods sold. The goods exported from Russia to the USA are mostly primary commodities and metals - 50% of the goods exported referred to the mineral products, 17,70% - are ferrous and nonferrous metals, 11,26% - are precious metals and gems. The USA, at the same time, exported machinery (38,91%) and chemical industries products (18,63%). It demonstrates that Russia was generally selling goods with a diminishing return while the products exported from the USA were more sophisticated and tended to have an increasing return. This structure remains stable despite the fact Russia is able to produce high-tech and machinery competitive in the international markets. The current structure of the economic exchange correlates with a strong and rocketing (10.3 mln USD in 2018, 138.8 mln USD in 2019, 1,7 bln USD in 2020) bilateral trade deficit for Russia that makes the trade unprofitable and can push Russia to search for partners interested in more sophisticated and costly goods from it.

There is a row of reasons limiting the prospects of the situation transformation. The first one is an outdated normative base for bilateral economic cooperation (mostly referring to 2006). The situation should have been ameliorated with Russia having entered the WHO in 2012, but it was soon followed by sanctions encouraging Moscow to cooperate economically with either Eastern partners or with semi-traditional European allies. The sanctions imposed led to export restrictions, including ones connected with space cooperation, technologies needed to ensure the safe operation of commercial passenger aviation, and other so-called national security-sensitive goods and technology. The broadness of the given category is an additional factor limiting economic cooperation not connected with one-sided exchanges with high-tech and primary commodities.

In this context, the United States' governmental and legislative institutions should:

  • Implement bilateral economic cooperation with Russia into a broad strategy of economic restoration and the restoration of global trade institutions;

  • Revamp bilateral (and, if possible) multilateral treaties regulating the goods imported quality and the lifting export restrictions;

  • Review the sanctions imposed by the previous administrations and lift the sanctions which restrict technological cooperation and trade;

  • Stimulate “old” (e.g. agriculture) and “new” (e.g. high-tech) sectors by creating platforms for creating platforms for Russian and American business leaders to network and exchange ideas.