WASHINGTON — Trade friction between Russia and the U.S. and European Union heated up Friday.
Details about new sanctions against Russia were released, while threatened counter-sanctions against Western imports of autos and textiles were reported.
The fraying trade relationship stems from a series of sanctions the U.S. and EU have imposed on Russia in the wake of its annexation of the Ukrainian peninsula of Crimea and support for separatists fighting Ukrainian government forces. Both sides are struggling to maintain a tenuous cease-fire that has been backed by Russia, but the Western governments are insisting that the Kremlin negotiate a formal resolution.
“Today’s actions demonstrate our determination to increase the costs on Russia as long as it continues to violate Ukraine’s territorial integrity and sovereignty,” said David S. Cohen, undersecretary for terrorism and financial intelligence at the U.S. Treasury Department. “The United States, in close cooperation with the European Union, will impose ever-increasing sanctions that further Russia’s isolation from the global financial system unless Russia abandons its current path and genuinely works toward a negotiated diplomatic resolution to the crisis.”
Treasury said it is expanding targeted financial sanctions against Russia’s largest bank, Sberbank of Russia, deepening existing sanctions on Russian financial institutions, expanding sanctions in its energy sector and increasing the number of sanctioned entities in its energy and defense sectors.
The EU also revealed a new round of sanctions targeting leading Russian state-run banks by reducing the terms of loans, and imposed a travel ban and froze the assets of 24 more Russian and Ukrainian separatist officials, bringing the total of people with that status to 119.
The Kremlin’s new threat to retaliate against apparel and textile imports from the West put U.S. and European brands on edge. American businesses that export to Russia or have investments in the country are keeping a close eye on the rising political tensions.
“Russia is a growing market for U.S. branded apparel and footwear, including products exported from the United States to Russia,” said Stephen Lamar, executive vice president at the American Apparel & Footwear Association. “We strongly oppose the proposed imposition of sanctions on U.S. exports by Russia. We would vigorously urge our government to challenge any trade barriers imposed by Russia, especially those that violate Russia’s obligations under the World Trade Organization.”
U.S. exports of apparel and textiles to Russia are significantly smaller than the EU’s exports to Russia. U.S. apparel and textile exports to Russia rose 51 percent to $194 million for the year ending July 31, according to the latest U.S. government data. Of that total, exports of U.S. apparel fabrics represented $169 million.
The EU exported $5.1 billion in apparel and textiles to Russia for the year ending June 30, according to data compiled by International Development Systems.
“Up until this point, there hasn’t really been any retaliation that has specifically targeted apparel brands and retailers or companies in the fashion industry, but these [comments from Russian officials] suggests that as the Russians are looking at where they are going to have the greatest impact, certainly with Europe and to a lesser extent with the U.S., consumer products may get caught up in this,” said Julia Hughes, president of the U.S. Fashion Industry Association. “We’ve seen a lot of saber rattling and we have definitely seen sanctions. If Russia takes action and expands the limits on trade, that certainly will have a chilling effect.”
Hughes said two U.S. textile export categories to Russia have grown significantly in the past year. While Russian officials have not targeted specific textile exports to date, there is likely cause for concern in the industry.
U.S. exports of man-made fiber broadwoven, bottom-weight fabrics used in men’s trousers rose 500 percent to $55 million in the 12 months ending July 31. Russia has become the fourth-largest market of that category of U.S.-made fabrics, Hughes said. Similarly, exports of U.S.-made knits and knit pile fabrics surged 400 percent to $24 million in the same period.