LOOKING EAST
Russia finally cracks WTO A
fter 18 years of talks, threats, pleas and negotiations, Russia was finally admitted into the World Trade Organisation as a
member country on December 16 last year. The admission ceremony was held in
Switzerland, after the Swiss early last year managed to help Georgia and Russia sit down to sort out their differences, effectively removing the last barrier to the major Eastern power’s WTO entry. Until December, Russia was by far the biggest economy left out in the cold by the WTO and the last of 20 major economies still outstanding once China had signed on in 2001. The membership was, according to President
Dmitry Medvedev, the “result of long and complex talks” and was “good both for Russia and for our future partners”. The former statement cannot be disputed but, while membership to the WTO will certainly have its benefits, challenges remain for Russian dealings with the rest of the world. For a start, restrictions on Russian trade with the world’s largest economy, the US, still exist from the Cold War days. This will have to be resolved before the US and Russia are able to benefit from fresh trade agreements under the WTO umbrella. For the forest sector, the foremost shift will be expected changes to Russia’s log export taxes that were implemented several years ago. While this measure aimed to boost the country’s secondary forestry industry, the immediate effect was to threaten Russia’s status as the world’s greatest exporter of roundwood (and in the process threaten the livelihood of thousands of Russian foresters). The Russian Government decided to increase its timber export duties from July 1, 2007,
having already raised duties for softwood, from €2.5/m3
to €4/m3 in June the previous year. The plan had been to hit all timber exports
(except birch of less than 150 mm diameter) with export duties that would rise incrementally from €10/m3
in 2007, to €15/m3 in 2008 and up to €50/m3 in 2009.
The global economic crisis, round one, forced the postponement of the final hike and current duties will now be maintained until all the paperwork for Russian entry to the WTO can be cleared
The Fins, who export millions of cubic meters
of roundwood over the border every year for processing at highly sophisticated sawmills, were gutted by the increased duties and have been kicking and screaming ever since. Finnish sawmillers and politicians now seem otimistic that these tariffs will be revised under WTO scrutiny but have taken the opportunity to remind the world that Russian logs should never carry inhibitive export tariffs, which they
Russia. Timber has to be imported because Finland’s own supply of birch pulpwood is insufficient. Expansion of the Finnish owned sawmilling sector in Russia has also boosted imports of chips in recent years. “Export duties cannot be considered an acceptable means of promoting investments because, at least in this case, they are a clear trade restriction and, ultimately, will have impacts similar to export bans. “For example, no export duties on timber are collected in the EU, USA, Canada or Brazil. “Over the last 15 years, Finnish companies
Russia’s WTO membership was the result of long and complex talks and is good both for Russia and for our future partners – Russian
President, Dmitry Medvedev
say targeted Finland. “Timber export duties will not be removed in their entirety once Russia joins the WTO, but they will not target the timber grades, which are imported by Finland, as heavily as has been the case up to now,” the Finnish Forest Industries Federation stated. “The duties levied on hardwood will reduce by about three-quarters and softwood duties will be cut by about half. “Most of the raw material that Finnish forest
industry has imported from its eastern neighbour is of a type that is little used in
64 International Forest Industries | FEBRUARY/MARCH 2012
have invested a total of €1 billion in the Russian forest sector. The projects have helped Finnish forest industry operators to acquire valuable experience in the purchasing of local raw material for plants they are planning to build in Russia.” Russia’s entry into the WTO is expected to be
worth “hundreds of millions of euros” to Finnish export companies. Assuming that the imports remain at the
current level, the reduction in Russia’s export duties will bring the Finnish forest industry savings of about €20 million. The exports of paper and paperboard will produce annual savings of about €10 million. Boris Kheyfets from the Russian Academy of Sciences failed to share the relief of the Fins and instead showed concern for the car industry and the forestry sector, which he said would find it increasingly difficult to compete once it was forced to lower its export duties. “Products such as paper, for example, will be cheaper to import than to produce until the industry becomes more efficient. And from 2012, Russia’s car industry will no longer be able to depend on state subsidies or the protection it receives from duties imposed on imported cars. “Similarly, foreign investors will have less
incentive to relocate production facilities to Russia in exchange for customs exemptions.” IFI
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