Väyrynen makes proposals to Russia on wood export tariff issue

EU urges direct talks between Finland and Russia on wood tariff issue

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Finland's proposal for a solution to the dispute with Russia over Russia's decision to impose high tariffs on the export of raw timber to Finland is for an end to tariffs on birch fibre wood, and a tariff-free quota for pine and spruce.
      The Finnish proposal was detailed by Foreign Trade Minister Paavo Väyrynen (Centre) at a meeting of an association of Finnish sawmill owners on Thursday.
      On Tuesday, Väyrynen is to meet with Russia's Minister of Economic Development and Trade, Elvira Nabiullina to discuss the tariff issue.
      Last summer Russia began to impose export tariffs of EUR 10 per cubic metre for raw timber. In 2009 the tariff is rising to EUR 50 per cubic metre. The aim is to discourage the export of wood raw material and to encourage the development of the wood processing industry inside Russia.
      The move has caused serious problems for Finland's pulp and paper industry, which has come to rely heavily on imports from Russia for its raw material.
     
Tariffs on birch logs for fibre are not to be introduced until 2011. However, in transport, it is difficult to distinguish between birch suitable for fibre and the more sturdy grades of birch used for the manufacture of plywood, which is subject to a tariff.
      Finnish importers say that practice varies with respect to fibre birch: some customs stations impose fees on birch, while others let it pass freely into Finland.
     
In principle, the two sides to the dispute are Russia and the European Union, but Finland is also holding direct talks with Russia. According to Väyrynen, the European Commissioner for Trade Peter Mandelson has actually recommended bilateral discussions.
      "It is my view that it is possible to reach a solution in the birch fibre issue. It is premature to say how quickly, and what kind of a settlement it will be."
      "But now it seems to be clear that Russia has a desire to treat birch logs differently, and to impose an export tariff on it."
     
The demand that birch logs should be separated into those suitable for fibre and logs used for plywood is seen as a difficult question.
      "We have tried to suggest to them that they would stop sorting the logs, as it seems to be so difficult. Then all birch would be free of tariffs."
      "But they want to treat birch logs differently than fibre wood. Logs are more valuable for them, because they have a plywood industry."
      Russia is unlikely to completely give up on export tariffs for coniferous wood. "One possibility is to place tariff-free quotas on coniferous wood. Russia is pondering this on its own side", Väyrynen said.
      According to Väyrynen, Finland wants a quick, permanent solution. "It is possible that Russia will unilaterally change its decision so that it will better satisfy the interests of the Finns and others."
      The wood tariffs are linked with Russia's hopes to join the World Trade Organisation, whose rules only apply to import quotas. Therefore, Väyrynen feels that the time for negotiations is now.
      "When Russia is a member, our negotiating position will deteriorate", Väyrynen says.
      He looks back to 30 years ago, when as Foreign Minister he negotiated with the Soviet Union on wood trade. At that time, the Russians were trying to persuade Finland to buy more wood, than it wanted. Instead, Finland wanted to protect the livelihood of Finnish forest owners.
     
Commenting on Väyrynen's views was former Stora Enso strategy director Arno Pelkonen, who noted that the price of Russian wood has risen strongly in the present decade, even without the export tariffs. "Pricing is not transparent. In plain language, the price rises have flowed into the pockets of the so-called men in leather jackets", he said.


Previously in HS International Edition:
  Commissioner says negotiations on Russian wood tariffs remain open (29.10.2007)
  EU Commission: No speedy solution in sight in dispute over Russia’s timber export tariffs (25.10.2007)
  Väyrynen demands discussion of wood tariff dispute at EU-Russia Summit (18.5.2007)
  UPM to start lay-off talks following shortage of birch logs (16.5.2007)
  Russian export tariff could end timber imports into Finland (12.2.2007)

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