Russian wood tariff angers Sweden

Russian wood tariff angers Sweden

By David Ibison in Stockholm

Published: May 7 2008 17:15 | Last updated: May 7 2008 17:15

New Russian tariffs on wood exports breach the terms of its proposed entry to the World Trade Organisation and reveal it is not yet capable of “joining the market economy family”, according to Ewa Björling, Sweden’s trade minister.

Russia doubled tariffs on wood exports to $15 per cubic metre on April 1 and plans to increase them to $50 next year despite agreeing a standstill agreement with the EU as part of its negotiations over WTO membership.

In a blunt welcome message for Dimitry Medvedev, who was sworn in as Russia’s president yesterday, Ms Björling said the issue could easily “delay” Russia’s WTO membership and pledged to step up international efforts to condemn the price rises.

“This is completely the wrong way to go about becoming a member of the WTO,” said Ms Björling in an interview. Russia has been trying to join the WTO since 1992.

The wood tariff issue is one of the most controversial in the Nordic region. Europe’s two largest paper companies, Stora Enso and UPM-Keymenne, have operations in Finland and Sweden and employ tens of thousands of workers in both countries.

The planned tariff increases will have a profound impact on the paper companies by making them far less competitive at a time when rivalry from China and South America is increasing.

These additional cost pressures will come as the industry is suffering due to falling global demand, especially for newsprint, prompting industry-wide overcapacity.

The paper companies believe Russia is increasing the tariffs to try and get them to move their factories to Russia. Ms Björling said Russia apparently wants to be a “producer and not a supplier”.

The Finnish Forest Industries Federation has warned up to 25,000 jobs could be lost in Finland and Ms Björling said yesterday that Stora Enso believes up to 6,000 jobs in Sweden may also be at risk.

The issue is of particular political importance in Sweden and Finland as both countries are struggling with rising rural unemployment – exactly the areas where the paper firms are located.

Sweden plans to try and step up efforts to convince other European countries that Russia’s commitment to the core principles of the WTO has been seriously undermined.

“This must change if Russia wants to prove it can behave like a real market economy,” she said. “They have to realise they are just hurting themselves by behaving like this.”

The European Commission is exerting pressure on Russia and the issue is expected to be brought up at a meeting the prime ministers of Finland and Russia at the end of the month.