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Wednesday, August 22, 2007

Sweden Bashes Russia over WTO

Reuters reports that Sweden has said it plans to raise new objections to Russia's membership in the World Trade Organization. Another brilliant success for Vladimir Putin in international diplomacy:

Sweden warned Russia on Monday that it could be harming its chances of World Trade Organisation (WTO) membership and future investment with its behaviour towards trading partners. Swedish Trade Minister Sten Tolgfors told Reuters he felt direct trade discussions with Russia were no longer productive and he had asked for EU help as he accused the Russians of failing to live up to promises on timber tariffs. "This is the first time my government is really this outspoken and critical towards Russia," he said in an interview. Tolgfors's office said earlier he had written to EU Trade Commissioner Peter Mandelson raising objections to Russia's planned membership of the WTO.

The letter was prompted by Russian plans to sharply raise export duties on birch timber. "I think simply that the highest leadership of Russia has not seen the linkage to the conditions for the WTO membership. So that's why the promises made by ministers have not been fulfilled," Tolgfors said. "It's very hard for me to continue a dialogue when the agreements are not fulfilled. That's why it has to go back to the Commission and they have to handle this issue with urgency in the WTO negotiations," he said. Russia is negotiating in Geneva for entry into the WTO, possibly next year, and the Commission represents the members of the EU, which include Sweden.

Russia as of July began charging a 10 euro ($13.50) export duty on each cubic meter of hardwood timber. It plans to raise that to 50 euros a cubic meter in January 2009, with one interim increase in April of 2008. Tolgfors said he had been promised by Russia that birch would be exempted from any export moves until 2011. Birch is a key import for Sweden because it is mixed with Swedish-grown timber to make pulp used in wood products. The move could make it impossible for some Swedish timber importers to turn a profit and could lead to plant shutdowns and lost jobs, the minister added. An official in his office said Sweden employs 90,000 workers in the forestry industry, or 1 percent of the population. Tolgfors, who expects the EU to support Sweden, said Russia's actions were also in breach of a 2004 agreement between the EU and Russia. "Yes, I really do think the commission will support this," he said, noting the European Commission had already rejected a Russian compromise proposal, as had Sweden and Finland.

Russia, Tolgfors said, appeared to be trying to force wood products companies to invest in Russia and add value there. "Their motive for imposing this export tariff is that they want to encourage companies to invest in Russia and not export raw materials but export products," he said. But he argued it could have the opposite effect. "This is sending a signal that the business conditions are not that stable, and that I think is going to hurt investments in Russia," he said.


Anonymous said...

Sometimes I am ashamed to be Swedish.

La Russophobe said...

Many who will read your idiotic comment will feel the same.

Anonymous said...

It seems that time and again authoritarians fail to realize that the decisions they make to try and strongarm business interests and squeeze as much as possible from them have the OPPOSITE effect of helping their country or their economy, or even their treasury. People simply take their money some place else, unless they have nowhere else to go.

Where export tariffs are concerned, I would understand better the function they serve, for example, in the case of sensitive military equipment, or anything else where the deal requires expensive government involvement and therefore recouping the actual cost to government of having such a deal go through requires such a tax, it might be sensible to impose such a tariff, but in the case of lumber? I shouldn't think so; one doubts very seriously that the export tax on lumber is meant to pay for the enforcement of environmental protections imposed on the lumber industry, or anything else that is meant to offset a detrimental effect that the the logging produces.

I am not an expert on the lumber industry, but if they raise the tariff to 50 euros a cubic meter, I shouldn't be surprised to find that Russian exports of hardwood take a serious hit at that; it's like a 20% tax, based on current hardwoods prices, which of course will be in addition to any other taxes the lumber companies are already paying. That hurts Russians first and foremost, by my assessment.