The government has developed a plan to catch up with our northern neighbour in timber processing.
Russia will no longer settle for being a supplier of raw materials to Europe. This is certainly true when it comes to timber processing. Prime Minister Vladimir Putin announced yesterday that Russia is committed to modernizing its timber processing industry and selling its timber products on the global market, which will require imposing customs barriers on foreigners. The topic of yesterday's cabinet meeting was how to tread the fine line between protectionism and defending domestic production.
The government draws attention to the fact that its customs tariff policy remained balanced even at the height of the crisis. Unlike many foreign countries, Russian authorities did not close their borders or impose draconian export and import duties (it seems that the introduction of prohibitive tariffs on the import of foreign-made cars to Russia counts for nothing). But what can be done now that domestic producers need more protection from foreign producers than ever before? The government has decided that it is high time to formulate clear-cut rules.
Forestry, it was decided, is where the process will begin. The decision was well timed, as St Petersburg will host a Forest Summit later this week, which our Finnish "partners"--to use a favourite word of the Prime Minister--will surely attend. For a long time now the Finns have been happily buying our cheap round timber, processing it and then selling it to us as its famous Finnish paper at three times the original price of wood.
"We are no longer satisfied with the role of supplier of primarily raw timber," Mr Putin said yesterday, "nor are we satisfied with the present structure of trade: exporting round timber and importing building materials, furniture, paper, etc, i.e. goods that are ten times more expensive. Our new policy is to modernize this industry."
The first step is to raise customs duties on the export of raw timber. A decision to this effect was taken two years ago. Not surprisingly, the foreign companies whose business is based on the export of our round timber were up in arms against the decision and tried to throw a wrench in the process of Russia's accession to the World Trade Organization (WTO). Moscow responded by inviting them to come to Russia, set up shop here and do business. The government has even allowed tracts of forest to be allocated to foreigners without an auction and cut payments for the use of forests. But then the crisis hit, and demand for timber plummeted. Money for investment projects became scarce.
"In this difficult period we need additional measures to support the timber industry," Mr Putin said yesterday.
The ministers decided that several measures are required in addition to the current practice of subsidizing interest on loans to exporters and financing the purchase of technology through Rosagrolizing. Specifically, they have proposed that customs duties for some types of machinery be set at zero and the practice of granting tracts of forest without cadastral registration be extended until 2015.
A final decision has yet to be made on export duties on round timber (there was a proposal to raise them to a prohibitive 50 euros per cubic metre as of 2010). Deputy Minister of Industry and Trade, Andrei Dementyev, said after the meeting that the decision "would depend on the performance of the industry in the first 9 months and the year as a whole as well as an assessment of the effectiveness of that scale today." If export duties are adopted, one can expect disappointment from our Finnish partners, who are finding it much more difficult to sell their finished products because of the crisis. And if they cannot sell their paper, they won't need the raw materials for it. That gives us a chance to roll up our sleeves and turn this situation around in our favour.
Anastasia Savinykh
