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. Last Updated: 07/27/2016

Wood Duty Rise May Hit WTO Bid

Itar-TassKarelian timber being loaded onto a truck in January. 80 percent of Finland's wood imports are from Russia.
HELSINKI -- A Russian decision to raise export duties on unprocessed timber violates a treaty with the European Union and could endanger Moscow's bid to join the World Trade Organization, Finland said Friday.

Russia said last month it would more than double duties on raw log exports in July and raise them again sharply in the next few years, a move that alarmed the paper and pulp industry in Finland, which imports wood from its eastern neighbor.

"The Russian export duty increases contradict the [May 2004] bilateral treaty between the EU and Russia. This being so, a solution has to be found before WTO membership comes into being," the Finnish Foreign Ministry said in a statement.

President Vladimir Putin wants the export tolls to boost investment in domestic timber processing and produce higher value exports than raw logs.

But an EU official said the proposed duties were unacceptable and that Trade Commissioner Peter Mandelson had raised the issue with Russian Economic Development and Trade Minister German Gref.

"It is a backtracking on an explicit commitment that Russia made to us in 2004," the official said. "We regard it as unacceptable and very much hope the increases won't happen."

A presidential decree aims to raise duties on raw timber exports to 10 euros ($13.2) per cubic meter in July from a current 4 euro minimum and increase the duties to 15 euros per cubic meter in 2008 and to 50 euros a year later on most wood.

Finland imported 17 million cubic meters of Russian lumber last year, or 80 percent of total wood imports to the Nordic country.

Paper and pulp account for roughly 20 percent of Finnish exports, with Stora Enso, UPM-Kymmene and M-real the biggest companies.

Finnish industrialists have said the duties could make Russian exports no longer viable.