Wood tariffs cause friction between Finland and Russia

Dispute an ongoing dispute about export tariffs on timber, Prime Minister Matti Vanhanen of Finland has announced that he will be supporting Russia in its bid to join the World Trade Organization (WTO).

According to the St. Petersburg Times, Vanhanen was interviewed by Bloomberg Television in Helsinki last week. “We have a lot of interest in getting Russia into the WTO,” he said during the interview. “It would benefit the whole European Union.”

For the last 15 years, Russia has been the world’s largest economy to remain outside the international organisation, though not through lack of trying. Despite gaining membership to WTO being one of the current Russian administration’s primary goals in terms of foreign policy, the problem of wood exports remains a point of contention.

Finland buys approximately 20 per cent of its timber from Russia and stands to be most affected by any changes in Russia’s export tariffs on wood.

“Of course these export duties on raw timber will damage our forestry industry,” Vanhanen said. “We cannot accept and understand why Russia is doing this. It is our biggest problem with Russia.”

For its part, Russia hopes that increased tariffs on wood exports will encourage domestic wood processing and manufacturing. But Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, says Russia’s internal economy may also be harmed by the export tariffs.

“Timber has the potential of being a key export good for Russia, but now its exports are falling,” Erixon said.

According to Finland’s Ministry for Foreign Affairs, the issue remained unresolved despite discussions between EU Trade Commissioner Peter Mandelson and Russian Deputy Prime Minister Alexei Kudrin.