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Russia’s Tariff continued on page 3
In This Issue:
Director’s Notes...2
Autumn 2012
Introduction
Russia’s endowment of natural resources is rarely debated.
Russia was the world’s largest exporter of natural resources
in 2008, with exports of USD 341.2 billion, which repre-
sented 9.1 percent of world natural resources trade (WTO
2010). Despite the fact that Russia contains the largest area
of natural forests in the world, its current share in the trade
of the world forest products is below 4 percent. “Forests
occupy over half of the land of the country, but the share
of the forest sector in the 2010 gross domestic product
(GDP) was only 1.3 percent; in industrial production, 3.7
percent; in employment, 1 percent; and in export revenue,
2.4 percent” (UN FAO 2012). The Russian Federation’s
intentions to support value-added processing by instituting
an export tariff on roundwood in 2007 has been well docu-
mented (CINTRAFOR News Winter 2009). This article
will review Russian softwood and hardwood market trends
up to 2007 and the government’s justi cation for institut-
ing export tariffs on roundwood, as well as discuss trends
in domestic production from 2007 to 2011 to evaluate the
short-term effectiveness of the log export tariff. Finally,
this article will conclude by highlighting some of the direct
effects that WTO accession has had on the log export tariff.
Of particular focus is how this may affect Russia’s trade of
forest products within the Paci c Rim region.
Forest Sector Trends up to 2007
Roundwood exports:
During the period 2001-2007, global log exports declined
by 14.4% while Russian log exports increased by 36%. As
a result, the Russian share of global log exports increased
from 21.4% in 2001 to 32.8% in 2007. Russian exports of
roundwood peaked at 51 million cubic meters in 2006. In
the same year, imports of Russian softwood logs repre-
sented 91.9% of total Chinese softwood log imports, 38.9%
of Japanese softwood log imports, 24% of South Korean
softwood log imports and 74.5% of Finnish softwood log
imports (Table 1).
The vast majority of Russian hardwood log exports go
to Finland and China, with market shares of 49% and
35.4% respectively in 2007. However, between 2001
and 2007, the Finnish share of Russian hardwood log
exports dropped from 71% to 49% whereas the Chinese
share jumped from 11.4% to 35.4%. The large increase
in the volume of hardwood log exports from Russia was
largely absorbed by the Chinese market where imports
rose from just under 1 million cubic meters in 2001 to 4.6
million cubic meters in 2007. This is similar to the trend
observed with Russian softwood log exports.
Lumber exports:
While hardwood logs comprised 28.5% of total Rus-
sian log exports, hardwood lumber represented just 3%
of total lumber exports in 2007. The ratio of hardwood
lumber exports to total lumber exports declined steadily
from 5.1% in 1998 to 3% in 2007, although the volume
of hardwood lumber exports increased from 293,000
cubic meters in 1997 to 480,000 cubic meters in 2007.
In contrast, softwood lumber exports increased rapidly,
jumping from 4.6 million cubic meters in 1998 to 16.8
million cubic meters in 2007.
Wood-based panel exports:
Russian total exports of wood based panels displayed
strong growth through 2007. Wood-based panel exports
were dominated by plywood, although a drop in plywood
exports in 2007 caused the share of plywood in total
wood-based panel exports to drop from 68% in 2006 to
61% in 2007. However, exports of both particleboard
and berboard continued to grow through 2007. While
berboard exports grew by just 4.5% between 2006 and
2007, particleboard exports jumped by 62% over the
same period. The 4.7% drop in Russian plywood exports
in 2007 came as global exports of plywood increased by
3.3%, suggesting that Russian plywood had become less
competitive in global markets, although strong domestic
demand within the construction sector also contributed
to the decline in plywood exports. In
By: John Simeone and Ivan Eastin, School of Environmental and Forest Sciences, University of Washington
Table 1. Major destinations for Russian softwood log exports (cubic meters).
2001 2002 2003 2004 2005 2006 2007
Sof twood Total 29,524,993 28,309,665 27,667,734 31, 078,046 34,309,665 37, 195,326 36,415,182
Chin a 9,640, 210 12,860, 826 12,285,199 13,245,657 16, 298,962 19, 051,215 23, 049,945
Fi nl and 4,851, 867 5,458, 677 5,284,514 5,514, 956 6,907,796 5,811, 051 3,733,609
Japan 8, 368,293 4, 533,564 4,701, 822 5,637,715 4,553, 876 5,094,752 4, 376,285
S. Kore a 2,273, 866 1,572, 728 1,509, 187 1, 593,686 1,733,416 1,974,156 1,224,245
Swede n 1,681, 813 1,449,060 1, 386,941 1, 456,914 899,346 584,843 369,940
Estonia 458,173 456, 919 778,111 1, 303,122 1, 277,779 1,444, 414 989,904
Turke y 429,058 453, 608 522,323 882,296 1,087,972 1, 251,416 820,595
Total l og ex ports 37,562,542
36,659,062 36,921,235
41,389,639 47,945,184 51,080,881 49,291,371
Source: (UN Food and Agricul ture Organization 2008; Global Trade Atlas 2008)
Russian softwood log exports
2
Director’s Notes
The forestry and wood products manufacturing
sectors have always played an important role
in the economy of Washington State. This
is particularly true in rural timber-dependent
communities and Native American communities,
where employment within the forest products
sector is often a major source of family wage
jobs. In the state of Washington the forest
products sector provided over 25,000 jobs,
generated approximately $14.5 billion in gross
business revenues and paid out over $1.5 billion
in wages in 2011. However, continued weak
domestic demand for wood products as a result of
the 2006 nancial crisis has devastated the forest
products industry in Washington and across the
US. In response, forest products manufacturers
have increasingly looked offshore to supplement
weak domestic demand, particularly those
in Washington. Washington remains the
largest exporter of forest products in the US,
representing over 17% of total US wood exports
in 2012 and the forest products industry is the
fourth largest export sector in Washington. 2012
has been a dramatic year for the forest products
industry in Washington State, and as we near
the end of the year, it is useful to take the time
to consider how the state has performed. In this
quarter’s Director’s Notes, I provide an overview
of the projected trade data for Washington State
(based on actual exports through September
2012). Next quarter’s Notes will offer a more
detailed analysis of the trade statistics for
Washington State on a port by port basis.
Exports of wood products from Washington
State were down sharply in 2012 (-22.9%),
primarily as a result of a sharp decline in wood
imports by China (-6.1% through October).
However, since the start of the economic crisis
in the US, Washington state has seen its exports
increase substantially (+64.7%) and its share of
US exports has increased from 12.2% in 2006
to 17.2% in 2012. Washington remains the
largest exporter of wood products in the US by
a large margin, with the second largest exporter,
Oregon, having a market share of just 7.6% of
total US exports. Washington’s wood exports
are primarily targeted towards three markets,
with 84% of total exports going to Japan (33.5%
export market share), China (26.3%) and Canada
(24%). This mix of markets has changed little
(with the singular exception of China) since the
start of the nancial crisis in 2006, when 52% of
Washington’s total wood exports went to Japan,
5.7% went to China and 27.3% went to Canada
(Table 1). Clearly China has become a much
University of Washington
School of Environmental &
Forest Sciences
Box 352100
Seattle, Washington
98195-2100
Phone: 206-543-8684
Fax: 206-685-0790
www.cintrafor.org
The Center for International
Trade in Forest Products
addresses opportunities and
problems related to the
international trade of wood
and ber products.
Emphasizing forest
economics and policy impacts,
international marketing,
technology developments,
and value-added forest
products, CINTRAFOR’s
work results in a variety of
publications, professional
gatherings, and consultations
with public policy makers,
industry representatives, and
community members.
Located in the Paci c
Northwest, CINTRAFOR
is administered through the
School of Environmental
& Forest Sciences at the
University of Washington
under the guidance of an
Executive Board representing
both large and small
companies, agencies, and
academics. It is supported
by state, federal, and
private grants. The Center’s
interdisciplinary research
is carried out by university
faculty and graduate students,
internal staff, and through
cooperative arrangements
with professional groups and
individuals.
Table 1. Washington wood products exports, by country of destination. (US$)
Table 2. The export mix of products has changed substantially since 2006.
more important trading partner over the past six
years, increasing its imports from Washington by
almost 700% while Japanese imports of wood from
Washington have increased a more modest +6.3%.
In 2012, Japanese imports of wood products
from Washington are projected to total $443,000,
followed by China ($348,000) and Canada
($318,000).
The overall mix of wood products exported from
Washington State has changed slightly since 2006,
with the share of logs dropping from 54% to 50%
of total wood exports while lumber has increased
from 21% to 27%, plywood has increased from
2.6% to 6.7% and builder’s joinery has dropped
from 10.4% to 8.2%. The mix of wood products
differs across the three major markets in 2012
with both China and Japan favoring logs and
lumber while exports to Canada are mainly lumber,
builder’s joinery, millwork and plywood (Table 2).
However, the mix of products sent to Washington’s
three major export markets has changed
substantially since the start of the economic crisis
in 2006, although in different ways. For example,
the mix of exports going to Japan has seen a
substantial shift from logs to a greater emphasis on
lumber, while the opposite trend has occurred in
China. Despite these shifts, both markets remain
heavily oriented toward the import of logs over
lumber, while imports of all other wood products
remain small by comparison. The mix of wood
products imported by Canada is more varied,
with large amounts of lumber, builder’s joinery,
millwork and plywood being shipped north.
In summary, the past six years has resulted in
substantial changes for the forest products industry
in Washington. Facing weak demand for their
products in the US, Washington’s exporters have
increasingly looked offshore, particularly to
Asia, to supplement demand for their products.
While 2012 looks to be a less-then-stellar year for
exporters in Washington (and the rest of the US),
a number of stimulus measures in China designed
to speed up infrastructure projects and improve the
competitiveness of Chinese wood exporters, should
increase the demand for wood products, particularly
from Washington, in China.
2006 2007 2008 2009 2010 2011 2012e 2011-2012
Total $802,485 $854,053 $983,352 $853,790 $1,301,506 $1,714,830 $1,321,448 -22.9%
Japan $416,391 $354,967 $419,237 $331,746 $377,507 $421,012 $442,526 5.1%
China $45,517 $49,788 $47,962 $82,272 $392,512 $717,517 $347,924 -51.5%
Canada $219,169 $243,033 $261,087 $199,078 $277,816 $308,761 $317,746 2.9%
S. Korea $38,878 $101,648 $135,384 $136,195 $116,764 $125,960 $83,650 -33.6%
Japan China Canada
2006 2012 2006 2012 2006 2012
Logs 90.5% 71.9% 11.8% 78.6% 2.7% 2.2%
Lumber 5.4% 24.9% 78.2% 20.1% 22.2 29.3
Builder Joinery 3.1% 2.5% 2.1 0.3 28.0% 26.7%
Veneer Sheets 0.0% 0.0% 5.0% 0.1% 4.4% 1.2%
Plywood 0.1% 0.2% 0.2% 1.1% 8.6% 12.2%
Millwork 0.1% 0.6% 2.4% 0.0% 15.3% 12.2%
3
Russia’s Tariff continued on page 4
Russia’s Tariff continued from page 1
tariffs designed to reduce the export of roundwood. In 2008,
the Ministry of Industry and Trade adopted an initiative titled
“Strategy for the Development of the Forest Complex to
2020,” which formally enumerated the policies that Russia
would enact to encourage the development of a domestic
processing industry. One initiative that was stressed was a
mechanism of subsidizing timber processing development as
a way to attract investment, for priority investment projects
(MINPROMTORG 2008).
An export tariff on unprocessed timber, or roundwood, was
announced on February 5, 2007 by the Russian government.
This policy levied an ad valorem export tax on roundwood
that would increase incrementally each year. By instituting
an export tax on unprocessed wood, the Russian government
intended to decrease exports of raw wood in order to increase
its price abroad and lower its domestic price, thereby direct-
ing log sales into the domestic market.
Beginning on January 1, 2007, the Russian Federation’s
tax on roundwood was set at 6.5%; on July 1, 2007 the tax
was increased to 20% and on April 1, 2008, the tax again
increased to 25%. While the Russian government’s goal had
been to increase the export tax rate to 80% by January 1,
2009, in early November 2008 the Russian authorities, citing
the rapidly deteriorating global nancial crisis as well as in
response to pressure from Scandinavian countries that were
heavily dependent on Russian logs, announced that they
would delay the implementation of the 80% log export tax
inde nitely.
Where lies the competitive advantage?
Before looking at domestic production trends in Russia
between 2007 and 2011, one needs to consider whether
Russia possessed a competitive advantage in the value-
added manufacturing of wood products. “Competitiveness in
economics usually refers to the ability of countries, indus-
tries, or rms to prosper in certain market conditions. It is an
elusive concept, with few clear indicators” (Makela 2009)
and an industry’s competiveness can be attributable to many
domestic and international factors. The following discussion
will touch upon both aspects of competiveness.
Ignoring this important issue can lead to the provision of
expensive subsidies to manufacturers and result in the disas-
trous over-development of the wood processing sector (e.g.
Indonesia and plywood). It has been repeatedly demonstrated
that lacking any clear basis for developing a competitive
advantage in wood processing generally results in an inef-
cient wood processing sector that is unable to compete
internationally without the continued provision of subsidies
over the long-term. This discussion also addresses the issue
of whether Russia can indeed develop an internationally
competitive wood processing sector in the future.
Domestically, there are several factors that need to be consid-
ered including the cost, quality and availability of labor, cost
of capital, hosting conditions (including the perception of
risk), presence of supporting industries and exchange rates.
For example, Russia is expected to experience a decline in
the availability of working age labor in the future, particular-
ly in the timber growing regions (including the Urals, Siberia
and the Russian Far East) where the decline in workers
will exceed the national average (CIBC 2007). These three
regions which contain 54% of the economically available
timber harvest, have an under-developed wood processing
sector capable of processing about 10% of the actual harvest
and less than 5% of the economically available harvest.
Attracting and retaining quali ed workers in these regions
poses a challenge for the Russian government, particularly in
the areas of sales/marketing and technical managers.
Related to the labor issue and the underdeveloped wood
processing industry, is the absence of related and supporting
contrast, the sharp growth in Russian particleboard exports
(up 62%) in 2007 came as global exports of particleboard
fell off by 3.5%. This anomaly was likely attributable to the
addition of new, more ef cient particleboard production ca-
pacity in Russia whereas little new plywood capacity addition
occurred between 2004 and 2007.
Production Trends between 1998 and 2007
Russian production of industrial logs increased by 12% in
2007, exceeding 160 million cubic meters. Much of the
production increase was attributable to increased investment
in building construction and infrastructure projects in Russia.
Just over half of the industrial log production was sawlogs
(51%), while an additional 37.4% was pulpwood. Produc-
tion of hardwood sawlogs increased by 79% between 1998
and 2007, while softwood sawlog and pulpwood produc-
tion doubled. Russian total lumber production increased
over the period 1998-2007 and showed a strong upsurge in
2007, driven by increased domestic demand. Total lumber
production increased by 18.4% from 1998-2007, softwood
lumber production jumped by 30.8% while hardwood lumber
production actually declined by 29.8% over the same period.
The hardwood lumber production decline was skewed by the
unusually high level of production in 1998 and the sudden
drop in 1999. Since 1999, hardwood lumber production
increased by 13%.
Russian production of wood-based panels increased rapidly
from 1998 to 2007 as a result of increased investment in this
sector, although the particleboard industry bene ted more
than plywood, and since 2005, the MDF sector has grown
rapidly. During this period, the production of wood-based
panels almost tripled, with plywood increasing by 151%, par-
ticleboard increasing by 238% and berboard increasing by
720%. In 2007, production for the entire industry increased
by 9.5%, whereas within the different sectors production
increased by 5.7% (plywood), 12.5% (particleboard) and
15.7% ( berboard). Despite the increases in production over
this time period, regional production data exposed the fact
that wood processing capacity in Russia lagged far behind the
available resource. Data from 2005 indicates that in only two
regions, the Northwest and Siberia, did the processing capac-
ity exceed 25%. In the remaining ve regions, which possess
about half of the country’s available harvest, the processing
capacity averaged just 6.6% of the actual harvest and just
over 3% of the economically available timber harvest (CIBC
2007).
Forest sector competitiveness through trade policy
The vast differences in regional production trends did not go
unnoticed by the Russian government and former Presi-
dent Vladimir Putin. In 2006, at a meeting on forest sector
development, Putin acknowledged the lack of domestic
production: noting that “processing facilities are needed…we
are desperately short of processing capacity…there are not
enough companies performing even minimum processing…
and [Russia is] doing little to develop our own wood products
and timber processing industry” (Russian Federation 2006).
In order to make the forestry sector and timber industry more
competitive, Putin called for the prioritization of: (1) the legal
foundation for forest sector development via the passing of
the new, more effective, Forest Code; (2) structural change in
the sector by helping small companies transition from logging
to value-added processing; and (3) economic conditions that
would make processing attractive to investors. “These issues
are all interlinked,” stated Putin, “and if we fail to deal with
one of them, we will fail to resolve the problem as a whole”
(Russian Federation 2006).
Beginning in 2007, the Russian government implemented
a series of policies designed to promote the development of
the wood processing sector. In 2007, in addition to passing
a new Forest Code, Russia announced a series of log export
4
industries. Operating a sawmill requires more
than simply building and staf ng the sawmill.
It also requires the presence of related industries
to purchase the mill residues, such as a pulp mill
or a bio-energy facility (facilities that require
a substantially larger capital investment than
sawmills). Similarly, having a large, competi-
tive logging industry and adequate transportation
infrastructure is critical to ensuring an adequate
supply of competitively priced logs. A trans-
parent and fair investment climate is important
in order to attract capital investment. Finally,
transparency of forest ownership, risk of expro-
priation, transparency of governance and the
endemic nature of corruption are all of concern
to potential investors.
The economic indicators most often used to
assess export-oriented competitiveness “do little
to measure the potential competiveness of a country, but
rather assume that the potential has already been realized and
is therefore evident in its current export statistics” (Makela
2009). Recognizing this, Makela (2009) uses Russian export
data to make some rudimentary observations regarding what
Russian wood products currently have the highest revealed
comparative advantage (RCA). Makela (2009) nds that “the
most competitive products in the Russian forest sector are
products that require little processing” with untreated conifer-
ous wood in the rough and chemical wood pulp being the
most competitive products (Table 2) and concludes by noting,
that:
“While Russia’s forest products are not particularly developed,
as could be seen from their RCA indicators, Russia had not
been ‘left behind’ in terms of modernization either. Russia’s
export basket represents the type of export basket a country in
that development state would export. This does not mean that
trade policy could not be used to improve Russia’s situation,
but it does mean that Russia’s current level of export sophisti-
cation is by no means unusually low.”
“Russia has so far focused on the low end processing part
of the forest industry: roundwood, sawnwood, and pulp. It
is now attempting to transform its industry toward more
value-added products, but it is a relevant question to ask
whether this would necessarily even be desirable. The aim
to develop production toward high levels of sophistication
makes sense, particularly as Russia possesses vast natural
resources and hence a natural advantage in the eld. Still,
the transition the industry currently faces may make a
transition from raw materials to processed goods production
unpro table at least in the short term” (Makela 2009.)
Production and export trends from 2007 to 2011
The combined effects of the global nancial crises in 2009
and Russia’s export tax on roundwood in early 2007 contrib-
uted to a drastic decline in Russia’s total roundwood exports
–from 49.3 million m3 in 2007 to 21.9 million m3 in 2011.
However, understanding the short-term effectiveness of the
export tax can be helped by looking at domestic production
and export trends since 2007; although, as Makela (2009)
suggests, the short-term trends may not necessarily be indica-
tive of the potential for long-term success.
Looking at production trends beginning in 2007, the dra-
matic decreases in production of all forest products between
2007 and 2009 is obvious. Most notable, and expected, is the
plunge in total roundwood production (Figure 1). However,
since 2009 roundwood production has been rising with the
largest increases coming from the production of coniferous
Russia’s Tariff continued from page 3
Russia’s Tariff continued on page 5
0
20
40
60
80
100
120
140
160
180
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Othe r Indust Roundwd(C)
Othe r Indust Roundwd(N C)
Pulpwood,Round&Split(C)
Pulpwood,Round&Split(NC)
Sawlogs+Veneer Logs (C)
Sawlogs+Veneer Logs (NC)
Industr ial Roundwood + (Total)
Figure 1. Domestic Production of Roundwood (FAOSTAT 2012)
Table 2. Products with the highest RCA indicator in the Russian forestry sector in 2006
HS # Ite m RCA
440320 Untreated coniferous wood in the rough 16.45
470411 Unbleached coniferous chemical wood pulp 14.90
440399 Wood, not elsewhere specified, in the rough 11.02
470311 Unbleached coniferous chemical wood pulp 9.30
440391 Oak wood in the rough 6.74
440610 Railway or tramway sleepers (cross-ties of wood) 5.67
441212 Plywood with >=1 outer ply of non-coniferous 5.58
440690 Railway or tramway sleepers (cross-ties of wood) 4.71
480421 Unbleached sack kraft paper, uncoated 4.06
441111 Fibreboard of a density >0.8g/cm3 3.67
Source: Makela 2009
5
Russia’s Tariff continued on page 6
sawlogs and veneer logs. Domestic production of
sawnwood (Figure 2) also slumped between 2007
and 2009, but began an upward trend again in
2010 due to an increase in coniferous sawnwood
production capacity, increased domestic demand
and a rapid expansion in lumber exports (up
380% between 2007 and 2011). Coniferous sawn-
wood production in 2011 exceeded 29 million
m3 , a record production volume. Non-coniferous
sawnwood production remains low, reaching just
2.6 million m3 in 2011. Production of wood-based
panels fell to 8.6 million m3 in 2009 (Figure
3), before resuming its rapid growth trajectory
between 2009-2011. The largest production
gains occurred with particle board, followed by
plywood and berboard.
Lower domestic log prices would be expected
to encourage an increase in domestic production
of secondary wood products while reduced log
exports and lower prices should translate into an
increased demand for Russian processed wood
products in international markets. As discussed
earlier, short-term production trends reveal that
the production of wood products is growing,
although this growth is skewed towards the
production of low-value-added products. In
contrast, Russian wood products’ exports pres-
ent a mixed picture (Figure 4). The total export
value of wood products declined from $8.8
billion in 2007 to $5.5 billion in 2009 largely
due to a 49% drop in log exports and the
impact of the global nancial crisis. Between
2007 and 2011 the export value of all wood
products decreased by 16.2%, while exports of
value-added wood products increased by 16.8
% to $5 billion in 2011. This trend was driven
by increased exports of lumber (+12.4%), ply-
wood (+20%) and veneer (+426%). It should
be noted that much of the increased production
of wood products was consumed domestically
in response to large increases in infrastructure
and construction spending.
Russia’s WTO Accession
On August 22, 2012 Russia of cially became a
member of the World Trade Organization (WTO). Russia’s
accession to the WTO will affect the competitiveness of Rus-
sian timber in foreign markets, as well as change the incentive
structure of the domestic timber industry and thereby impact
the domestic market as well (Sheingauz and Antonova 2008).
WTO membership requires Russia to reduce barriers to foreign
investment, lower import and export tariffs, and should im-
prove Russia’s access to international markets (Rutherford and
Tarr 2010).
Following its accession into the WTO, Russia instituted an
abrupt change of policy with respect to the log export tariff.
Abandoning its goal of imposing an 80% log export tariff, Rus-
sia has now instituted an elaborate set of tax rates for round-
wood exports and introduced volume tariff rate quotas (TRQs)
for certain timber species. Two of these TRQs establish an
in-quota duty rate of 13% for spruce (Picea abies Karst) and
silver r (Abies alba Mill) while red pine (Pinus sylvestris L.)
will have an in-quota export duty rate of 15%. These duty
rates, however, will continue to fall over the next several years
as Russian moves to comply with the nal bound rates (8% by
2015) as established in the WTO accession package. The of-
cial Russian newspaper, Rossiskaya Gazeta (2012), recently
reported that all out-of-quota duty rates will be set at the
unprecedented rate of 80%. In addition to the TRQs, the export
tax rates for hardwood logs will be: 10% for poplar, 7% for
birch, and 5% for aspen. The roundwood export tariff for all
other species –including larch- remains at the current 25%.
It is important to note that even many Russian authorities
still remain unclear about the full changes that are occur-
ring within the forestry sector as a result of WTO accession
and revisions to laws and export duty rates are still being
discussed.
According to the quotas established at the time of Russia’s
WTO accession, over 95% of the TRQ for spruce and r
logs (6.25 million m3) has been allocated to the EU with
just 4.5% going to all other countries (Table 3). Based on
the 2011 Russian log export statistics, spruce/ r log exports
totaled just 10.3% of the total available TRQ volume, sug-
gesting that Russia is looking to substantially increase these
log exports in 2013. However, given the small volume of
spruce/ r logs that were exported to both the EU and Asia
in 2011, the large size of the current TRQ is expected to
have little impact on either the European or Asian markets
in 2013. In contrast, the majority (77.3%) of the 2013 red
pine TRQ has been allocated to non-EU markets. In 2011,
red pine exports represented 72.3% of the available TRQ
for non-EU markets in contrast to 12.4% for EU markets.
This could lead to adverse impacts on red pine imports by
China and Japan where Russian red pine represented a sig-
Russia’s Tariff continued from page 4
0
5
10
15
20
25
30
35
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Millions of cubic meters
Sawnwood (C)
Sawnwood (NC)
Sawnwood (Total)
Figure 2: Domestic Production of Sawnwood (FAOSTAT 2012)
5.5
6.6
0
2
4
6
8
10
12
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Millions of cubic meters
Veneer
Plywood
Particle Board
Fiberboard
Total Wood-based Panels
Figure 3: Domestic Production of Wood-based Panels, 2000-2011 (FAOSTAT 2012)
6
ni can portion of total softwood log imports totaling 26.8%
and 3.5%, respectively, in 2011. For example, in 2011
China imported 8.4 million m3 of red pine and 3.4 million
m3 larch from Russia while Japan imported 119,613 m3 of
red pine and 108,155 m3 of larch. Under the new tariff sys-
tem, the export tariff for red pine will fall from 25% to 15%
while the export tariff for Russian larch will remain at 25%.
The disparity in tariffs between red pine and larch could well
encourage importers in China and Japan to increase their
imports of red pine in order to take advantage of the lower
tax rate. If this were to happen on a large scale, it could eas-
ily cause red pine exports to run up against the out-of quota
limit, triggering a sudden jump in the export tariff for red
pine from 15% to 80%. While the new TRQs have been set
close to Russia’s 2006 log export volumes (which reached
a record level), the Russian government has stated that new
log export quotas for spruce, r, and pine logs will be revised
each year.
Works cited
CIBC World Markets. 2007. Russia Plans to Dramatically In-
crease its Export Tax on Logs. Equity Research Industry Update.
32 pages. Available at: http://conservation-economics.com/
pdf_pubs/presentation/CIBC_RussiaLogExportTax_022207.pdf
FAOSTAT. Food and Agriculture Organization of the United
Nations. 2008 and 2012. Available at: http://faostat.fao.org/
site/626/default.aspx#ancor
Global Trade Atlas. 2008 and 2012. Global Trade Information
Service. www.gtis.com\gta
Makela, Tuomas. 2009. The Russian Forest Industry: A Case
of Competitiveness and Export Taxes. MA Thesis in Econom-
ics: Helsinki School of Economics. Available at: http://epub.lib.
aalto. /en/ethesis/pdf/12057/hse_ethesis_12057.pdf
[MINPROMTORG] Ministry of Industry and Trade of the Rus-
sian Federation. 2008. Strategy on the Development of the Rus-
sian Federation’s Forest Complex to the Year 2020 (in Russian).
Available at: http://www.minpromtorg.gov.ru/ministry/strategic/
sectoral/12/
Rossiskaya Gazeta. 13 September 2012. Impose quotas –chips
y. Kvoti vvodyat –schepki letyat. (in Russian). Available at:
http://www.rg.ru/2012/09/13/reg-sibfo/forum.html
Russian Federation. 2006. President of Russia: Of cial Web Por-
tal. “Opening Remarks at Meeting on Forestry Sector and Timber
Industry Development.” Available at: http://archive.kremlin.ru/
eng/text/speeches/2006/04/06/2344_type82913_104294.shtml
Russian Federation. 2012. Federal Duma of the Russian Federa-
tion. Computer-aided system guaranteeing the legislative activity
for Bill No. 89689-6. Available in Russian at: http://asozd2.duma.
gov.ru
Rutherford, T. F., & Tarr, D. G. (2010). Regional impacts of liber-
alization of barriers against foreign direct investment in services:
The case of Russia’s accession to the WTO. Review of Interna-
tional Economics, 18(1), 30-46.
Sheingauz, A., & Antonova, N. (2008). The implications of
Russia’s accession to the WTO for the growth of the Far Eastern
federal district timber complex. Studies on Russian Economic
Development, 19(3), 295-299.
UN FAO [Food and Agricultural Organization of the United Na-
tions]. 2012. The Russian Federation Forest Sector: Outlook Study
to 2030. Rome, Italy. Available at: http://www.fao.org/docrep/016/
i3020e/i3020e00.pdf
World Trade Organization (WTO). 2010. World Trade Report
2010: Trade in natural resources. Available at: http://www.wto.org/
english/res_e/publications_e/wtr10_e.htm
Russia’s Tariff continued from page 5
0
10
20
30
40
50
60
70
80
90
100
0
1
2
3
4
5
6
7
8
9
10
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Billions of USD
Sawnwood
Roundwood
Plywood
Veneer
Value ($) of All Produc ts Exporte d under HS 44
Perce ntage of FPs othe r than roundwood or fue l wood
Percent (%)
Figure 4: Total Export Revenue of Forest Products (FPS) under HS 44. (Global Trade Atlas 2012)
m3 allotte d
for 2013
% of
Total TRQ
% of quota used (according
to 2011 Russian Export Data)
6,246,500 100.0 10.3
5,960,600 95.4 10.7
285,900 4.6 3.7
m3 allotted
for 2013
% of
Total TRQ
% of quota used (according
to 2011 Russian Export Data)
16,038,200 100.0 58.7
3,645,900 22.7 12.4
12,392,300 77.3 72.3
To EU =
others =
Lumped 13% TRQ for Spruce (Picea abies Karst.) and Silver Fir (Abies alba
Total lumped quota =
To EU =
others =
15% TRQ for Red Pine (Pinus sylves tris L.)
Total quota =
Table 3: Projected Impact of the In-quota Duty in 2013 (Global Trade Atlas 2013)
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... Although trade flows have increased in recent years, a number of significant distortions remain in markets for softwood logs and lumber: one example is the Canada-U.S. Softwood Lumber Agreement (SLA) that penalizes lumber exports from Canada but allows logs to enter tariff free; another is Russian restrictions on log exports (Simeone and Eastin, 2012). Forest management policies adopted by countries can also influence domestic supply, such as Vietnam's curtailment of production from native forests that influences domestic supply and hence external demand (Vietnam has the world's 4th largest furniture industry) and Japan's subsides to promote domestic supplies for its sawmilling industry. ...
... For exports above the quota amount, an 80% export tax could be applied; in essence, then, the quota would be effective. Since much of the quota was allocated to the Scandinavian countries, and because export taxes varied by species, China and Japan were particularly impacted by the taxes and quotas (Simeone and Eastin, 2012). ...
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... The large number of international trade partners who purchase Russian logs hindered a complete tracking of this supply chain that includes all international and domestic purchasers. To make the study manageable, we prioritized wood exports, as this is the fate of most Russian wood (Simeone and Eastin, 2012). We consulted bilateral trade statistics from UN-Comtrade to identify major importing and exporting countries along the supply chain. ...
... Instead, Russia established a new volume tariff rate quota system and has agreed to reduce the ad valorem tax rate on softwood logs to the final bound rate of 8 per cent by 2015 for log exports below quota. For exports above the quota, a 25 per cent export tax might be applied (Random Lengths International, 2012;Simeone and Eastin, 2012). ...
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Russia is China’s main log supplier and has implemented a series of log export control policies. The implementation of Russia’s export control policy has inevitably had an impact on China’s timber processing industry. This paper uses breakpoint regression to analyse the impact of the increase in the import price of logs under the Russian log export control policy on the market price of timber products in China. The results show that under the control policy, the increase in log import prices had a significant positive impact on the timber product market when April 2008, January 2010 and January 2019 were the breakpoints. Due to the lag effects in price transmission, the impact on China's timber product market was not reflected when July 2007 and January 2018 were the breakpoints. Based on the research conclusions, this paper puts forward some suggestions from the perspective of China’s log supply security.
China's Forest Sector: Essays on Production Effi ciency, Foreign Investment, and Trade and Illegal Logging
  • S Alicia
  • Robbins
China's Forest Sector: Essays on Production Effi ciency, Foreign Investment, and Trade and Illegal Logging Alicia S T Robbins.. 2011. (96pp) $50.00