20/01/2017

Ukrainian Timber Export Ban: to be or not to be?

The proposal of the European Commission President Jean-Claude Juncker at the Ukraine – EU summit in Brussels in November 2016 sparked a massive discussion in the Ukrainian society. He suggested that Ukraine lifts the 10-year ban on the export of unprocessed timber in exchange for getting EU tranche of 600 million euros. Ukrainian President Petro Poroshenko promised to lift the ban.

What decision is good for Ukraine? On January 1, 2017, the ban came into force for pine exports, and back in November 2015 for all other wood species. Enough time has passed to assess the efficiency of the ban, and in 2016 FLEG experts produced an analytical report on the issue.

The report has 80 pages and 20 graphs and tables, and analyzes the history of introducing similar bans in other countries, assesses the influence of the ban on solving modern forestry problems of Ukraine and predicts its consequences for different economy sectors.

There were three main motives for adopting the Timber Export Ban:

  • Nature conservation: to decrease logging;
  • Economic: to stimulate the economy by redirecting the previously exported unprocessed timber to local timber processing enterprises;
  • Social: to create new jobs for Ukrainian citizens.

An additional motive was realizing that the government couldn’t otherwise cope with illegal logging, shade timber trade and related corruption (for this reason, timber export bans are usually used by relatively young countries in Africa, America and Asia-Pacific).

FLEG experts analyzed the consequences of the bans in other countries, and came to the conclusion that:

  • Timber Export Bans decrease timber and wood prices.
  • Timber Export Bans negatively affect forestry.
  • Timber Export Bans lead to a rapid development of primitive wood processing.

As a consequence, in the short-term perspective, the bans helped the wood processing industry, and small and medium business. In the long-term, the bans helped no one.

The law was also negatively viewed by European Commission representatives, who pointed out that it violates the obligations of Ukraine in the frame of the World Trade Organization and Ukraine – European Union Association Agreement, and as a consequence, impedes the allocation of macro-economic assistance to the country ”, says Mikhail Popkov , the author of the analytical report.

However, FLEG believes that lifting the ban must the consequence of alternative, more adequate measures, and not the goal by itself. “ Neither the ban nor its abolition will save our forests from destruction. They can only be saved by wise and honest implementation of the Coalition agreement of the Parliament, adopted in 2014 (Chapter “Reforming Forestry”) ”, says Oleg Lystopad , FLEG consultant.

Before dropping the ban, FLEG experts suggest the following urgent measures in the report:

1. To start using the international classification of exported goods.

2. To prohibit directors of state enterprises to enter into timber supply contracts with intermediary firms on the domestic and foreign markets.

3. To start licensing timber exporters (by registering them in the Chamber of Commerce and confirming the availability of processing capacity and jobs and the payment of taxes).

4. To adopt new trade rules that provide for the use of different methods of trade that guarantee the priority purchase of raw materials by companies that have a history of trade relations with state forestry enterprises, ensuring the creation of jobs and payment of taxes.

5. To amend the Tax Code to ensure the competitive equality for timber buyers, both residents and non-residents of Ukraine. Alternatively, replace the VAT on timber trade with the income tax (7-10%) that will go to the forestry fund.

6. To create an interagency commission to study the situation on the timber market and develop a system of measures for its monitoring and regulation.

7. To adopt a practice common in European countries by committing the State Forestry Agency to publish publicly the information about available timber resources and their use, the dynamics of prices, compromised trading partners. To instruct the Forest Information-Analytical Center to prepare and publish regular overviews on timber trade, for use by public authorities and enterprises.

8. Identify the national strategy for the development of timber processing facilities at state forest enterprises.

In the report, FLEG also suggests long-term measures (2016-2020) aimed at ensuring a stable development of the forest sector.

The report has been actively used in the multiple roundtables and high-level meetings in the Cabinet of Ministers of Ukraine, Verkhovna Rada (Parliament), timber processing associations and on other platforms.

The report (in Russian) can be found at:

http://www.fleg.org.ua/docs/1648

http://pryroda.in.ua/lis/moratoriy-na-eksport-derevyny-panatse/



            

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