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Sweden's birch grievances

MOSCOW. (RIA Novosti economic commentator Yelena Zagorodnyaya) - Swedish Minister for Foreign Trade Sten Tolgfors has fiercely criticized Russia's WTO bid because of higher duties on Russian unprocessed timber.

However, if Tolgfors' intention is to slow or stop Russia's ascension to the WTO, he is unlikely to succeed. The talks on Russia's WTO entry are irreversible, although the advantages are still vague.

Tolgfors told Reuters that this was the first time that his government had been so openly critical of Russia. Deciding that direct trade discussions with Russia were no longer productive, on August 20 he sent a letter to European Trade Commissioner Peter Mandelson requesting a revision of the terms of the EU's WTO agreement with Russia.

The minister is angry at Russia for breaking a promise that until 2011 birch trees would not attract new duties on round timber exports. However, in July this year the tariff per cubic meter was raised from 4 to 10 euros; and further increases are planned in coming years: in April 2008 to 25 euros and in January 2009 to 50 euros. The higher tariffs do not apply to birch timber less than 15 cm in diameter, but this accounts for a small share of supplies and has to be sorted out during customs clearance, adding to overall costs.

The minister's exasperation is easy to understand. Swedish furniture makers badly need birch timber, which they mix with local varieties to produce boards. Tolgfors is worried that now they will lose profits and with them jobs.

But this birch story is not likely to affect the EU-Russia WTO agreement or delay Russia's entry to the World Trade Organization. Finland's attempts to bring Russia to book for a similar reason fell flat, although it is far more dependent on Russian unprocessed timber than Sweden. It takes much more serious threats, like energy security, to provoke the EU to get tough.

Russia's WTO entry may be dragged out by the election race, but not by the Swedes. With the State Duma elections approaching this fall there is no time to discuss the issue now, and the new MPs and ministers are even less likely to focus on it in winter.

Nor are the current negotiators particularly eager to press on. As the WTO's glory has faded, so enthusiasm for Russian entry has waned. At the turn of the century, the WTO was setting the rules of globalization, whereas now it has become, as President Vladimir Putin put it, an "archaic, undemocratic and sluggish" agency, which is less and less able to deal with modern challenges. Its influence on global trends is close to zero.

Conscious of its loss of standing, the WTO tried to draft a new set of rules for global commerce by 2004. But the Doha round of trade talks continues to this day, with no agreement in sight. The Indian trade minister (in this round, India and Brazil are objecting to the EU-U.S. stance on agricultural subsidies) has recently described the trading club as a patient "in between resuscitation and the crematorium."

It is not clear what Russia will gain by joining the WTO. The global consequences of this move are in fact somewhat dubious. The benefits for exporters of non-traded goods (traded goods are not WTO-regulated) may be annulled by the losses of the more vulnerable industries. The car industry will be doomed to the screwdriver principle - the WTO does not let its members demand higher localization. Agriculture may become uncompetitive without government subsidies, while the financial sector will simply lack the capital to resist a tsunami of global resources.

Surprising though it may seem, during the 14 years of WTO talks Russian experts have not made any forecasts about the potential economic consequences of Russia's entry. Is this too difficult and complex a task for them, or are they simply afraid of conclusions?

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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