“Visa-free or forest-free", "600 mln. euros vs national interests", — last week passed to the accompaniment of finger-pointing around ten-year moratorium on rough timber export. Controversies did not subside; today there is a real confrontation between the government and local business.
A few words about its supporters and opponents. The moratorium has been imposed because of catastrophic situation with mass and uncontrolled deforestation in the west of Ukraine, as well as the crisis in the domestic wood processing industry as a result of mass export of unprocessed timber. The idea of the moratorium stirred up strong resistance of both individual representatives of the local government circles and the European community. Since the calls to lift the moratorium increase, I’ll try to identify 7 main arguments for its preservation.
1. The first results of the moratorium witness the positive impact of timber export restrictions on the development of the national economy. While the volume of sales of industrial products in Ukraine in January – February 2016 decreased by 4%, wood processing industry has shown the gain by 16% (to 983 mln. dollars), furniture making — by 15% (to 506 mln. dollars), and paper industry — by 5% (to 1.14 bln. dollars) compared to the same period of the previous year. The amount of taxes paid by these industries for the above period in US dollars increased by 17% —to 89 mln. dollars. Export of round timber decreased by 30%, while deliveries of processed timber abroad increased by 11%.
2. Positive impact of the moratorium on the economy is also evidenced by the expert forecasts, based on the results of the economic and mathematical modeling. For example, according to estimates, prices for timber for wood processing will fall, on average, by 8%. In conditions of growth in access of domestic wood processing enterprises to advanced technologies and foreign investments the moratorium will also allow to increase the volumes of production (by 9.6%) and exports (by 22.4%) of timber products in Ukraine.
3. Imposing of the moratorium on timber export will help to reduce the volumes of deforestation in Ukraine by 38.2%. This is an extremely important argument, because, according to statistical data, uncontrolled deforestation in the west of Ukraine resulted in the decrease of forest cover indicator from 16% in 1996 to 11% in 2015. In order to achieve the optimal level of 20% of the forest cover in Ukraine, it is necessary to plant new trees on the area of about 2.5 mln. hectares. Moreover, the quality of forest resources is rapidly deteriorating as well. Today the largest area of forest plantations is occupied by saplings (45.4%) and middle-aged stands (37.7%); maturing and mature stands account for 10.1 and 6.8%, respectively. With the current pace of deforestation, the forest potential of Ukraine in the near future will be probably left for historians only.
4. Generally, the moratorium complies with the regulations of the international trade law and the commitments of Ukraine within the framework of the WTO accession. In particular, Article ХХ(g) of GAТТ provides for an opportunity for WTO member countries to take measures for conservation of exhaustible natural resources. One of main preconditions is the use of such measures along with restrictions of domestic production or consumption. The current legislative developments of the Verkhovna Rada of Ukraine with regard to establishing restrictions on consumption of timber products ensure compliance with these provisions in full scope.
5. Lifting of the moratorium is supported by EU member states the most. They are guided by simple logic — wood processing facilities there use round timber of Ukrainian origin. Meanwhile, the legislation of these countries prohibits destruction of their own forest resources. Зрештою, скасування moratorium стало основною вимогою ЄС для надання Україні Finally, lifting of the moratorium is the basic requirement of EU to grant the next loan tranche of 600 mln. euros to Ukraine for macro-stabilization support. Acceptance of such terms will mean the absolute inability of our government to think strategically and for the long term. Foreign loan is a “pill” temporarily relieving the economic situation, but not influencing the condition of economic “organism” as a whole. Besides, the loan is to be repaid with interest. Or even worse – we surrender our national interests again. In contrast to it, the policy of wood processing industry development will create a strong foundation for the growth of GDP, employment and economic welfare of citizens.
6. One of the main objectives of the moratorium was the development of wood processing industry, since the companies operating in it, actually, had no access to high-quality domestic wood. The reasons are well known: more than 70% of first-grade timber raw materials were exported. Owing to the moratorium, Ukrainian companies gained access to round timber of Ukrainian origin; almost three times increase in volumes of import of wood-working machines to Ukraine (from 24.1 to 69.1 mln. dollars) was recorded in January – September 2016. This dynamics reflects 45 mln. dollars’ growth of investment demand which clearly stands out at the background of general stagnation of the economy. Thus, lifting of the moratorium will undermine the confidence of investors and worsen the investment climate in the country which is already not very favorable one.
7. Refusal from the moratorium will confirm inconsistent and unsystematic actions of the Ukrainian government in protection of the national economic interests. Absence of the agreed position of all branches of the Ukrainian authorities towards imposing of the moratorium already caused spreading of conflicting information among the international partners about the prospects of timber export ban. Lifting of the moratorium on the demand of EU with the sole purpose of obtaining another loan confirms the weakness of position of Ukraine in the international arena, yet again showing it not as a subject, but as an object of international processes. Some of the international legal entities see Ukraine as an object of derision and possible manipulations. Furthermore, newly elected president of the United States, as you know, respects strong and confident partners.
Therefore, now it is critically important to focus the efforts of all branches of government, stakeholders of public and business community on bringing to notice of the global community the substantiated position towards the relevance of this measure and lack of options, since it is aimed at development of processing facilities, setting up productions with high level of added value, and elimination of ecological disasters connected with mass deforestation.
The State policy should be pursued in the integrated manner, so the moratorium is to be developed in further steps. In particular, it is necessary to pass a number of bills, including those on abolition of wood-working machinery import duties, forest market, industrial parks and so on. Besides, the urgent solution is required for implementation of integrated and effective State program of forestry development, including, inter alia, securing of comprehensive electronic control, disclosure of consolidated balances of forest management and, most importantly, provision of planting new trees.