Finland advocates free trade agreement between Russia and EU countries

Helsingin Sanomat | 16.12.2011

Finland advocates free trade agreement between Russia and EU countries

Russia’s membership in the WTO will immediately lower customs duties by hundreds of millions of euros

Russia’s accession into the World Trade Organisation (WTO) next summer will bring Finnish export companies annual savings worth up to hundreds of millions of euros.

However, Finland has its sights already set on the next target: the establishment of a free trade zone between Russia and the European Union.

Even according to the most pessimistic of estimates, Russia’s WTO membership will reduce customs duties by EUR 300 million right away, reckons Minister of European Affairs and Foreign Trade Alexander Stubb (National Coalition Party).

Today, Stubb is to attend the WTO Ministerial Conference in Geneva, Switzerland. The final decision on the accession of the Russian Federation into the WTO will be made at the WTO meeting today - after negotiations of 18 years.

In addition to Russia, the conference will also approve the accessions of Montenegro, Vanuatu, and Samoa.

Russia’s WTO membership will improve Finnish export companies’ access to Russian markets and will stabilise the Russian business environment.

When the rules of the game become clear and the WTO’s dispute resolution mechanism is adopted, no ”politically motivated protective customs duties” can be imposed in the future, Stubb believes.

According to Stubb, the next target should be a free trade zone between Russia and the EU, within which all customs barriers would be removed entirely.

”The more freely goods and services can move between Russia and the EU countries, the better it is for Finland, Europe, and for the entire world”, said Stubb in Helsinki on Thursday.

The negotiations with Russia on the rules relating to international trade were the longest in the WTO’s history. This autumn the last open issues concerned investments in the automobile industry, rules of foodstuff trade, and questions related to agriculture.

After this, Russia will have six months to ratify the membership, which means that the membership will become valid next summer, maybe in August.

However, some goods are subject to a transition period of two to four years, which is why not all duties will come down in one go.

According to Pekka Laaksonen, CEO of the leading dairy products manufacturer Valio, tax-free trade between Russia and the EU would be ideal for the company.

Today, Valio pays annual customs duties for its exports to the tune of EUR 40 million.

These days, Valio’s Viola soft cheese is one of the best known Finnish brands in Russia, while more than half of the produced Oltermanni cheese goes to the Russian market.

According to Hannu Penttilä, CEO of the Stockmann retail group, the company’s export duties of 14% on average will be reduced by roughly 50%.

This is a major issue for Stockmann, which now has about 80 stores in Russia, and with the exception of fresh produce, the company brings almost all goods to its shops from behind the customs barriers.

Timo Jaatinen, CEO of the Finnish Forest Industries Federation, estimates that the duties for softwood imported from Russia will be cut by about half.

At the same time, the duties levied on hardwood will reduce by about three-quarters from the present level.

Assuming that the imports remain at the current level, the reduction in Russia’s export duties will bring the Finnish forest industry savings of approximately EUR 20 million, Jaatinen calculates.

The exports of paper and paperboard will produce annual savings of about EUR 10 million.

Minister Stubb urged Finnish companies to have no hesitation about entering the Russian markets.

FACTFILE: Chemicals account for the largest export category

Around 600 Finnish companies are doing business with Russia, with a total of about 50,000 employees in the country.

In 2010, the value of exports fell just short of EUR 5 billion.

The largest group of Finland’s exports to Russia consists of chemical products, namely 22% of the total exports. The proportion of machinery and equipment is 16%, that of electrotechnical equipment is 13%, the share of metal products is 11%, that of paper and paperboard 10%, and the proportion of foodstuffs is 7% of the total exports.

Over the first months of the current year, Finland’s exports to Russia grew by more than a third on 2010 figures.

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