Finnish Forest Research Institute  Metla
Press release 14.02.2008

Russian customs tariffs on roundwood will significantly affect forest sector’s employment in Eastern Finland

If the customs tariffs programme set by the Russian Federation is implemented and if no other means is found to replace in full the roundwood exports from Russia, Eastern Finland will be affected by employment reduction of almost 6000 person years and the effect on total production will be almost two billion Euros. In the most positive scenario, involving increased domestic roundwood removals and increased exports from other countries, employment would be reduced by only a few hundred person years. In forestry alone, employment rates would increase, because increased commercial roundwood removals would cause increased need for labour in harvesting and transportation. The employment situation in the Republic of Karelia will also become dramatically worse.

This is indicated in a survey made by the Finnish Forest Research Institute (Metla) and the Karelian Research Centre of the Russian Academy of Sciences. The survey was focused on assessing the direct and multiplicative effects of the customs tariffs programme on roundwood exports set by the Russian Federation , with specific emphasis on employment and production in the forest sectors of Eastern Finland and the Republic of Karelia.

Forest industry in Eastern Finland losing ground

Significant structural changes will have to be made in the forest industry in Eastern Finland if the customs tariffs programme on roundwood exports from Russia is enforced in full. The effects will also extend into other spheres of activity. The key issue in the development of production and employment within the forest industry in Eastern Finland will be replacing the imported wood with domestic roundwood. However, it is unlikely that the wood raw material from Russia , especially birch pulpwood, could be fully compensated by increasing domestic fellings.

In the worst-case scenario, in which the possibilities of increasing domestic wood supply are only limited, unemployment will be increased by almost 6000 person years. Of these, more than 4000 person years will be in the forest sector. Correspondingly, the production value will be decreased by as much as two billion Euros in the regional economy. Approximately a quarter of this concerns fields outside the forest sector.

If the maximum sustainable removal were implemented in Finland , it would limit the reductions of production value for Eastern Finland to an annual value of less than a hundred million Euros. Even then, employment would be reduced by a few hundred person years. However, the calculations for these alternatives were made assuming that the domestic market prices for industrial roundwood assortments will remain basically at the current level when the market’s demand for total output increases.

Worse employment situation expected also for the Republic of Karelia

I f the planned increase in customs tariffs is implemented and exports of roundwood are decreased, the Republic of Karelia should also be prepared to face reduced income and a deteriorating employment situation. It will be difficult for the local harvesting companies and forest lessors to find replacement for the current volumes of roundwood exports. One example is hardwood pulpwood; the supply is ample but there is no demand for it in Russia . If the production of the forest industry cannot be increased, the effects on employment in this region can be as much as several thousand person years.

In this joint study of Metla and the Russian Academy of Sciences, calculations were made for two different alternatives of increasing industrial use of domestic roundwood. The decrease in roundwood imports was investigated using four different scenarios. Due to insufficient statistical data, the calculations concerning the Republic of Karelia are not as detailed as those for Eastern Finland.

Publication: Pirhonen, Ilkka, Ollonqvist, Pekka, Viitanen, Jari, Toropainen, Mikko & Bungov, Vladimir. 2008. Income and Employment Effects of Change of Roundwood Use in Eastern Finland and the Republic of Karelia. Working Papers of the Finnish Forest Research Institute 70. 36 pages.

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