The Russian forest industry: a case of competitiveness and export taxes

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Journal Title
Journal ISSN
Volume Title
School of Economics | Master's thesis
Date
2009
Major/Subject
Economics
Kansantaloustiede
Mcode
Degree programme
Language
en
Pages
88
Series
Abstract
Objectives This study examines the theories of competitiveness and export taxes and applies these theories to the Russian forest industry and the proposed roundwood export taxes that Russia is currently implementing. The goal of this study is to provide a well rounded picture of the Russian forest industry and to answer questions about what commodities it is competitive in, and about how will the export taxes affect its competitiveness and welfare. These goals are attained by utilizing various theories and by calculating parameters to better describe the Russian forest industry’s current state. This thesis also looks at the global forest sector, its politics, and Russia’s place in it, and calculates an optimal export tax for Russia. Data The trade data utilized to calculate the competitiveness of the Russian forest sector is gathered from the United Nations Comtrade database and includes 216 commodities classified at the 6-digit level from 128 countries. RCA and PRODY values are calculated for all commodities and an EXPY value for all countries for the year 2006. The Food and Agriculture Organization of the United Nations statistics database Faostat is also used to calculate an optimal export tax for Russia and Herfindahl Hirschman Indexes for the concentrations of global supply and demand for roundwood. Results The Russian forest sector is found to be competitive primarily in products with a low added value. The competitiveness of the sector is not below what is expected from a country in Russia’s stage of development (measured by GDP per capita). The actual forest sector is fragmented in the case of logging, harvesting, and sawmills, and somewhat more concentrated in pulp and paper production. Russia is a major world exporter of industrial roundwood and hence could benefit from a relatively high export tax on roundwood exports, but the taxes currently suggested go even higher than this and are in effect prohibitive to trade. Russia faces a more concentrated world demand for its roundwood exports, but also operates in a more concentrated supplier market. Russia may be able to encourage investment into its processing sector by raising barriers to trade, but the costs of investing in Russia may remain too high to make this optimal even with the barriers in place. The main loser in the Russian forest sector because of the export taxes will be the logging and harvesting industry, while the main winners will be the sawmills and producers of plywood and pulp.
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Keywords
Russia, forest industry, competitiveness, export taxes
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