Round timber export ban: historical background and positions of stakeholders

In early September, the Parliament lifted a moratorium on the export of logs, which has been in operation since 2015. The moratorium has caused the deterioration of relations with the EU and, at some point, has become a reason for not receiving Ukraine a tranche of macro-financial assistance. Officially, the moratorium is aimed at combating mass deforestation, but in practice creates preferential conditions for internal processing. The moratorium “closed the border” far from 100 percent of the percent – the export of unprocessed timber continued, but already in the form of firewood or other wood-processing products. And the environmental component remains open. In Ukraine, officially, the volume of felling of the forest is not reduced – 20-22 million cubic meters of timber are cut annually. Experts believe that this figure is at least twice as high – 40 million. Several attempts were made to legislate in the field of logging, but the President vetoed the adopted laws as violating the provisions of the Association Agreement with the EU and the commitments made by Ukraine upon accession to the WTO. Previously, the EU and Ukraine have agreed to resolve the issue of an ongoing moratorium through arbitration proceedings. However, until recently the Government has refrained from taking any steps to resolve this problem. The lack of a clear position and initiatives of the Government to address this problem has made the arguments of supporters of the moratorium uncontested, forming a public opinion. It will be extremely difficult to change, even though the moratorium has not helped to reduce illegal logging.

 

From November 1, 2015, the Parliament adopted the law on the total ban on the export of logs. According to the opinion of one of the initiators of the bill Ostap Yednak, such a measure was necessary for the preservation of Ukrainian forests from uncontrolled felling, the provision of wood-processing industry and the creation of value-added products. One of the reasons for introducing a moratorium is the predominance of wood exports and round wood products from it. Thus, according to the Office on Financial and Economic Analysis of the Verkhovna Rada, in 2015, from 19.3 million m3 of timber cut down in Ukraine, only 10 million cubic meters of wood remain in the country, in addition, that the needs of domestic producers make up 20 million cubic meters of timber annually. On January 1, 2017, a moratorium on exports of pine wood, one of the important of Ukrainian wood, entered into force.

Proponents of the introduction of the moratorium said that this measure will contribute to the reduction of illegal cuttings. The second motive for a ban is to support domestic wood processors in order to export non-forest raw materials for export, and already processed products.

In their opinion, it is profitable for Europe to buy logs from Ukraine, and not finished products, the added value of which is ten times higher. The average cost of 1 cubic meter of wood is 80-90 cu, while the average world price of processed wood is much higher – about 950 cu for a conventional cubic meter. Proponents of the moratorium urge European companies to cover production in Ukraine. Their opponents claim that the key interest of the supporters of the moratorium is the lobbying of domestic commercial structures engaged in forest reproduction.

Uncontrolled felling of forests in the west of Ukraine led to a decrease in the forestry index from 16% in 1996 to 11% in 2015.

According to one of the main supporters of the moratorium, MP Galasyuk (Radical Party), an export ban, scheduled for ten years, has allowed the Ukrainian woodworking industry to revive. According to the tax administration, in 2016 the woodworking industry showed a growth of 16%, furniture industry grew by 15%, paper – by 5%. At the same time, exports of processed timber increased by 11%. It should be noted that it is the laws of Galasyuk’s authorship (including a moratorium on the export of unprocessed timber) that are currently generating considerable problems in relations with the EU.

The key lobbyist for lifting the moratorium was the European Commission. The EU believes that the moratorium is contrary to the Treaty on the Free Trade Area and Ukraine has introduced restrictive actions with respect to certain groups of goods.

The main EU instruments in the field of logging policy are the FLEGT Work Plan and EU Regulation No. 995/2010 on the obligation of operators on placing on the market unprocessed forest products.

Despite a number of problems, FLEGT allows countries to find a balance between social needs (forest protection) and the interests of private operators (maximum profit from production and trade).

The EU emphasizes that the ban on exports does not prevent deforestation and does not prevent illegal logging or smuggling of forests, because due to the moratorium this illegal activity becomes even more profitable.

Despite the moratorium and legislative attempts, illegal deforestation did not stop. After the introduction of the moratorium, the round timber began to be transported as a firewood and sanitary timber, the export of which, according to official figures, increased.

According to the findings of the British non-governmental organization Earthsight, during the moratorium on deforestation, bypassing not only the national legislation, but also the regulations and certification of the EU, the Ukrainian forest is chopped and exported at such a pace that in four years its exports to the EU grew by 75%, exceeding a billion Euro in 2017.

According to experts, almost 60% of felling violates the restrictions established by Ukrainian legislation, most often, under the far-fetched pretext of sanitary felling.

  According to Earthsight, even if the forestry enterprises do not sell timber directly, and in accordance with the law at auctions, they often pass opaque, and most of the products result in “shadow” sawmills, which, according to researchers, are already over 12 thousand in Ukraine. This is the place where the sawn timber is produced from the “sanitary” forest for export, and in such quantity that, according to the research, the export of sawn timber exceeds their legal production in the country by 75%.

It is noted that the EU countries account for 70% of Ukrainian timber exports. At the same time, the EU Regulation, which establishes the criteria for the export of timber to the EU market, is the EUTR. It directly prohibits the import of trees illegally obtained in the country of origin, and still requires importers to conduct legal checks “with due diligence” in order to minimize the risk of illegal timber entering the Union’s domestic market. However, the Earthsight study shows that this law does not work, and timber of illicit origin systematically enters the EU markets. After the introduction in Ukraine of a moratorium on the export of round timber in the first place among Ukrainian wood importers, according to Earthsight, Egger, the world’s second largest wood panel manufacturer, its two closest competitors, Kronospan and Swiss-Krono, and the Polish pulp mill, which is included in the world’s largest paper corporation International Paper. The EU receives not only illegally cut, but also illegally exported wood, including the very round timber that is exported to Ukraine under a moratorium.

Earthsight notes that if the EU countries did not support the steadily growing demand for Ukrainian timber of illegal origin, the growth rates of corruption and schemes in the timber industry would be unequivocally lower.

A moratorium on the export of timber is an attempt to remove the symptom instead of treating the disease of the industry. Without complex changes in the legislation, as well as without state support for the activities of woodworking enterprises, the problem will not be solved. Control of deforestation, transparent rules for holding auctions and attracting investments in the woodworking industry will deprive the moratorium of meaning.

However, the abolition of the moratorium also does not solve the key problems of the Ukrainian forestry industry, although it eliminates the problem in relations with the EU.

The way out of the situation should be to punish not only the sellers of illegal timber, but also buyers from the EU. The problem of exporting illegal timber to the EU is not exclusively Ukrainian, it is global. Therefore, joint actions, both on the part of Ukraine and the EU, which may lead to the improvement of both the Ukrainian and European legislative framework, should be a way out of a difficult situation.