United Nations
Commission on Sustainable Development

Background Paper



                          ADVANCE UNEDITED TEXT


            BACKGROUND DOCUMENT INFORMATION ON TRADE AND ENVIRONMENT


This is a non-official document, for information only, prepared by the IFF
Secretariat.  It is largely based on inputs from The International Tropical
Timber Organization (ITTO) as Lead Agency on this Programme Element within the
informal, high level Interagency Task Force on Forests (ITFF).  It provides
additional background information to delegations attending the second session
of the Intergovernmental Forum on Forests (Geneva, 24 August-4 September
1998).  Published in English only.

                                CONTENTS

Executive Summary 

I.     Introduction 
          Global Trade and Forest Resources Trends
          Outline of Document

II.    General Overview of IPF Conclusions and Proposals for Action  

III.   Current Status on Trade and Environment in Forest Products and Services
          Market Access and ■New■ Barriers to Forest Products Trade  
          The Relative Competitiveness of Forest Products 
          Lesser Used Species
          Certification and Labelling
          Internalizing the Costs
          Market Transparency

IV.   Assessment of Recent Developments
         Illegal Trade
         Endangered Species and CITES
         International Obligations and Agreements 
         Country Certification
         Recent Market Developments

V.   Conclusions and Proposals for Action

References  


                         Executive Summary

1.  The following document aims to assist discussion at the Second Session of
the International Forum on Forests (IFF) by focusing on the key trade and
environment issues outlined in its mandate, and in particular on the major
challenges facing the IFF that result from the proposals for actions adopted
by the Intergovernmental Panel on Forests (IPF) on trade and environment in
relation to forest products and services.  

2.  Only a small proportion of global timber production is destined for
international trade.  Approximately one quarter of wood based panels and paper
products and one fifth of sawnwood and wood pulp are traded internationally. 
Nevertheless, the IPF -acknowledged the potential positive relationship
between trade in forest products and services and sustainable forest
management■ and endorsed -the importance of promoting sustainable forest
management through mutually supportive trade and environmental policies, in
particular avoiding policies that have adverse impacts on the management,
conservation and sustainable development of forests.■  Thus the broad
principle that the trade in global forest products could be harnessed to
improve the incentives for sustainable forest management was generally
accepted by the IPF.  

3.  The Intergovernmental Panel on forests (IPF) reached an important set of
conclusions and proposals for action on achieving a positive and mutually
reinforcing relationship between trade and sustainable forest management
including:  market access, relative competitiveness of forest products, lesser
used species, certification and labelling, full-cost internalization and
market transparency.  However, the proliferation of 'new' trade barriers, such
as export restrictions, environmental and trade restrictions on production and
exports, and quantitative restrictions on imports of 'unsustainably produced'
timber products, still pose a potential threat to improved market access.  In
addition, the IPF also tried to address concerns such as the increasing
illegal trade in forest products and the need to reconcile national measures
with obligations under international agreements.  All these important areas
must also become the focus of the subsequent discussions by the IFF on trade
and environment.

4.  The proliferation of  -new■ trade barriers, such as export restrictions by
developing countries to encourage domestic processing of tropical timber for
export, environmental and trade restrictions on production and exports in
developed countries that affect international trade patterns, and quantitative
restrictions on imports of 'unsustainably produced' timber products, still
pose a potential threat to improved market access.  Competition between
different wood products and between products from different regions of origin
and between wood and non-wood substitutes is inevitable, and should not unduly
constrain a global initiative to improve sustainable forest management. 
Increased utilization of lesser used species (LUS) will occur as some
currently commercially exploited species become increasingly scarce relative
to their demand; however, this increased utilization must be made compatible
and consistent with improvements in the overall sustainable management of
production forests.

5.  The proliferation of and lack of coordination among schemes are currently
hampering the development of an internationally agreed and voluntary timber
certification process.  There is a need to achieve international harmonization
and mutual recognition of standards.  To date, the slow progress in timber
certification has meant that its potential role in promoting sustainable
forest management on a significant scale globally is, at best, still unclear.

6.  Public policies continue to be a major barrier to sustainable forest
management in producer countries.  The result is inappropriate economic
incentives creating inefficiencies in timber harvesting and short-term
extraction for immediate gain, and a more long term and wide scale effect on
the pattern of forest-based industrialization and its implications for the
management of the forest resource base as a whole, including the conversion of
forest land to agriculture and other uses.  Improved market transparency is
one key element in progress towards policy reform and full cost
internalization to promote sustainable forest management. 

7.  In addition to dealing with the above challenges, the IFF must consider
such recent developments as illegal trade, species extinction, the role of
international obligations and agreements and recent market trends.  

8.  Illegal activities in the timber trade cover a number of widespread
practices involving illegal logging, illegal trading (i.e. 'timber smuggling')
and illegal pricing and classification of timber.  The continuing growth of
these illegal activities should be of concern to the IFF, as such activities
involve destructive and short-term practices that are damaging to forests, and
result in loss of export earnings and revenues that could be invested in
improved sustainable management.  

9.  There has been concern that the listing of commercially important tropical
timber species on CITES appendices is being used as a means to control or
limit the global forest products trade.  It is important to ensure that any
trade restrictions imposed through CITES are both necessary for the protection
of an endangered tree species and effective in achieving this objective.

10.  The issue as to whether the ITTA, or any other forum, should eventually
evolve a multilateral agreement to cover all forests must still be addressed
by the IFF.  In particular, IFF needs to consider the issue as to what
international and national policies are required to facilitate sustainable
management, and whether these policies need to be endorsed through
multilateral agreement and commitments.  To make such initiatives effective,
it may be necessary to consider country certification, which involves an
international commitment by both producer and consumer countries to adopt
policies and practices towards encouraging sustainable management of
production forests and timber products while simultaneously improving
international market access of these products.

11.  Finally, the economic impacts of events such as the Asian financial
crisis on the region■s forest products trade, and the implications for the
global trade need to be monitored in order to determine whether international
contingency plans and assistance could support countries and industries to
continue developing sustainable forest management plans in the face of such
short-term economic crises.

12.  The main conclusions and proposals for action of this report are
summarized in Section V.

I.  Introduction

13.  At its First Session, the IFF was charged with the following mandate on
trade and environment issues:

"(b) Consider matters left pending on trade and environment. Analyse the
mutually supportive roles performed by the international trade and sustainable
forest management and, in that context, issues related to non-discriminatory
international trade in forest products from all types of forests, including
the role that tariff and non-tariff barriers perform in relation to
sustainable forest management, certification issues where relevant and
improved market access, taking into account the needs of developing countries,
in particular those of the least developed among them.  Consider the question
of the relationship between obligations under international agreements and
national measures, including actions imposed by subnational jurisdictions,
recognizing that those matters are also considered in forums whose primary
competence is to address trade issues; the relative competitiveness of wood
versus substitutes; valuation; and market transparency and the related issue
of illegal trade in wood and non-wood forest products." 1/

14.  Some of these issues, such as market access, competitiveness,
certification and labelling, full-cost internalization and market
transparency, were the initial focus of the substantive trade and environment
discussions during the Second and Third Sessions of the Intergovernmental
Panel on Forests (IPF).  The new issues recognized by the IFF at its First
Session include analysis of trade and sustainable forest management, non-
discriminatory international trade, the relationship between obligations under
international agreements and national measures, and illegal trade in wood and
non-wood forest products.  

15.  The trade and environment issues raised by the mandate of the IFF are
very wide-ranging. The following background document aims to assist discussion
at the Second Session of the IFF by focusing on the key trade and environment
issues outlined in its mandate, and in particular on the major challenges
facing the IFF that result from the proposals for actions adopted by the IPF
on trade and environment in relation to forest products and services.  It also
aims to help focus the discussion on analysing and potentially enhancing the
important role of international trade in forest products in promoting
sustainable forest management.  The latter term has been interpreted in many
different ways.  Here, the chief concern will be with sustainable production
and environmental management of those forests currently or potentially
exploitable for timber, although there is also a general concern of the impact
of timber production and trade on the ■sustainability■ of forest resources
generally and the potential values of their goods and services. 

16.  The main rationale for focusing primarily on the relationship between the
international trade in timber products and sustainable management of
production forests is that this relationship lies at the heart of the key
trade and environment issues that the IFF seeks to address.  However, it is
also important to recognize that analysis of trade and environment linkages
with respect to the global forest products trade is subject to a few
limitations.  Data availability usually constrains the vast majority of
studies to examining these linkages mainly in terms of the trade in wood
products - roundwood, sawnwood, plywood, furniture and pulp and paper
products. 2/  While charcoal and fuelwood production is significant as a
percentage of the volume of total roundwood production, especially in
developing countries (i.e. 55%), only a very small percentage (less than 0.3%)
of non-industrial roundwood production enters the international trade (FAO
1995).  Thus the treatment of fuelwood-environment linkages is generally
considered separate from trade and environment issues.  At the other end of
the forest products spectrum, lack of data has also precluded analysis of how
trends in production and trade in higher processed products, such as
furniture, doors, construction and joinery items, etc., might impact on
sustainable forest management. 

17.  Trade statistics on non-wood forest products (NWFPs), such as rattans,
wildlife products and medicinal plants, are not well established, possibly
because of their relatively small contribution in terms of volume and value to
international trade. As a rough estimate, the total value of world trade in
NWFPs is thought to be around US$1,100 million (FAO 1997).  There is also a
lack of available statistical information for proper analysis of the key
cross-border ecological and amenity services provided by forests, such as
ecotourism, watershed management, carbon sequestration and biochemical
prospecting.  Nevertheless, to the extent that the trade in wood products
impacts on the sustainable management of forests, then the potential
availability and quality of NWFPs and forest services will also be affected. 
Where the appropriate data exist, it may also be important to examine this
linkage explicitly, especially in the context of determining the
sustainability of NWFP exploitation as well as valuable regional and trans-
boundary flows of forest services.

18.  This problem of data availability for assessing the full range of trade
and environment linkages associated with the global forest products trade was
recognized by the IPF.  For example, the Panel concluded that, although -
issues of trade and environment relating to forest products and services
should be addressed in a holistic manner,■ the IPF noted that -there was
inadequate information on both domestic and international trade in non-wood
products and forest services.  Further studies and data gathering are needed
to overcome these gaps in future.■


       Global Trade and Forest Resource Trends

19.   Any assessment of the trade and environment issues associated with the
global forest products trade must consider the recent trends in that trade and
in the forest resource base supporting it.  The global forest products trade,
particularly the regional trade in Asia, has been badly affected by the very
recent economic crisis in the Asia region (Adams and Johnson 1998).  In
Section IV, the implications of this crisis for the trade and sustainable
forest management is discussed further.  Here, the more long term trends in
the global forest products trade and forest resource base are reviewed.

20.  Only a small proportion of global timber production is destined for
international trade.  Approximately one quarter of wood based panels and paper
products and one fifth of sawnwood and wood pulp are traded internationally. 
Only 6-7% of global industrial roundwood output is currently traded (Barbier
1996b; FAO 1997).

21.  At a global level, forestry contributes about 2% to world GDP and 3% of
international merchandise trade. The regional pattern and direction of the
global forest products trade has been fairly stable, with the global forest
product market still largely dominated by developed countries, in terms of
both exports and imports (FAO 1997).  Nevertheless, two distinct trends have
become discernible in recent years (Barbier 1996b):

22.  First, the trade in forest products is highly regionalised within three
important trading blocs, the Pacific Rim, North America and Europe (mainly
Western Europe).  Within each trading bloc the major importers are mainly
developed countries, such as Japan, the United States, Canada and the European
Union. However, in recent years developing countries particularly in Asia have
been increasing their share of global imports (see Table 1).  Much of this
demand reflects the increased growth in consumption of industrial wood
products in developing countries. Newly industrialized countries with limited
forest resources have also been increasing their imports of logs and semi-
finished wood products as raw materials for the export-oriented processing
industries. 

23.  Second, the major global exporters of forest products still tend to be
developed countries with temperate forest resources and processing industries.
However, developing countries such as Indonesia and Malaysia have emerged as
dominant world exporters of certain forest product exports, such as non-
coniferous wood-based panels, logs and sawnwood (see Table 1).  Other
developing countries, notably Brazil, Chile and the Asian newly
industrializing countries, are beginning to have an impact on the
international trade in wood pulp and paper products.  In general, the trade in
forest products has shifted towards value-added processed products.  

24.  However, the global forest products trade is still dominated by a few
countries.  In 1995, five countries accounted for 55% of world exports, and
ten accounted for 70%.  The top two exporters, Canada and the United States,
were responsible for almost one third of the global export market.  Similarly,
five countries accounted for 48% of global imports, and ten countries for 66%. 
The top two importers, the United States and Japan, comprised nearly one third
of the global import market (Bourke 1998 and Table 1).

25.  The trade in forest products has generally benefitted from successive
post-war GATT Agreements.  Tariff barriers to forest products trade have
continued to decline in recent years, particularly in the post-Tokyo Round era
(Bourke 1988). The extent of the decline in tariffs differs with the market
and product.  With few exceptions, developed country markets tariff rates had
fallen generally to very low levels even before the Uruguay Round schedules
were agreed.  For example, pre-Uruguay Round tariff rates for forest products
in developed countries averaged 3.5% compared to 6.3% for all industrial
products (WTO 1994). 

26. The effect of the recently concluded Uruguay Round negotiations is likely
to reduce tariff rates on forest products further, including the phasing out
completely of tariffs on pulp and paper products in major developed country
markets.  The extent of tariff escalation for forest products will be reduced
in most importing markets, and many tariff rates will be bound.  It is
estimated that the likely gains in trade for major forest products from this
development could be in the range of US$460-593 million, but proportionately
this amounts to a gain of only 0.4-0.5% of total forest product imports in the
markets analysed (Barbier 1996a and 1997).  The implications of the Uruguay
Round for the non-tariff barriers increasingly faced by forest products is
less clear.  However, two special agreements, the Agreement on the Application
of Sanitary and Phytosanitary (SPS) Measures and the Agreement on Technical
Barriers to Trade (TBT), provide the basis for tackling certain non-tariff
measures that have been used as trade barriers against forest products.

27.  In terms of the status and management of global temperate and tropical
forest resources, the most environmentally important resource is usually
considered to be the closed forests (WRI 1992).  In tropical countries closed
forest resources have been subject to a higher rate of deforestation than in
temperate countries.  Reforestation is generally higher in temperate countries
as well.  Recent estimates of total forest loss (net of reforestation) by the
FAO (1997) suggest that 12.26 million ha was lost annually over the 1980-90
period, and a further 13.03 million ha was deforested annually over 1990-95 at
an estimated 0.65% annual deforestation rate.  In comparison, all developed
countries (excluding Russia) increased their total forest area by 8.78 million
ha, or at an annual rate of 0.12%. 

28.  This changing pattern of global forest resources is thought to have two
important implications for the trade in forest products (Barbier et al. 1994;
Sedjo and Lyon 1990): 

29.  Declining tropical resources and expanding temperate resources will
generally offset each other leading to stable prices for wood products, except
for highly valued tropical woods.

30.  The shift to plantations and second-growth forests versus old-growth
stands as the source of timber will continue.  The long-term pattern will
shift from the Pacific Northwest and the tropics to plantations forests in
North America and newly planted Southern Hemisphere forests.  European forest
resources are also projected to expand, at a net rate of around 1% annually
(Pajuoja 1995).

31.  Continued loss of old growth forests, and in particular tropical
deforestation, will of course also have important environmental implications. 

Outline of Document
32.  This document is organized in the following way.  Section II summarizes
the key points of consensus emerging from the Report of the Fourth Session of
the IPF, as well as the issues that remain unresolved, and discusses briefly
the challenges ahead.  Section III examines current available evidence on the
nature of trade and environment linkages in the global forest products trade,
focusing in particular on issues that were initially examined by the IPF and
are also of concern to the IFF, such as market access, relative
competitiveness of forest products, lesser used species, certification and
labelling, full-cost internalization and market transparency.  Section IV
concentrates on more recent developments, such as illegal trade, species
extinction, recent market trends and their implications for sustainable forest
management, and international obligations and agreements.  Section V suggests
some conclusions and proposals for action.

General Overview of IPF Conclusions and Proposals for Action

33.  This section examines the key conclusions and proposals for action
reached by the IPF at its Fourth Session, and discusses the issues for which
no clear consensus was reached. 3/

34.  The IPF -acknowledged the potential positive relationship between trade
in forest products and services and sustainable forest management■ and
endorsed -the importance of promoting sustainable forest management through
mutually supportive trade and environmental policies, in particular avoiding
policies that have adverse impacts on the management, conservation and
sustainable development of forests.■  Thus the broad principle that the trade
in global forest products could be harnessed to improve the incentives for
sustainable forest management was generally accepted by the IPF.  

35.  This general acceptance of the broad principle in turn poses an important
challenge for the global community and for the IFF specifically: how can
improvements in trade and environmental policies be made, both nationally and
internationally, to ensure that a positive and mutually reinforcing
relationship between trade and sustainable forest management takes place?

36.  To some extent, the IPF attempted to examine this challenge by debating
and reaching a consensus on current issues of market access, relative
competitiveness of forest products, lesser used species, certification and
labelling, full-cost internalization and market transparency.  Specifically,
the main conclusions reached by the IPF were:

37.  Although the IPF noted the reductions in tariff barriers to forest
products, especially as a consequence of the Uruguay Round, the Panel
expressed concern that -barriers to international trade in forest products,
particularly non-tariff barriers, could still impede access of forest products
to the international market.■

38.  Given the possibility that market competition among different forest
products, and between wood and non-wood substitutes, might have implications
for sustainable forest management and for markets for specific forest products
in the future, the IPF recommended that -further economic and market studies,
therefore, should be carried out to determine how best to use markets and
economic instruments to promote sustainable forest management.■

39.  With regard to the attempts by developing countries to develop forest-
based industries, the IPF recommended that more effort in these countries -
should be geared towards promoting efficient and environmentally sound
downstream processing industries and exports of processed products, consistent
with sustainable forest management, in order to increase their contribution to
sustainable development and to increase export earnings.■

40.  The IPF both acknowledged the progress in promoting lesser used timber
species and endorsed further efforts, in particular the inclusion of temperate
and boreal species, as long as exploitation was consistent with the principles
of sustainable forest management.

41.  The IPF -recognized that voluntary certification and labelling schemes
are among many potentially useful tools that can be employed to promote the
sustainable management of forests■, but also acknowledged that -because of
inadequate information and relatively few real world experiences, it is still
too early to assess objectively their full potential in promoting sustainable
forest management.■ 

42.  On certification, the Panel concluded that -more studies and information
are required to clarify various uncertainties■; that -in view of the potential
proliferation of schemes, there is a need to promote comparability and avoid
duplication among various voluntary certification and labelling schemes■; that
although schemes are generally private and voluntary, governments -have a role
in encouraging transparency, the full participation of interested parties,
non-discrimination, and open access to voluntary certification schemes■; and
finally, that -international efforts should focus on ensuring that existing
and new certification and labelling schemes are open and non-discriminatory.■

43.  The IPF recommended with regard to full-cost implementation -that
exchange of information on various research findings and experiences in
relation to costs and policy mechanisms are encouraged so as to facilitate
discussion and policy development.■ 

44.  Finally, the Panel concluded that -there has been little progress in
improving market transparency for trade in forest products■ and that greater
efforts are required -to address such issues as illegal international trade in
forest products, transfer pricing and market distortions.■

45.  In accordance with the above set of conclusions, the IPF endorsed a
number of key proposals of action, at the international and national level,
involving both private and public entities.  However, the Panel discussed but
was unable to obtain consensus on the following options for action:

46.  Options for action relating to possible agreement for forest products
from all types of forests, based on non-discriminatory rules and
multilaterally agreed procedures.

47.  Options for action concerning the relationship between obligations under
international agreement and national measures, including actions imposed by
subnational jurisdiction. 4/

48.  Under the first group of options for action, the following proposals were
discussed:

49.  To explore the possibility of extending the concept of the Year 2000
Objective of the International Tropical Timber Agreement (ITTA) for all types
of forests;

50.  To explore the possibility of an international agreement on trade in
forest products from all types of forests;

51.  To examine the possibilities of further initiatives on trade
liberalization within the auspices of the World Trade Organization; and

52.  To explore, within an intergovernmental forum on forests, an
intergovernmental negotiating committee or other arrangements decided upon at
an appropriate time, the possibilities of promoting the management,
conservation and sustainable development of all types of forests and trade in
forest products in the context of an international, comprehensive and legally
binding instrument on all types of forests.

53.  Within the second group of options, the following specific proposals were
raised and discussed:

54.  Urging countries to remove all unilateral measures to the extent that
those are inconsistent with international agreements;

55.  Urging countries to remove all unilateral bans and boycotts inconsistent
with the rules of the international trade system, including those imposed by
subnational jurisdiction, in order to facilitate the long-term management,
conservation and sustainable development of all types of forests, in
accordance with paragraph 14 of the Forest Principles.

56.  Recognizing that those matters are also considered in forums whose
primary competence is to address trade issues.

57.  In summary, the IPF formulated an important set of conclusions and
proposals for action that need to be implemented if serious progress is to be
made on developing trade related incentives for improved sustainable
management of forests, in particular on market access, relative
competitiveness of forest products, lesser used species, certification and
labelling, full-cost internalization and market transparency.  In addition,
the IPF also tried to address some more recent concerns, such as the
increasing illegal trade in forest products and the need to reconcile national
measures with obligations under international agreements. All these important
areas must become the focus of the subsequent discussions by the IFF on trade
and environment issues of relevance to the global forest products trade.

58.  However, the lack of consensus in the IPF on certain proposals on market
access suggests that these proposals are generally concerned with establishing
a commitment by all countries either to: i) accept an internationally binding
agreement on all forests which cover trade or ii) ensure that national forest
trade policies conform with global trading rules and international agreements. 
That is, although there is an emerging international consensus for endorsing
measures to improve the trade-related incentives for sustainable forest
management, the international community is not yet prepared to enshrine this
principle in a binding international agreement to cover all the world■s
forests or subordinating all national and subnational policies that affect the
forest products trade to strict accountability under international trade rules
and agreements.

59.  Thus two distinct challenges for the IFF emerge from the conclusions and
proposals for action reached by the IPF, namely

60.  First, what is the scope for furthering the recommendations of the IPF on
market access, relative competitiveness of forest products, lesser used
species, certification and labelling, full-cost internalization and market
transparency, in light of the current status and developments in the global
forest products trade?

61.  Second, to what extent are more recent developments, such as illegal
trade, species extinction, recent market trends and their implications for
sustainable forest management, and international obligations and agreements,
factors in influencing the objective of improving the trade-related incentives
for sustainable forest management?

  III.Current Status on Trade and Environment in Forest Products and Services

62.  Implication that were initially examined by the IPF and are also of
concern to the IFF, such as market access, relative competitiveness of forest
products, lesser used species, certification and labelling, full-cost
internalization and market transparency.  Trends in each of these areas will
be discussed with a view to assess progress in the implementation of the IPF
proposals for action.

Market Access and ■New■ Barriers to Forest Products Trade
63.  The trade in forest products is highly susceptible to changes in market
access and trade barriers.  By affecting the returns to forest production and
exports, including the comparative returns with respect to non-wood
substitutes, restrictions on market access and trade barriers can have an
important influence on sustainable management of forest resources.

64.  While noting the substantial progress on reducing tariffs on the forest
products trade as a result of the Uruguay Round, the IPF expressed concern
that new types of barriers to the trade, particularly non-tariff barriers,
could still impede market access for many products as well as lead to new
forms of ■protectionism.■  This concern is not misplaced, as in recent years
there has been a proliferation of additional policies and regulations that
have the potential of becoming 'new' barriers to the forest products trade. 
These include:

65.  export restrictions by developing countries to encourage domestic
processing of tropical timber for export; 

66.  environmental and trade restrictions on production and exports in
developed countries that affect international trade patterns; 

67.  quantitative restrictions on imports of 'unsustainably produced' timber
products; and 

68.  the use of eco-labelling and 'green' certification as import barriers. 

69.  Although only the last two measures could be strictly defined as 'new',
all of these trade measures have been increasingly employed in recent years
and have the potential to affect forest product trade flows significantly. 
The issue of certification will be discussed in more detail in the next
section. The first three barriers will be briefly discussed below.

70.  Developing countries continue the use of export restrictions on wood in
rough and semi-processed products to support domestic processing industries
and improve export prospects for higher valued forest products.  Several
studies on the role of export taxes and bans in encouraging forest-based
industrialization and sustainable timber management in tropical forest
countries have indicated that timber export taxes and bans have proved only
moderately successful in achieving the desired results in Southeast Asia. 5/  
For example, although expanded processing capacity was established in
Malaysia, the Philippines and Indonesia, it was achieved at high economic
costs, both in terms of the direct costs of subsidization as well as the
additional costs of wasteful and inefficient processing operations.  

71.  Despite the losses in terms of economic inefficiencies and the
implications for the management of their forest resource base, developing
countries are unlikely to end such policies but may instead employ them more
extensively.  Many log-producing countries see the use of export taxes and
bans as the means to compensate domestic processing industries for import
barriers faced in developed economy markets.  However, with the post-Uruguay
Round decline in tariff escalation and barriers in import markets for forest
products, this argument is less valid. 

72.  Developed countries are increasingly employing a variety of environmental
regulations in their forest industries - both alone and in conjunction with
export restrictions - that may have significant trade implications.  Whether
or not such regulations are being used intentionally for this purpose, they
may lead to trade distortions and discrimination.  For example, the
combination of trade and environmental restrictions on logging in the Pacific
Northwest of the United States - such as the spotted owl reservations coupled
with the state-level log bans - produced significant domestic and global trade
impacts, including increases in global sawlog prices and regional shifts in
production with related effects in major sawnwood and plywood markets (Flora
and McGinnis 1991 and Perez-Garcia 1991).

73.  In many developed countries domestic policies to promote waste paper
recovery and recycling have had important trade implications, particularly
where they involve mandatory restrictions on the levels of virgin fibre and
pulp use. For example, Bourke (1995) and Elliot (1994) discuss the trade
implications for Canada - the world's largest producer and exporter of
newsprint - of US state and federal recycled content laws for newsprint.  In
particular, the US recycled content laws may provide an unfair cost advantage
to domestic producers because of the greater availability of used newsprint in
the United States than in Canada.  Similar problems apply to packaging and
reuse requirements, such as the recent European Union Packaging Directive and
the Japan■s regulations for recycling of paper, logging residues and
dismantled houses.  Such regulations all have the potential of being used as
non-tariff barriers to competing paper product imports, particularly if there
are requirements on suppliers to recover packaging or to impose deposit and
refund schemes (Bourke 1995; Weaver et al. 1995). Potential problems exist
with other environmentally oriented regulations, such as the increasing
restrictions on trade in wood panels using formaldehyde glue, regulations
banning or controlling certain timber preservation processes and materials,
and controls on processing materials - e.g. the use of chlorine in bleaching
pulp.

74.  Although there are legitimate uses of all the trade policy measures
discussed above, the rate at which they are being implemented and the
frequency with which they have led to trade distortion and discrimination
suggests that their use must be examined carefully.  International agreements
and rules governing their use should also be negotiated, and the interface and
possible conflicts between multilateral environmental agreements and trade
rules need to be explored through the auspices of the WTO.  What clearly needs
to be avoided is indiscriminate and widespread application of 'new' barriers
to the forest products trade that could easily over-ride the gains in market
access resulting from the recently concluded Uruguay Round.  

75.  What further advances the IFF can make in ensuring that national
governments reconcile their individual trading policies with established
international trading rules and agreements, and whether this requires the need
for a new international agreement covering all forests, are important issues. 
The next section will return to these issues.

The Relative Competitiveness of Forest Products
76.  The IPF also recognized that the degree to which forest products from
different regions compete among themselves and with non-wood substitutes for
import markets is an important determinant to the long-run returns to forest
products, and thus a potential influence on efforts to establish sustainable
forest management. 

77.  The degree of substitution between tropical and temperate products in
consumer markets illustrates the extent to which the markets for these two
types of products are inter-related, or whether there are essentially two
different markets for two distinct commodities.  The available evidence
indicates that the elasticities of substitution between temperate and tropical
wood products are very low (Barbier et al. 1994).  This suggests that there
are two distinct markets, and tropical producers of these products would have
difficulty in penetrating the larger temperate market. That is, temperate
softwoods from different regions are still closer substitutes than softwoods
and tropical hardwoods; equally, for tropical timber products there are strong
substitution effects between products from different tropical regions or
countries.  In general, substitution by origin for tropical sawnwood and
plywood in certain importing countries appears to be very high, especially for
plywood.  This would suggest that importers can substitute between sources of
origin with relative ease but also that exporters can easily capture market
share through price competition.  There is also evidence that in some major
processing markets imports of tropical logs are subject to substitution by
domestic softwood logs and by technical change. 

78.  Forest products may also be substituted by non-wood products in end uses
and final markets.  Although there is increasing anecdotal evidence of this
occurring in many consumer markets, particularly in construction and furniture
industries, estimating the magnitude or scale of this effect has proven more
difficult.  However, for specific products this substitution effect may be
significant.  For example, plywood is believed to face severe competition from
solid synthetic panels, with price strongly influencing the choice of product
in the construction industry.  In addition, substitution may be more of a
problem for wood-based composites, such as particle board, fibreboard and
reconstituted panels, and wood pulp.

79.  Thus the available empirical evidence indicates that producers as a group
may enjoy significant market power.  If all producer countries instigate
sustainable forest management and this leads to higher prices for timber
products across the board, then there may not necessarily be any significant
loss of market share by any country.  However, if only a few producers
instigate sustainable management and this leads to higher prices for their
forest products, then substitution away from these products is more likely to
occur.

Lesser Used Species
80.  The IPF has suggested that, provided markets exist and harvesting can be
conducted sustainably, there is substantial potential for expanding
utilization of forest resources, particularly in tropical countries, by
exploiting commercially lesser used species (LUS).  For example, recent FAO
statistics suggest that only about 26% of the potential standing volume in
tropical harvest areas is being felled.  In general, the forest products
industry is based on the utilization of large-sized logs from commercially
important species (e.g., logs for sawnwood, plywood and veneer).  Over the
1988-92 period saw and veneer logs comprised 92% of the total industrial
roundwood harvest in Indonesia, 97% for Malaysia and 93% for Papua New Guinea
(Drake et al. 1995).  

81.  If LUS are to play an expanded role in both the temperate and tropical
forest products industry, it is unlikely that this additional supply would be
suitable for traditional solid wood products such as sawnwood and plywood. 
Instead, the likely use of LUS would be for wood pulp and reconstituted wood
products such as fibreboard, particle board and reconstituted panels. At least
one set of projections, for the Asia-Pacific region, suggest that the
potential gains to producers of developing capacity to manufacture composite
panel products and other engineered wood products might be substantial, and
could offset the negative impacts on the forest products industry of declining
supplies of forest resources for sawnwood, plywood and veneer (Drake et al.
1995).  

82.  However, there are important considerations for any global strategy to
promote LUS.

83.  First, as discussed above, reconstituted wood products and wood pulp are
currently some of the most competitive and volatile markets for timber
products.  Reconstituted wood panels are highly susceptible to substitution in
import markets by semi-wood composites, such as cement fibreboard, composites
made from agricultural and other recycled wastes, and a variety of non-wood
substitutes. Any new form of virgin wood pulp would be competing in terms of
quality and price with more traditional sources but also from recycled pulp. 
As noted above, the problem of market access for any new products generated
from LUS is further exacerbated by the increasing proliferation of
environmental, health and other regulations specifying the composition and
quality of both reconstituted wood and paper products in consumer markets.

84.  Second, in many countries particularly in tropical regions, the potential
for identifying let alone exploiting LUS is limited by lack of basic
information on the availability and commercial viability of these species. 
This in turn reflects the limited human and technical resources devoted to
inventorying and assessing the forest resource base of the timber industry. 
Forest Resource Accounting (FRA) has been promoted as a means for tropical
producer countries to assess regularly their forests, including the
identification of LUS for potential commercial exploitation through
sustainable forest management (Kemp and Phantumvanit 1995).  Basic assessment
of this kind is essential if LUS are to be utilized more in the forest
products industry.

85.  Thirdly, although it is generally assumed that exploitation of LUS is
advantageous as it would increase stand harvesting yields and thus reduce per
unit costs, and possibly lower regeneration costs by removing more of the
residual stems, greater utilization of the standing volume of timber is not
always compatible with sustainable forest management.  A critical issue is
whether there is a considerable loss of forest services such as biodiversity
and watershed protection, if more species and hence stems are removed. 
Clearly, more needs to be learned about the potential ecological effects on
forests of increasing the rate of utilization of LUS and the resulting impacts
of greater stem removal from stands.  Again, a FRA might be a first step in
determining the capacity for exploiting LUS through sustainable management
practices.  However, further analysis of market demand and the costs of
exploitation and utilization is required to determine the commercial viability
of these species.



86.  Finally, exploitation of LUS must be considered in relation to the
problem of increasing scarcity and depletion of key timber species.  This
issue is discussed further in the next section.

Certification and Labelling
87.  As noted by the IPF, the number of eco-labelling and certification
initiatives applied to the forest products trade has increased rapidly in
recent years.  Generally, the aim of these initiatives is to distinguish
'sustainably' produced forest products or to ensure that forest product
imports conform to domestic environmental standards and regulations.  As the
IPF acknowledged, there is considerable concern among producer countries and
forest-based industries that certification and labelling will be used as non-
tariff barriers limiting access to key import markets.  Provided that such
regulations and schemes are non-discriminatory, transparent and justified, are
agreed mutually between trading partners or through multilateral negotiations,
comply with GATT/WTO rules and conform with internationally recognized
guidelines, then their potential use as trade barriers will be drastically
reduced. However, the possible role of voluntary and non-discriminatory timber
certification in promoting sustainable forest management on a significant
scale globally is, at best, still not clear.

88.  The term ■certification■ has been used indiscriminately to cover a wide
range of processes.  In this document the term timber certification will be
used to mean a process which results in a written statement, i.e. a
certificate, attesting to the origin of wood raw material and its status
and/or qualifications, often following validation by an independent third
party (Baharuddin 1995).  To be effective in reassuring consumers that wood
products originate from ■sustainably managed■ sources, timber certification
requires both certification of the product process and certification of the
sustainability of forest management practices.  The former involves inspection
of the entire product processing chain of custody from the forest to final
product, through domestic and export markets if necessary.  The latter
requires verification of the forest management system in the country of
origin, including the environmental and social impacts of forestry practices,
against  specified sustainable management criteria and standards. 

89.  Proponents of certification argue that it can assist potentially in
promoting sustainable forest management while simultaneously reassuring
consumers.  A properly designed, voluntary and independently accredited
certification scheme at the global level can be a means by which the various
stakeholders can hold producers accountable; it can provide a market-based
incentive to the individual producer to improve management; it can meet
consumer demands for wood from well-managed forests without creating trade
discriminations; and it can be a mechanism for monitoring multiple factors
involved in forest use (Dubois, Robins and Bass 1995).

90.  However, others suggest that the evidence for considerable additional
demand for certified wood products is unproven and the only in certain small
'niche' markets may customers be willing to pay more for certified timber
(Varangis, Crossley and Primo Braga 1995).  In fact, there is concern that the
impacts of certification on production and distribution costs might reduce the
competitiveness of wood products in consumer markets.  It is also argued that,
although certification requires sustainable forest management as a necessary
prerequisite, implementation of sustainable forest management does not require
certification to take place (Kiekens 1995 and 1997).  The promotion of
certification globally should not either displace or divert resources from
ongoing efforts in the major timber supplying countries to implement national
forest policies, regulations and standards in accordance to international and
national commitments to sustainable forest management.  Finally, it is argued
by some that the necessary but stringent conditions required for an accredited
global certification scheme are bound to have only a limited impact on a small
proportion of global timber production, and equally, on the sustainable
management of a limited area of forests (Baharuddin and Simula 1994; Kiekens
1995).  

91.  Recent estimates of the total global forest area certified are depicted
in Table 2.  Total production amounts to around 3.5 million m3 from about 5.1
million ha of certified forests.  In fact, certified production accounts for
only 0.23% of the world■s industrial roundwood production.  It is unlikely
that the supply of certified timber and timber products will expand very fast. 
Even under optimistic projections, only 15% of traded wood products are
expected to be affected by certification by the year 1999 (Baharuddin and
Simula 1996).  In fact, recent progress in certification appears to have
slowed.  A survey in March 1997 revealed that, although the number of
certified forests had nearly doubled from 25 to 58,  the total area of
certified forests had fallen from 5.1 to 3.1 million ha.  The main reason for
this decline is that a number of large forest concerns did not have their
certificates renewed.  On the other hand, total production of roundwood
estimated from certified forests is now estimated to be 9.5 million m3
annually (Baharuddin and Simula 1997).

92.  One of the additional benefits of certification might be that it will
allow timber exporters to avoid losses of market share and revenues in
environmentally sensitive markets. An attempt to estimate these benefits for
tropical timber certification has been conducted by Varangis, Crossley and
Primo Braga (1995).  The results are depicted in Table 3.  The total gain from
certification of tropical timber products is estimated to be US$428 million,
or 4% of current developing country timber product exports.  An interesting
aspect of this estimate is that the vast majority of the gains from
certification arises from avoiding losses in markets and revenues in the
absence of certification and not from the additional gains of any ■green
premium■ - despite the generous assumption that the latter might be as high as
10% and with no substitution effects.

93.  It has been suggested that if both tropical and timber products were
certified, more markets would certainly be affected, and as a result around
15-25% of the total share of global forest trade could be influenced by
certification (Baharuddin and Simula 1996).  However, critics argue that the
growing importance of domestic markets in tropical countries and the dominance
of markets where consumers are less interested in certified timber, limit the
potential market effects of this instrument for tropical timber products
(Bourke 1998; Kiekens 1997).  In the case of European temperate forests, it is
argued that the only forests suitable for certification are public forests and
a few large-sized private forests, mainly located in Sweden, but to date any
certification of these forests has not led to any improvement in forest
management or improved market access for certified products (Kiekens 1997).

94.  There is also the issue as to whether timber certification inevitably
leads to higher prices for timber products in final consumer markets.  This
issue has proven difficult to resolve conclusively, and it relates to the
evidence concerning the overall costs of certification. It is useful to
distinguish two costs: the direct costs of certification in terms of
implementing such schemes and the indirect costs of certification through any
trade losses and diversion  in final consumer markets as a result of
substitution between certified and non-certified products. 

95.  For example, for tropical products the costs of assessing or auditing
have been estimated at about US$ 0.3 and US$ 1 per hectare per year in
developing countries, and the costs of certifying the chain of supply for
processing could be up to 1% of border prices (Baharuddin and Simula 1994). 
For temperate products in developed countries, cost estimates for certifying
forests are roughly similar - US$ 0.3 to 0.6 per hectare (Varangis, Crossley
and Primo Braga 1995).  Dubois, Robins and Bass (1995) suggest as a rough
approximation  the minimum costs of certifying forest management would be a
fixed assessment cost of US$ 500 plus US$ 0.40 per ha for the initial
assessment and US$ 0.15 per ha for each subsequent visit. In addition, to meet
established certification criteria forest management costs in North American
temperate and boreal forests will rise by 20-30%, and could be as high as
100%.  Finally, there are likely to be some indirect costs in terms of trade
losses and diversion for certified timber products in importing markets -
although the precise magnitude of these indirect costs of certification are
difficult to determine presently.

96.  There is now an emerging international opinion that an adequate
international framework is needed both to ensure harmonization and mutual
recognition of certification systems and to ensure an effective international
accreditation process of certification bodies.  The important criteria for any
internationally accredited certification body is that it is independent;
impartial; and able to demonstrate that its organization and personnel are
free from any commercial, financial or other pressure (Dubois, Robins and Bass
1995).  Equally, to achieve harmonization and mutual recognition, a voluntary
international certification system must: i) be comprehensive and cover all
types of forests and wood products; ii) be based on objective and measurable
criteria; iii) produce reliable assessment results and thus be fully
independent from any vested interests; iv) be transparent and involve a
balanced participation of the interested parties and stakeholders thereby
ensuring their commitment; v) represent all involved parties; and vi) be goal
oriented and cost-effective (Baharuddin and Simula 1996).

97.  A major problem affecting progress on certification appears to be the
duplication and poor coordination of efforts on developing internationally
recognized criteria and indicators of sustainable forest management
(Baharuddin and Simula 1997).  There are at least eight intergovernmental
processes, some closely linked and others overlapping, that are attempting to
derive such criteria.  In addition there are numerous national-led initiatives
that are being developed more or less independently and without necessarily
conforming to internationally agreed common criteria.  Only one recent
initiative, implemented by the Centre for International Forestry Research
(CIFOR), appears to be evaluating and developing criteria and indicators for
sustainable forest management at the forest or forest management unit level,
and which could be used as the basis for assisting various national efforts in
determining how close their forest management efforts are conforming to
sustainability standards.  

98.  Establishment of an international framework covering all existing and
proposed timber certification schemes, as well as a common core set of
criteria and indicators for sustainable forest management on which such
schemes can rely, is clearly a long term process.  As a multinational forum,
the IFF could endorse this process and encourage the parallel and cooperative
development of existing and proposed international schemes, as well as the
related national and regional schemes, with the overall objective of achieving
international harmonization and mutual recognition of standards. In addition,
the international community should support WTO■s efforts to ensure that
existing and new certification and eco-labelling schemes for wood products are
not used in a discriminatory way as a form of ■disguised protectionism■.  The
purpose of timber certification should be to reinforce the positive incentives
for sustainable forest management and not to penalize or restrict production
and trade in timber not meeting standards. 

99.  However, there is also the issue as to whether the IFF should consider a
different sort of certification scheme altogether, such as a country-level
certification scheme that has been proposed recently (Barbier et al. 1994). 
Similarly a new kind of certification for forest is under discussion in the
International organization for Standardization in connection with the already
agreed ISO 14001 standard for environmental management system (EMS) which
applies to all sectors not only forest sector.  EMS certification is verifying
that the right system is in place.  Canada is moving ahead with implementing a
certification scheme for certifying forests under EMS.  Section IV will
discuss the country-level scheme in more detail.

Internalizing the Costs
100.  The IPF came to the conclusion that full-cost internalization may
contribute to sustainable forest management in the long run, and there needs
to be more studies globally to assess the costs of unsustainable forest use. 
However, assessing these costs is difficult because the impacts of
unsustainable harvesting are pervasive.  Unsustainable extraction of timber
from forests can lead not only to a decline in standing timber stocks but also
wider environmental effects.  These external effects include the loss of other
consumptive uses (e.g. harvesting and hunting non-wood products and
recreational uses), of ecological functions (e.g. watershed protection, carbon
storage and microclimatic role) and of other non-consumptive values (e.g.
ecotourism, genetic or biochemical information, and ■existence■ values) of the
forest.  In addition to these direct impacts of timber extraction on the
environment, timber production can influence more widespread deforestation
indirectly.  This indirect impact may occur through the opening up and
improvement of access to the forests, which may then interact with other
socioeconomic factors encouraging activities that degrade the environment. 
However, due to the intricately interconnected relationship of the various
causes of deforestation, it is extremely difficult to identify how much of the
deforestation process is due to timber production.  

101.  Moreover, a background document for the IPF noted that to a large extent
the unsustainable management of forests has become ■institutionalized■ in many
countries and regions as a result of long-standing and widespread policy
distortions leading to inappropriate incentive mechanisms (Barbier 1996b). 
Several important points emerge from this review.  

102.  First, inadequate and often distortionary public policies are a major
barrier to sustainable forest management in producer countries.  The result is
inappropriate economic incentives at the stand level that lead to
inefficiencies in timber harvesting and create the conditions for short-term
extraction for immediate gain, while at the same time failing to ■internalize■
the direct and indirect environmental impacts of forestry operations. 
Improper policies also have a more long term and wide scale effect on the
pattern of forest-based industrialization and its implications for the
management of the forest resource base as a whole, including the conversion of
forest land to agriculture and other uses.  

103.  Thus policy reform to improve sustainable forest management may not only
reduce the direct and indirect environmental impacts of forestry operations
but may also be justified on economic efficiency grounds for long-term
development of the forestry industry and the use of forest resources.  The
result is that producer countries may incur significant short term costs from
encouraging policy reforms and regulations to encourage sustainable forest
management, but they are also likely to gain substantially in the long run
from a more efficient forestry sector.  Even in the short run, the reduction
in subsidies, preferential tax breaks and other inducements may be an
additional financial benefit of policy reform.

104.  Equally, the transition to sustainable forest management may impose
additional costs at the stand level for residual stand management and
increased environmental protection.  For example, Baharuddin and Simula (1996)
suggest that the increased costs may derive from five different sources: i)
setting aside of areas; ii) lower harvesting yields; iii) additional
silvicultural and harvesting costs; iv) additional costs of planning and
monitoring; and v) different distribution of costs and benefits over time. 
Low-intensity harvesting will generally mean less timber extracted per hectare
in the short term.  However, these  costs can be at least partially offset by
improved harvesting techniques and better planning that lower operating costs. 
In addition, the current income foregone with reduced yields initially may be
more than compensated over the long run from improved stand productivity and
yields as a result of reduced residual damage and better stand regeneration
and recovery.  Too often, assessment of the costs of sustainable forest
management focuses on the short-term costs of implementing improved management
and fails to take into account the potential long-term gains in stand
productivity and income.

105.  Estimating the additional costs to both timber operations at the stand
level and forestry industries at the national level of implementing
sustainable forest management practices is therefore extremely difficult. 
However, the available evidence does suggest that on the whole:

106.  the transition to sustainable management is likely to impose some
increase in production costs in the short term, both at the industry-wide
level and the stand level

107.  the additional costs may be higher for tropical than temperate countries

108. it may no longer economically worthwhile to harvest some forests, and
large areas of some countries■ forest resource base may have to be ■set aside■
from production which could result in some income losses, and

109.increases in costs and stumpage prices at the stand level do not
necessarily mean significantly higher prices for final forest products.

110. The costs of implementing sustainable forest management are likely to
vary significantly across forests, countries and regions.  A range of 5% to up
to 50% additional production costs is possible (Baharuddin and Simula 1996). 
For temperate and boreal forests, the available estimates suggest generally an
increase of around 20-30% in costs (Dubois, Robins and Bass 1995).  For
tropical countries, the variation in estimates is much wider but on average
higher than for temperate regions.  Most estimates suggest that the costs of
sustainable forest management per  cubic metre of log produced lies between
10-20% of the current average international tropical log price of about US$
350 (Varangis, Crossley and Primo Braga 1995).

111.  The higher costs of sustainable forest management on overall timber
production are likely to make it infeasible to harvest some forest areas that
would have otherwise been logged.  This makes perfect sense in cases where the
failure to ■internalize■ the environmental and long-run costs of timber
operations has meant that these operations remain financially profitable even
though they are socially inefficient.  A comparison of the private and social
returns to selective logging on steeply-sloped (30%-50%) old-growth forest in
the Philippines illustrates this point (see Table 4 and Paris and Ruzika
1991).  The magnitude of the estimated damage to downstream activities
indicates that the Philippines would be better off by not harvesting old-
growth forests on such steep slopes, even though the private concessionaire
would gain financially from unsustainable harvesting on the steep terrain.

112.  On the other hand, the widespread implementation of sustainable forest
management across many regions in country could result in the removal of many
forest areas from potential production.  Although there would no doubt be
substantial environmental gains, the economic costs to producer countries
could be significant, particularly for tropical timber exporting countries. 
This was demonstrated in a recent policy simulation that indicated the
additional economic impacts to tropical forest countries of 'setting aside'
10% of their forest resource base (Perez-Garcia and Lippke 1993).  The
simulation indicates that such reductions in supply would result in a loss of
wealth for tropical timber producing countries.  Over the long run, permanent
set asides would mean that the remaining production forest inventory could not
support as high a level of sustainable harvest as under base case projections.

113.  Finally, it is sometimes argued that the higher additional costs of
sustainable forest management will make many timber products uncompetitive in
final markets.  However, although harvesting costs are often a large
proportion of the stumpage value of logs, for most processed forest products
the costs of the wood raw material is a small proportion of the total costs of
harvesting.  This is particularly the case for products traded globally; for
example, typical stumpage values in tropical countries of US$ 6-30 per cubic
meter of log equivalent end product often represents less than one percent of
the final value of the product being sold in foreign consumer markets (Barbier
et al. 1994).  As a consequence, even reasonably large increases in harvesting
costs and the stumpage value of timber can have little or only a modest impact
on the final product price in consumer markets.  Thus the evidence for both
traded tropical and temperate wood products suggest that a doubling of
harvesting costs may lead to an increase of 10 to 15% of the costs at the
importer or wholesaler level and less than a 10% increase in the retailer■s
cost (Barbier et al. 1994; Dubois, Robins and Bass 1995).

114.  A model of Indonesia's forestry sector developed by Barbier et al.
(1995) was used to simulate a policy initiative by Indonesia to implement more
'sustainable' management of its remaining production forests. As shown in
Table 5, scenarios depicting 25% and 50% increases in harvesting costs across
Indonesia■s forestry sector were examined.  Although domestic log prices are
affected significantly by the increased harvest costs, any resulting impacts
on the rest of Indonesia's forestry sector seem to be somewhat dissipated. 
Indonesia's sawnwood and plywood exports seem to be the least affected by the
increased harvest costs, which would suggest that external demand factors
exert an important counter-acting influence.

Market Transparency
115.  Improved market transparency is a key element in progress on the three
key areas that the IPF considered: reducing trade barriers to market access;
international harmonization and mutual recognition of standards on timber
certification; and policy reform and full cost internalization to promote
sustainable forest management.  Without greater market transparency, progress
in all these areas is likely to be hampered.

116.   For example, earlier in this section it was suggested that a potential
threat to the trade in forest products was the development of ■new■ non-tariff
trade barriers, ranging from export restrictions by developing countries to
encourage domestic processing of tropical timber for export; environmental and
trade restrictions on production and exports in developed countries that
affect international trade in forest products; and the use of quantitative
restrictions on imports of ■unsustainably produced■ timber products. 
Similarly, the potential use of timber certification as import barriers
through ■disguised protectionism■ was also discussed.  Finally, the lack of
detailed information on the distribution of costs and rents in the global
forest products trade makes it difficult to assess accurately the likely
economic impacts of sustainable forest management and any loss of consumer
markets.

117.  This suggests that progress in developing trade-related incentives for
sustainable forest management globally would benefit from improvements in
market transparency in the following ways:

118.  Countries importing forest products should routinely review and make
publicly available information on domestic environmental, health, building and
other standards and regulations that are likely to affect the import of forest
products and patterns of international trade generally.  Where such
regulations are considered a legitimate means by the importing country to
restrict access to its domestic market on environmental or health grounds,
then this information should not only be made publicly available but also
periodically assessed by an appropriate international authority, such as the
WTO.

119.   Countries that use export restrictions to promote value added
processing should also routinely review and make available detailed
information on such policies. The latter should also be periodically reviewed
and assessed by an appropriate international body, such as the WTO.


120.  a.International harmonization and mutual recognition of standards on
timber certification will require detailed information on both forest
management practices globally and the process chain of custody from the forest
stand in producer countries to final product in consumer countries for the
wide variety of timber products traded internationally.  Although some of this
information can be gained from end use studies directed at the final  consumer
and from assessments of forest-level harvesting practices, more information
needs to be made available from intermediate processors, exporters, importers
and wood-based manufacturers to supply the information on which improved
international standards on timber certification can be developed.

121. Assessments of the costs of implementing sustainable forest management in
producer countries, as well as of the long-term impacts on patterns of forest-
based industries in these countries, use of the forest resource base,  the
returns to different harvesting systems and the competitiveness of forest
products in consumer markets will require more market information being made
available from producing country, consumer country and industry sources. 
Again, cooperation on providing this information may be more forthcoming if
such assessments were officially sanctioned through an internationally agreed
process, such as country certification.

122.  Improved market intelligence for forest products is also required
generally, as this intelligence is lacking for most wood-based products.  Both
consumers and producers would benefit from better market intelligence that
would lead to more competitive and efficient markets.
 
 IV.    Assessment of Recent Developments

123.  Although the IFF will face a number of similar ongoing trends and
challenges that the IPF also considered, there have been some recent
developments that may pose both new opportunities and challenges.  These
include illegal trade, species extinction, recent market trends and their
implications for sustainable forest management, and international obligations
and agreements.

Illegal Trade
124.  Illegal activities in the timber trade cover a number of widespread
practices involving illegal logging, illegal trading (i.e. 'timber smuggling')
and illegal pricing and classification of timber (see Table 6).  For obvious
reasons, assessing the extent of these activities is extremely difficult, and
estimates can vary widely.  For example, a recent review of studies by the
Environmental Investigation Agency (EIA 1996) noted that the World Bank has
estimated that on a global scale 5,000 km2 of tropical forests were being
logged each year during the early 1990s, an area nearly the size of the
Indonesian island of Bali. However, a report by the Worldwide Fund for Nature
(WWF) claims that virtually all logging for export currently taking place in
India, Laos, Cambodia, Thailand and the Philippines is illegal; and much
logging in Malaysia and Indonesia could be classified as illegal.  Although
most of the recent concern has been with illegal activities in tropical
countries, and the consequent loss and degradation of tropical forests, there
is also evidence of significant illegal harvesting and other practices in
temperate countries as well.

125.  Although difficult to verify conclusively, there is some evidence that
the scale of illegal trade in logs is continuing unabated and possibly even
increasing.  For example, ITTO's Annual Review of member countries' trade has
indicated a perpetual problem of under-reporting of log exports, i.e. some
countries reported exports of logs are consistently and significantly below
the corresponding level of imports reported by trading countries.  Trade
statistics for some importing countries have indicated sizeable log imports
from countries where a complete log export ban is supposed to be in force. 
Publicizing such discrepancies can have an impact.  For example, as a result
of the evidence of under-reporting in ITTO's Annual Review, Papua New Guinea
has undertaken to tighten controls over its log exports.

126.To some extent, the growing illegal trade in logs is a consequence of many
developing countries implementing export bans and restrictions, as well as
prohibitively high tariffs, as a means of encouraging a shift in the
composition of their exports away from logs to more highly valued processed
timber products.  The loss of export earnings and government revenue from any
resulting increase in illegal log exports is yet another significant cost of
such policies.

127.However, illegal logging and trade is also a serious setback for promoting
sustainable forest management practices.  By their very nature, such
activities involve destructive and short-term practices that are damaging to
forests.  In addition, the loss in export duties, timber royalties and income
taxes to developing country governments means less revenues available to
promote sustainable forest management and improve forest departments and
institutions.

Endangered Species and CITES
128.  According to the 1994 IUCN threat categories and criteria, to date over
7,000 tree species have been documented as threatened.  Nearly half of these
species are considered vulnerable, and a particularly wide range of tropical
tree species fall in this category as a result of increased tropical
deforestation over the past 150 years. 

129.Because of the concern over these trends, a number of developed countries,
strongly supported by conservation groups, have attempted to have various
commercially important tropical tree species placed in one of three appendix
listings of the Convention on International Trade in Endangered Species of
Wild Fauna and Flora (CITES).  An Appendix I listing essentially prohibits
trade in a species; an Appendix II listing requires an export permit to be
issued by the CITES Authority in the country exporting the species; and an
Appendix III listing permits commercial trade provided that export permits are
issued for the country or countries listing the species, or  a certificate of
origin is issued from other countries that re-export the species.  Table 7
shows the timber species currently listed in the CITES appendices.  Only two
are traded internationally in significant volumes: Pericopsis elata (Appendix
II) and Swietenia macrophylla (Appendix III).

130.The recent attempts to have more commercially important tropical species
listed have been controversial.  Many trade and forestry interests, including
exporting countries affected by the listings, have questioned whether some of
the species proposed for listing are really endangered or threatened, and
whether the procedures used to determine this are sound, given the generally
poor information on the inventory of species in tropical forests and on the
actual species composition of traded timber products.  Given that the listing
of a species - even in Appendix III - is considered to have a substantial
negative impact on trade in that species, there is general concern that CITES
is being used as a means to control, if not limit, the trade in tropical
timber products.  Because of these concerns, CITES has recently established a
Timber Working Group to monitor and make recommendations concerning both the
listing of timber species as well as the implementation of the appropriate
export controls on a listed species (FAO 1997).

131.  However, a further problem with a CITES listing, as noted in the
previous sub-section, is that it can create inducements to increase illegal
trade in a species.  A CITES listing places a large burden on the CITES
Authorities in countries involved in the trade of the listed species to
implement the required controls.  Without significant support by the relevant
governments and trade interests, CITES controls on trade may be less
effective.  

132.  For example, a recent review of the implementation of CITES Appendix III
for Swietenia macrophylla (big-leafed mahogany, native to Central and South
America) found that the controls have been somewhat effective with regard to
trade between the key producer and consumer countries (Buitro'n and Mulliken
1997).  However, the failure of several range States to implement CITES import
controls have undermined their effectiveness.  In addition, the Appendix III
listing does not specifically require certificates of origin or re-export to
be presented at the time of export, thus limiting its usefulness with regard
to export controls.  Although the Timber Working Group recommended changes in
this scheme, it did not ask that the name of the exporter be included on the
certificate of origin. Thus, the system of controls is vulnerable to abuse,
such as the transfer of CITES documents from one exporter to another without
the CITES Authority granting permission.

133.  There is a genuine need to control trade in endangered species. 
However, it is important to ensure that any trade restrictions imposed are,
first of all, necessary to guarantee protection of an endangered species, and
second, capable of improving the survival of a species that would otherwise be
endangered by commercial trade.  It is not obvious that many timber species
fall into both of these categories.

International Obligations and Agreements
134.  As noted in Section II, the IPF discussed but could not reach consensus
on proposals for action leading to a possible international and non-
discriminatory agreement for forest products from all types of forests.  In
particular, one initiative proposed was to explore the possibility of
extending the ■Year 2000 objective■ of the International Tropical Timber
Agreement (ITTA) for all types of forests.

135.  The ITTA was adopted in November 1983 and came into force on 1 April
1985, and its Secretariat, the International Tropical Timber Organization
(ITTO), was established in November 1986.  The ITTO has a current membership
of 53 countries, of which 26 are tropical timber producer countries and 27 are
consumer countries representing the world■s major importers of not just
tropical timber but all forest products.  The 'Year 2000 objective' is an
important objective of the International Tropical Timber Organization (ITTO)
as specified in the new International Tropical timber Agreement (ITTA) of
1994. 1/  6/

136.  The new ITTA was agreed in 1994, and became operable on 1 January 1997
for an initial four years, with a possible extension to ten years.  During the
process of negotiating the new agreement, the issue as to whether the ITTA
should be broadened to cover  all the world■s forests was debated.  Although
the new ITTA has not been strictly altered beyond its original mandate to
cover just tropical forests, the terms of the new agreement does allow some
scope for such broadening of the ITTA mandate beyond tropical forests.  For
example, in several key paragraphs, the new ITTA replaces the term ■tropical
forests■ with ■timber producing forests■, and stresses that some ■obligations■
under the treaty are required by ■all members■ and not just ■producer
members■.  Thus, the new statement on the ■Year 2000 Objective■ commits the
ITTA -...to enhance the capacity of members to implement a strategy for
achieving exports of tropical timber and timber products from sustainably
managed sources by the Year 2000", and -to encourage members to develop
national policies aimed at sustainable utilization and conservation of timber-
producing forests.■  Already, many consumer member countries - who are also
major exporters of temperate forest products - have indicated that they are
willing to follow similar commitments as the ■Year 2000 Objective■ to ensure
sustainable management of their forests for the timber trade.

137.  The issue as to whether the ITTA, or any other international forum on
forests, should eventually evolve a multilateral agreement to cover all
forests, and in particular, to commit all producer and consumer countries to
ensure that the global forest products trade is derived from sustainably
managed sources, is still an important proposal that the IFF must address.  In
particular, the issue as to what international and national policies are
required to facilitate the long-term management, conservation and sustainable
development of all types of forests that are sources for the global forest
products trade, and whether these policies need to be endorsed through
multilateral agreement and commitments, is an important area for the IFF to
consider.

Country Certification
138.  Any development of a multilateral agreement or commitment to support and
encourage producer countries to develop national policies aimed at sustainable
utilization and conservation of timber-producing forests must consider very
carefully the best means of attaining this objective.  

139.  As timber certification is currently influencing only a very small
proportion of the global trade in forest products and an equally limited area
of the world■s production forests, it cannot be considered the main instrument
for promoting sustainable forest management globally.  Given the pressing need
to promote sustainable forest management globally, it is imperative to develop
urgently other instruments complementary to timber certification that are more
directly aimed at wholesome and timely improvements in forestry management
policies and regulations in producer countries.  The need for such instruments
is essential if any multilateral agreement or commitment to ensure that all
forest product exports are from sustainably managed sources is to be
realistically implemented.

140.  One such approach is the concept of country certification. Originally
proposed in a report to ITTO (Barbier et al. 1994), country certification
involves certifying through explicit bilateral or multilateral recognition all
timber products from a country that can prove it is complying with an
internationally agreed objective, such as a sustainable forest management
target.  Such a scheme could be enacted for all timber producer countries
through an international agreement on global forests (Barbier 1996b).  It may
also require additional assistance for developing countries with inadequate
financial resources to achieve, implement and monitor the key policy
objectives. To be effective, country certification would require two broad
sets of policy commitments from  timber producing and consuming countries
respectively.

141.  The first set of policies would require producer countries to undertake
substantial reviews of their forest sector policies and to correct those
policy distortions that work against sustainable timber production objectives,
as such distortions are believed to be at the heart of inefficient and
unsustainable forest sector development and timber-related deforestation (see
Section III).  The second set of policies would require a commitment by
consumer countries to remove any remaining tariff and non-tariff barriers to
timber imports into domestic markets, for those producer countries that
demonstrate a commitment to forest sector policy reform, to promote actively
the use of tropical timber imports from exporting countries that are
implementing 'sustainable management' policies, and to remove any of the ■new
barriers■ identified in Section III to the imports from participating producer
countries.

142.  As with timber certification, any country certification scheme needs to
be voluntary and internationally agreed.  If poorly implemented without
sufficient international transparency, recognition or commitment, a country
certification scheme would have little impact on improving sustainable
forestry management globally.  It would neither take advantage of  the trade-
related incentives needed for encouraging sustainable management of forests
nor provide the stimulus for fostering further cooperation in related areas,
such as timber certification.  In addition, an important precondition for
implementing country certification would be the development of 
internationally recognized and agreed criteria and indicators of sustainable
forest management, so that all producer countries would have a common core set
of criteria and indicators for assessing how well their forest management
efforts and policies are measuring up to agreed sustainability standards and
targets.  

Recent Market Developments
143.  Encouraging trade-related incentives for sustainable forest management
is a long term process.  Attainment of such a long run goal may be affected by
major disruptions to key markets and price trends.  This is particularly the
case in the case of trade-related incentives for sustainable forest
management, as the whole rationale for this approach is based on the
presumption that there are significant long-term trade gains to be made from
producing and selling timber products from sustainably managed sources in
international markets.  Moreover, in order for producer countries to invest in
further improvements in the management of their forests over the long term,
the timber trade must continue to be a reliable source of income and
government revenue for the necessary long-run private and public investments
required.

144.  The recent economic and financial crises in East and Southeast Asia may
have affected the progress in this region towards sustainable management of
forests for the timber trade.  Beginning with the severe Thai currency
devaluation in June 1997, the crisis has spread rapidly through the region,
affecting virtually every country.  Not only have the major Asian timber
producing countries - Indonesia, Malaysia, Papua New Guinea, Thailand, the
Philippines and the Solomon Islands - experienced major economic disruptions,
but the crisis has affected several key Asian consumer countries as well -
Japan, China, Singapore, South Korea, and Hong Kong.  As indicated in Table 1,
some of the latter countries are major world importers of forest products,
from both producers in Asia and elsewhere in the world.  Thus the Asian
economic crisis has certainly affected the regional forest products trade, and
is starting to have an impact on the global trade as well.

145.  For example, the combined effects of falling currencies and weakening
market demand for forest products in Asian consumer countries has had a major
impact on all producers from the region (Adams and Johnson 1998).  With
sharply falling exports and prices, the worst affected appear to be the two
largest Asian exporters, Malaysia and Indonesia.  However, there is also
evidence that other major tropical producers outside of the region, such as
Brazil, are also being severely affected by the decline in demand from Asian
consumers.  Part of the problem is that, despite falling prices for most raw
and semi-processed timber products, demand in other sizable consumer markets,
such as the European Union, appears to be too sluggish to absorb the excess
supply of these products.  Already, the impact on Asian forestry industries is
becoming severe, with reports throughout the region of concessionaires ceasing
operations, mills closing and workers being made redundant.

146.  There is a need to -shock events■ such as the economic impacts of the
Asian market crisis on the region■s forest products trade, and the
implications for the global trade.  Although it is too early to determine the
long term impacts of this crisis, and in particular its implications for the
objective of improving trade-related incentives for sustainable forest
management, the short term indications are not good.  The vulnerability of
Asian and other developing country forest industries to such crises could make
it extremely difficult for such industries to plan and implement long term
strategies for ensuring that their trade is from sustainably managed forest
sources.  There is a need to consider ways in which the international
community could develop contingency plans and assistance to support countries
and industries to retain a long-term perspective on sustainable forest
management in the face of severe short term economic crises, such as the
recent Asian difficulties.

  V.  Conclusions and Proposals for Action

147.  The IFF can build on the proposals for action advanced by the IPF, and
consider further proposals  for action in line with recent developments
concerning trade and environment issues of importance to the world■s forests. 
The main objective of the trade and environment is to encourage all countries
to achieve trade in forest products from sustainably management forests, and
to use this trade as an incentive for making the transition to sustainable
forest management.


148.  Thus, the IFF may wish to consider the following key areas for policy
action that could improve the role of trade-related incentives in encouraging
sustainable forest management globally:

149.  Support continued efforts by the World Trade Organization (WTO) to
encourage all its member countries to reduce further tariff and non-tariff
barriers to trade in forest products.  In addition, the WTO should be urged to
focus its attention on the proliferation of ■new■ barriers to the forest
products trade, such as the use of export restrictions by developing countries
to encourage domestic processing of tropical timber for export; environmental
and trade restrictions on production and exports in developed countries that
affect international trade patterns; and quantitative restrictions on imports
of 'unsustainably produced' timber products.

150.  Support efforts by the WTO, FAO, ITTO, UNCTAD, EU and other
international institutions to conduct more independent market and economic
analyses of potential competition between different wood products and between
products from different regions of origin and between wood and non-wood
substitutes, analysing in particular the likely substitution effects of any
forest product price rises accompanying a global initiative to improve
sustainable forest management.

151.  Call upon producer countries to ensure that any policy for exploiting
lesser used species (LUS) and increasing the volume of timber removed from
stands is compatible and consistent with improvements in the overall
sustainable management of production forests. The ITTO may be called upon to
coordinate activities to further promote LUS.

152.  Encourage current international efforts to promote the parallel and
cooperative development of international timber certification initiatives, as
well as the related national and regional schemes, with the overall objective
of achieving international harmonization and mutual recognition of standards
for timber certification.  In this regard, recent work by CIFOR, to evaluate
and develop a common core set of criteria for evaluating sustainable
management at the forest management unit level are notable.  

153.  Support the efforts of the World Trade Organization (WTO) to ensure that
existing and new certification and eco-labelling schemes for wood products in
importing and consumer markets are not used in a discriminatory way as a form
of ■disguised protectionism■.  

154.  Support efforts by the WTO, FAO, CIFOR, ITTO, UNCTAD, EU and other
international institutions to develop more independent market and economic
analyses of the potential additional stand-level and industry-wide costs
resulting from the transition to sustainable forestry management and policy
reforms.  Such analyses should also examine the potential long-term benefits
of improved efficiencies and sustainability at all levels of the forestry
industry, as well as the development and coordination of international efforts
for improved market intelligence.

155.  Encourage greater market transparency to ensure the objectives on
improved market access for timber products, international harmonization and
mutual recognition of standards for timber certification, international
commitments to a country certification process and assessing the international
financial and technical assistance needed by developing countries.  In
addition, market transparency is essential for providing information to
facilitate the independent market and economic analyses of the market
competitiveness and long-run substitution of forest products and of the costs
and benefits of implementing sustainable forest management in producer
countries. 

156.  support on-going efforts by the WTO, FAO, ITTO, EU, UNCTAD and other
international institutions to improve market transparency and intelligence.

157.  Reaffirm the IPF■s proposal for action, which asked countries -to
provide an assessment and share relevant information on the nature and extent
of illegal trade in forest products, and to consider measures to counter such
illegal trade,■ support on-going efforts by the WTO, FAO, ITTO, EU, UNCTAD,
the World Bank and other institutions to monitor and investigate the illegal
trade, and encourage these institutions to coordinate their efforts.

158.  Urge the Timber Working Group of CITES to work with member countries to
ensure that CITES is not used as a means to control or limit the forest
products trade, and to ensure that any trade restrictions imposed through
CITES are necessary to guarantee the protection of a species, can be
effectively and efficiently implemented, and capable of improving the survival
of a species.

159.  Continue to examine the issue as to whether the ITTA, or any other
international forum on forests, should eventually evolve a multilateral
agreement to cover all forests that would commit all producer countries to
ensuring that the global forest products trade is derived from sustainably
managed sources.  In particular, the issue as to what international and
national policies are required to facilitate sustainable forest management
globally, and whether these policies need to be endorsed through multilateral
agreement and commitments, is an important area for the IFF to consider.

160.  Consider a country certification process involving an international
commitment by both producer and consumer countries to adopt policies and
practices towards encouraging sustainable management of production forests and
timber products while simultaneously improving international market access of
these products.

161.  Recognize the need to monitor closely the events such as economic
impacts of the Asian market crisis on the region's forest products trade, and
the implications for the global trade and promote consideration of ways in
which international contingency plans could assist and support countries and
industries to retain a long-term perspective on sustainable forest management
in the face of severe short term economic crises, such as the recent Asian
difficulties.

162.  The above tasks clearly build upon existing efforts and work being
conducted by several international institutions, such as the WTO, FAO, CIFOR,
ITTO, ITC, UNCTAD, EU, the World Bank and others. There is considerable scope
for these different institutions to collaborate and coordinate activities on
these tasks, as well as jointly identify additional areas for further work. 
Thus the IFF could play a coordinating roll in ensuring that all relevant
agencies related to the trade in forest products and services collaborate in
tackling the above tasks.

              103. References

Adams, M. and Johnson, S. 1998. 
Turmoil in Asian Markets.■  ITTO Secretariat,Yokohama, Japan.

Baharuddin, H.G. 1995. 
Timber Certification: An Overview.■  Unasylva 46(183):18-24.

Baharuddin, H.G. and Simula, M. 1994. 
Certification Schemes for All Timber and Timber Products. Report for the
International Tropical Timber Organization,Yokohama.

Baharuddin, H.G. and Simula, M. 1996. 
Study of the Development in the Formulation and Implementation of Certification
Schemes for all Internationally Traded and Timber Products. Report to the
International Tropical Timber Organization, Yokohoma.


Baharuddin, H. and Simula, M. 1997. 
Timber Certification: Progress and Issues. Report to the 23rd Session of the
International Tropical Timber Council, 1-6  December, Yokohama.

Barbier, E.B. 1996a. 
Impact of the Uruguay Round on International Trade in Forest Products. FAO, Rome.

Barbier, E.B. 1996b. -
Trade and Environment Relating to Forest Products and Services: Consultant■s
Background Report.■  Paper prepared on behalf of the International Tropical
Timber Organization for the Third Session of the Intergovernmental Panel on
Forests, 9-20 September, Geneva.

Barbier, E.B. 1997. -
The Effects of the Uruguay Round Tariff Reductions on the Forest Product Trade:
A Partial Equilibrium Analysis.■  Paper prepared for the ESRC Conference
-International Dimensions of Tax and Environmental Policies.■ University of
Warwick, Coventry, UK, 11-12 July.

Barbier, E.B., Burgess, J.C., Bishop, J.T. and Aylward, B.A. 1994. 
The Economics of the Tropical Timber Trade. Earthscan Publications, London.

Barbier, E.B., Bockstael, N., Burgess, J.C. and Strand, I. 1995. 
"The Linkages Between the Timber Trade and Tropcial Deforestation - Indonesia."
World Economy 18(3):411-442. 

Bourke, I.J. 1988. 
Trade in Forest Products: A Study of the Barriers Faced by Developing Countries.
FAO Forestry Paper 83, FAO, Rome.

Bourke, I.J. 1995. -
International Trade in Forest Products and the Environment.■ Unasylva
46(183):11-17.

Bourke, I.J. 1998. -
Prospects and Challenges in the Supply and Demand of Timber in the Global
Market.■ Paper presented to the International Timber Conference ■98, Kuala
Lumpur, Malaysia, 5-7 March.

Buitro'n, X. and Mulliken, T. 1997. 
CITES Appendix III and the Trade in Big-Leafed Mahogany. A Traffic Network
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Drake, P., Haid, D., Hammons, E.J. and Williams, D. 1995. 
Analysis of Macroeconomic Trends in the Supply and Demand of Sustainably Produced
Tropical Timber from the Asia-Pacific Region Phase II. Report to the
International Tropical Timber Organization, Yokohoma.

Dubois, O., Robins, N., Bass, S. 1995. 
Forest Certification. Report to the European Commission. International Institute
for Environment and Development, London.

Elliot, G. 1994. 
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Life-Cycle Management and Trade. OECD, Paris. 

Environmental Investigation Agency (EIA). 1996. 
Corporate Power, Corruption and the Destruction of the World's Forests: The Case
for a New Global Forest Agreement. EIA, London.

Flora, D.F. and McGinnis, W.J. 1991. 
Effects of  Spotted-Owl Reservations, The State Log Embargo, Forest Replanning
and Recession on Timber Flows and Prices in the Pacific Northwest and Abroad,
unpub. review draft, Trade Research,
Pacific Northwest Research Station, USDA Forest Service, Seattle.

Food and Agricultural Organization of the United Nations (FAO). 1995. 
FAO Forest Products Yearbook 1993. FAO, Rome.

Food and Agricultural Organization of the United Nations (FAO). 1997. 
State of the World■s Forests 1997. FAO, Rome.

Kemp, R.H. and Phantumvanit, D. 1995. -1995 
Mid-Term Review of Progress Towards the Achievement of the Year 2000 Objective.■ 
Report to the International Tropical Timber Council XIX Session, 8-16 November,
Yokohoma.

Kiekens, J.-P. 1995. -
Timber Certification: A Critique.■ Unasylva 46(183):27-28.

Kiekens, J.-P. 1997. 
Eco-Certification: Tendances Internationales et Implications Forstie`res et
Commerciales, E'tude re'alise'e pour le Ministe`re de l'Environment, des
Ressource Naturelles et de l'Agriculture de la Re'gion Wallonne (Belgique),
Brussels.

Pajuoua, H. -
The Outlook for the European Forest Resources and Roundwood Supply.■ UN_ECE?FAO
Timber And Forest Discussion Papers. ECE/TIM/DP/4. United Nations Economic
Commission for Europe, Geneva.

Paris, R. and Ruzicka, I., 1991. 
Barking Up the Wrong Tree: The Role of Rent Appropriation in Sustainable Forest
Management, Asian Development Bank Environment Office Occasional Paper No.1.

Perez-Garcia, J.M. 1991. 
An Assessment of the Impacts of Recent Environmental and Trade Restrictions on
Timber Harvests and Exports, Working Paper No. 33, Center for International Trade
in Forest Products, Univ. Washington, Seattle.

Perez-Garcia, J.M. and Lippke, B.R. 1993. 
Measuring the Impacts of Tropical Timber Supply Constraints, Tropical Timber
Trade Constraints and Global Trade Liberalization, LEEC Discussion Paper 93-03,
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Varangis, P.N., Crossley, R. and Primo Braga, C.A. 1995. -
Is There a Commercial Case for Tropical Timber Certification?■ Policy Research
Working Paper 1479. The World Bank, Washington DC. 

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World Resources 1992-93. Oxford University Press, New York.

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The Results of the Uruguay Round of Multilateral Trade Negotiations. Market
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Vincent, J.R. 1992.  
"The Tropical Timber Trade and Sustainable Development", Science, 256:1651-1655.

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Optimising Environmental Product Life Cycles: A Case Study of the European
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Table 1. The Global Forest Products Trade - Major Importers and Exporter, 1995


IMPORTERS         US$ millions           EXPORTERS     US$ million

United States        22 448              Canada             27 787 
Japan                19 486              United States      18 148 
Germany              10 94               Finland            11 953 
Italy                8 637               Sweden             10 850
France               8 198               Germany             7 779
United Kingdom       8 084               France              5 851
Netherlands          5 163               Indonesia           4 728
Korea (Republic of)  4 972               Malaysia            4 226
Belgium-Luxembourg   4 066               Brazil              3 547
Taiwan               3 840               Austria             3 361
Spain                3 826               Russia              3 231
China                3 840               Netherlands         3 017
Canada               2 953               Italy               2 874
Switzerland          2 857               Belgium-Luxembourg  2 791
Hong Kong            2 796               Norway              2 179

Source: FAO.


Table 2.  Certified Global Forests 1/


Region             Production       Area     Percentage     Percentage
                      (m 3)         (ha) 2/   of Total      of Total
                                             Production 3/  Area 4/
______________________________________________________________________________

Africa 5/               NA          6,000       NA           0.45%
Plantation              NA          6,000                      NA

North America       502,408        617,000      0.09%         0.14%
Natural             502,408        617,000                    0.14%

Latin America 6/   101,350         672,940      0.12%         0.10%
Natural            101,350         597,000                    0.09%
Plantation              NA          75,940                    1.05%

Asia 7/            738,810       2,847,394     0.85%          1.66%
Natural              1,310          12,610                    0.01%
Plantation         737,500       2,834,784                   31.8%
              

Europe 8/         2,135,000      916,720       9.7%           8.43%
Semi-natural      2,135,000      916,563                      8.43%
Plantation NA                       157                       NA

World Total       3,477,568      5,060,054     0.23% 9/      0.14%10/
Natural           2,740,068      2,143,173                      0.06%
/Semi-natural
Plantation          737,500      2,916,881                     10.12%



NA = not applicable or not available.

Notes:  1/ Based on Baharuddin and Simula (1996), unless specified otherwise. 
        2/ In some cases includes non-forest land as well.
        3/ Percentage of total industrial roundwood production in 1993 for the 
           countries specified, from FAO (1995). 
        4/ Percentage of total forest area, natural forest area and plantation 
           area for the countries specified, from WRI (1994).
        5/ Certified forest is located in South Africa.
        6/ Certified forests are located in Costa Rica, Brazil, Guyana,        
           Honduras and Mexico.
        7/ Certified forests are located in Indonesia, Malaysia, Papua New     
           Guinea and Solomon Islands.
        8/ Certified forests are located in Poland and the United Kingdom.
        9/ Total production from certified forests expressed as a              
           percentage of total world industrial roundwood production in        
           1993, from FAO (1995).
       10/ Total certified forest, natural/semi-natural forest and             
           plantation areas expressed as a percentage of total world           
           forest, natural forest and plantation areas in 1980, from WRI       
           (1992).  Total world plantation area excludes plantation area       
           from Europe, North America and the former Soviet Union. 


Table 3.  Estimated Revenues from Tropical Timber Certification in European
and North American Markets


Source of Revenue               Export                            Share of 
                                Revenues                          Developing
                                Gained                            Country Wood
                               (US$ million)                      Exports 1/

1. Incremental revenue from European
   and American ■niche■ markets 2/     62                           0.58%

2. Avoidance of net revenue losses 
   without certification (a. - b.)    366                          3.43%

a. Loss of European and North 
   American markets 3/                 622                         5.83%

b. Gains from diversion to other 
   markets 4/                          256                         2.40%

3. Total net revenue gain (1. + 2.)     428                         4.02%


Notes:  Based on 1991 trade flows and values.

        1/ Developing countries excluding China, Argentina, Chile and Near     
           East countries.  Total value of forest product export revenues in   
           1991 estimated at around US$ 10.66 billion, of which US$ 9.02       
           billion from non-coniferous logs, non-coniferous sawnwood and wood- 
           based panels and US$ 1.64 billion from furniture and processed wood 
           products.

        2/ Assumes a 10% increment in revenues due to a ■green premium■        
           from certification affecting 10% of the North American and 20% of   
           the European markets.

        3/ Assumes that the markets in 1/ will be lost in the absence of       
           certification.

        4/ Assumes that developing country exports would increase by 8.8%      
           to non-European/North American markets in the absence of            
           certification.

Source: Varangis, Crossley and Braga (1995).




Table 4.  Private and Social Efficiency: Logging in the Philippines 

                                  (US$1 = 27.7 Philippino Pesos (P))

(Figures in Philippino Pesos per ha per year)
Sustainable Management Scenario a/
______________________________________________________________________________

Value of log harvest b/                                         5,720
Road building, harvesting and transportation costs             -2,369

Net financial return to short run timber harvesting             3,351

Internalizing cost of sustainable timber management:
Cost of protection, timber stand improvement and 
enrichment plantingc/                                          -1,000

Net returns to 'privately efficient' timber harvesting          2,351

Shadow pricing adjustments:
Adjustment to market price of logs d/                             572
Adjustment to local harvesting costs e/                           474

Social costs of degradation of non-timber values:
Cost of marginal offsite damage to downstream activities f/    -6,245

Net returns to 'socially efficient' timber harvesting g/       -2,848


NOTES:   a/  Old growth forest selectively logged and subsequently protected.
         b/ Legal operations using existing selective logging systems assumed. 
            Private profits of illegal operators will be higher.  Different    
            combinations of yield and price are possible to capture the        
            variations in the quality of standing forest.  Assumption is that  
            one hectare of old growth forest of 30-50% slope sustainably       
            yields 100 cum every 35 years or 2.86 cum per year.  Market        
            price is 2,000 Philippino Pesos per cum.
         c/ P1,000/ha for one year to ensure sustainability of production on   
            the one hectare in question.  
         d/ Equal to market price adjusted upwards by 10% to account for low   
            cost illegal supplies.
         e/ Standard conversion factor 0.8 applied.
         f/ P2,600 for 3 years discounted at 12%.  Off-site damage assumed to  
            be limited in duration instead of being sustained in perpetuity.   
            Damage resulting from the selective logging of a single plot.      
            The high magnitude of the estimate is a result of logging on very  
            steep slopes.
          g/The overall returns are only a rough indication and are based on   
            estimates prepared in 1990 as part of the formulation of the       
            Philippine Master Plan for Forestry Development.

Source:   Adapted from Paris and Ruzicka (1991).












Table 5.  Indonesia - Timber Trade and Tropical Deforestation Simulation Model
Policy Scenario - Sustainable Timber Management (% Change over Base Case)

Key Variables                               25% Rise in          50% Rise in
                                            Harvest Costs        Harvest Costs
------------------------------------------------------------------------------
1.  Prices (Rp/m 3)

Log border-equivalent price (unit value)    41.59%               83.06%
Sawnwood export price (unit value)           4.04%                8.09%
Plywood export price (unit value)            2.86%                5.72%

2.  Quantities ('000 m 3)

Log production                             -  0.94%            -  1.87%
Log domestic consumption                   -  1.37%            -  2.73%
Sawnwood production                        -  1.89%            -  3.77%
Sawnwood exports                           -  1.03%            -  2.05%
Sawnwood domestic consumption              -  2.28%            -  4.55%
Plywood production                         -  0.87%            -  1.73%
Plywood exports                            -  0.38%            -  0.75%
Plywood domestic consumption               -  3.12%            -  6.24%

3.  Deforestation (km 2)

Total forest area                             0.02%              0.04%
Annual rate of deforestation               -  2.28%           -  4.23%

Source:   Barbier et al. (1995).


Table 6.   Illegal Practices in the Forest Products Trade

1. Illegal Logging

   - Logging timber species protected by national or international law, such   
     as the Convention on International Trade in Endangered Species of Fauna   
     and Flora (CITES)
   - Logging outside concession boundaries
   - Logging in protected areas such as forest reserves
   - Logging in prohibited areas such as on steep slopes, river banks and      
     catchment areas
   - Removing under/over-sized trees
   - Extracting more timber than authorized
   - Logging without authorization
   - Logging when in breach of contractual obligations
   - Obtaining concessions illegally

2.  Illegal Trading

   -  Export/import of tree species banned under national or international law

   - Illegal log export/import in contravention of national bans

3.  Illegal Timber Pricing and Classification

   - Transfer pricing (i.e. internal over or under pricing of timber products) 
     by a company to transfer profits abroad, usually to avoid tax in the      
     country where a timber operation is occurring
   - Under-grading, under-valuing and misclassification of species by a        
     company to avoid royalties and duties by declaring a lower value for      
     timber extracted from concessions

Source:   Adapted from EIA (1996).


Table 7. Timber Species Listed in CITES Appendices


Appendix I     Araucaria araucana (Argentina), Fitzroya cupressoides,          
               Pilgerodendron uviferum, Dalbergia nigra, Abies guatemalensis,  
               Podocarpus parlatorei, Balmea stormiae

Appendix II    Araucaria araucaia (Chile), Caryocar costaricense, Oreomunnea   
               pterocarpa (also referenced as Engelhardia pterocarpa),         
               Pericopsis elata, Platymiscium pleiostachyum, Pterocarpus       
               santalinus, Swietenia humilis, Swietenia mahogoni, Prunus       
               africana, Taxus wallichiana, Aquilaria malaccensis, Guaiacum    
               officinale, Guaiacum sanctum

Appendix III   Talauma hadgsonii, Swietenia macrophylla, Podocarpus            
               nerifolius, Tetracentron sinense

Source:   FAO (1997).


                             FOOTNOTES

  1/  See page 5 of E/CN.17/IFF/1997/4

  2/  Most available information on the international trade in wood products
has been assembled by the Food and Agricultural Organization of the United
Nations (FAO), and it is this information that will be used primarily in this
document.  Following FAO's convention in the following document, wood or
timber products will also be referred to as forest products generally.

  3/  The reference for this section is Report of the Ad Hoc Intergovernmental
Panel on Forests on its fourth session, New York, 11-21 February 1997,
E/CN.17/1997/12.

  4/  See E/CN.17/1997/12, op. cit., paragraphs 129 and 130.

  5/  See for example,  Barbier et al. (1994) and (1995; Vincent (1992).

  6/  It is generally accepted that the actual target year 2000 may be
unrealistic for many poorer producer countries to attain;  thus the "Year 2000
objective" has been more appropriately interpreted as requiring all producer
members to achieve exports of forest products from sustainably managed sources
as rapidly as economic and financial conditions will allow them to fulfill
this objective.




                                   Notes

1/                  It is generally accepted that the actual target year 2000 may
be unrealistic for many
           poorer producer countries to attain; thus the >Year 2000 objective=
has been more
           appropriately interpreted as requiring all producer members to achieve
exports of forest
           products from sustainably managed sources as rapidly as economic and
financial conditions will
           allow them to fulfill this objective.

1.

 


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Date last posted: 5 December 1999 15:45:34
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