| United Nations | E/CN.17/IPF/1996/11 |
Economic and Social Council
Distr. GENERAL
20 February 1996
ORIGINAL: ENGLISH
COMMISSION ON SUSTAINABLE DEVELOPMENT
Ad Hoc Intergovernmental Panel on Forests
Second session
11-22 March 1996
Item 5 of the provisional agenda*
* E/CN.17/IPF/1996/1.
TRADE AND ENVIRONMENT IN RELATION TO FOREST PRODUCTS AND SERVICES
Programme element IV
Report of the Secretary-General
CONTENTS
Paragraphs Page
INTRODUCTION ................................................ 1 - 5 3
I. CURRENT STATUS AND PATTERNS OF INTERNATIONAL TRADE
IN FOREST PRODUCTS .................................... 6 - 38 4
A. Wood and non-wood forest products ................. 6 - 7 4
B. Forest services ................................... 8 4
C. Scope of analysis ................................. 9 5
D. Trade in wood products in general ................. 10 - 14 5
E. Promotion of lesser-used species (LUS) ............ 15 - 17 6
F. Increasing market transparency .................... 18 - 19 7
G. Market access .................................... 20 - 24 7
H. The types of trade-induced environmental impacts 25 - 26 8
I. Feasibility of "full cost internalization" ....... 27 - 30 8
J. Certification of origin from sustainably
managed forests .................................. 31 - 38 9
II. FINANCING AND TECHNOLOGY ............................. 39 - 43 11
A. Investment patterns and their influence on trade . 39 - 42 11
B. Technology and research .......................... 43 11
III. PROPOSALS FOR ACTION ................................. 44 12
INTRODUCTION
1. The present document reports on category IV, "Trade and environment in
relation to forest products and services", of the work programme of the Ad Hoc
Intergovernmental Panel on Forests scheduled for initial discussion at the
second session of the Panel. It aims to provide a preliminary overview of the
issues related to trade in forest products in general as well as its
implications for the environment and sustainable forest management, in
preparing for the substantive discussion of this programme element at the
third session of the Panel.
2. The work under this category is guided by the decisions taken at the
third session of the Commission on Sustainable Development and further
elaborated at the first session of the Ad Hoc Intergovernmental Panel on
Forests.
3. At its third session, the Commission on Sustainable Development defined
the terms of reference for the Panel of the programme element under category
IV as follows: "Examine relevant factors affecting trade in forest products
and other forest and trade issues in an integrated and holistic approach that
promotes a supportive relationship between trade and environment. In this
connection, identify opportunities and recommend measures for improving market
access for forest products on a non-discriminatory basis and consider factors
that may distort trade in forest products and affect their value, including
pricing, import/export controls, subsidies and the need to remove unilateral
bans and boycotts inconsistent with the rules of the international trade
system. Promote the development of methodologies to advance the full
valuation, including replacement and environmental costs, of forest goods and
services, with a view to promoting full cost internalization. Taking account
of the interests of all sectors and particularities of different countries and
ensuring full transparency and participation of all interested parties,
examine the issue of voluntary certification and labelling of forest products
so as to contribute to a better understanding of the role of voluntary
certification with regard to the sustainable management of forests including
the impact of certification on developing countries." 1/
4. The Panel, at its first session, subsequently emphasized that "the broad
mandate assigned to the Panel by the Commission on Sustainable Development
should be examined in an integrated and holistic manner. The overall goal is
to promote the mutually supportive roles of trade and environment. Reports
should be prepared in order to identify opportunities and recommend measures
for improving market access for forest products on a non-discriminatory basis
and consider factors that may distort trade in forest products and affect
their value, including pricing, import/export controls, subsidies and the need
to remove bans and boycotts inconsistent with the rules of the multilateral
trading system. Reports should include an assessment of means to promote the
development of methodologies to advance the full valuation, including
replacement and environmental costs, of forest goods and services, and of wood
substitutes, with the view to promoting full cost internalization. Reports
must, taking into account the interests of all sectors and the particularities
of different countries and ensuring full transparency and participation of all
interested parties, examine the issue of voluntary certification and labelling
of forest products, so as to contribute to a better understanding of the role
of voluntary certification with regard to the sustainable management of
forests, including the impact of certification on developing countries. The
Secretary-General, in carrying out the consultative process outlined in
paragraph 13 above, is requested to draw on the expertise of organizations,
such as the United Nations Environment Programme (UNEP), the United Nations
Conference on Trade and Development (UNCTAD), the International Tropical
Timber Organization (ITTO) and the World Trade Organization, able to
contribute to the preparatory work under this programme element". 2/ At the
Panel's first session, it was decided to schedule the programme element of
category IV for substantive discussion at the third session of the Panel, to
be held from 2 to 13 September 1996.
5. This document was prepared by ITTO, as the lead agency for programme
element IV, in consultation with the secretariat of the Ad Hoc
Intergovernmental Panel on Forests in the Division for Sustainable Development
of the Department for Policy Coordination and Sustainable Development of the
United Nations Secretariat.
I. CURRENT STATUS AND PATTERNS OF INTERNATIONAL TRADE
IN FOREST PRODUCTS
A. Wood and non-wood forest products
6. Wood is still the most important commercial forest product. It is being
used, inter alia, for building material, paper production and generating of
energy for cooking and heating. Production of wood from forests has been
increasing for the past decade. Wood products have been traded in the form of
roundwood, sawn wood, plywood, wood chips, furniture, pulp and paper products.
In view of its essentially renewable and environmentally friendly nature, an
increase in the demand for wood and the volume in international trade are
expected to continue in the future.
7. Trade statistics on non-wood forest products (NWFPs) are not well
established. This may be due to their relatively smaller volume and value in
international trade compared with those of wood. Recent developments,
however, show evidence of the emerging importance of NWFPs, including
increased revenues from international trade. The relatively smaller
importance of NWFPs in international trade may also be attributed to the
current system of classification of products that are regarded as NWFPs.
While for wood, timber from forest plantations is regarded as a product of
forests, the NWFPs from tree plantations such as rubber latex and palm oil,
which generate billions of dollars of foreign exchange for many countries in
South-East Asia, are classified as agricultural products.
B. Forest services
8. Conventionally, services provided by forests and forest land were
reflected only as an intangible value of forests. Owing to the increasing
importance being given to the environment, the emerging importance placed on
forest services as a potential area of trade has only just begun. Unique
forest habitats and ecosystems have a great potential for, among other things,
ecotourism, biological diversity in the form of biotic samples that have been
marketed for pharmaceutical prospecting, and carbon sequestration which has a
potential for being traded under schemes of joint implementation and tradable
permits. Although there exists a potential for forest services to be marketed
internationally, the current value of this trade is still very small and not
yet fully defined and developed. The issue of valuation of forest services is
explored under programme element I.3.
C. Scope of analysis
9. Available statistical information does not allow for a proper analysis
of trade in services provided by forests, despite the increasing recognition
of the importance of cross-border watershed management, ecotourism and carbon
sequestration. For practical purposes, therefore, the effects and
effectiveness of measures based on the linkage between environment and trade
in forest products and services will be assessed in terms of wood products
alone in this document.
D. Trade in wood products in general
10. To illustrate the status of trade in terms of volume traded from
developed and developing countries, statistics of the Food and Agriculture
Organization of the United Nations (FAO) on the production, import and export
of wood products from 1981 and 1992 3/ are used. In roundwood production,
several observations can be made:
(a) World production of roundwood increased by 21 per cent from
2.9 billion cubic metres (m3) in 1981 to about 3.5 billion m3 in 1992. The
increase came mainly from additional extraction in developing countries, while
the increase in developed countries was marginal;
(b) Despite the increase by 25 per cent in roundwood production in
developing countries, from 1.6 billion m3 in 1981 to about 2.0 billion m3 in
1992, nearly 80 per cent of the production in 1992 was directed towards
fuelwood and charcoal production. In contrast, fuelwood and charcoal
production in developed countries is negligible. More than 84 per cent of
roundwood production in the developed countries is used for industrial
purposes;
(c) Of the 415 million m3 in roundwood production from developing
countries that is used for industrial purposes, only about 25 per cent is
exported in the form of various products.
11. The value of international trade in wood-based products increased about
100 per cent from US$ 51 billion in 1981 to about US$ 103 billion in 1992.
Despite higher production of roundwood in developing countries, international
trade is still dominated by the developed countries with a market share of
about 84 per cent. Furthermore, about 80 per cent of forest products imported
into developed countries also originate in developed countries.
12. As a group, developing countries are net importers of wood-based
products with a net deficit of about $3.8 billion in 1992. They have a
surplus in exports of logs, plywood and panel products, and are marginal net
importers of sawn wood; however, they have a large deficit in paper and paper
products.
13. Only a few countries dominate the export of wood products in the
international market. Canada, Finland, Germany, Sweden and the United States
are the major exporters among the developed countries, while Indonesia and
Malaysia are the major exporters of wood products from tropical and developing
countries. Malaysia and Indonesia dominate the world export of tropical
timber products; they had a combined market share of about 86 per cent of
total export from tropical countries in 1992. The remainder was shared by a
dozen other countries from tropical regions.
14. Owing to rapid industrialization in the East Asian region, trade in
tropical timber products among countries in this region has surpassed by far
the trade with their traditional European and North American partners. The
Republic of Korea, China and Thailand have now emerged as major buyers with a
combined share of about 33.6 per cent of total world import. By including
Japan, the market share of East Asian countries is further increased to about
76.7 per cent. Countries of the European Union account for only about 13 per
cent of the total market share.
E. Promotion of lesser-used species (LUS)
15. Greater utilization of lesser-used species including their promotion in
the international market has been recognized as one of the positive measures
to increase the value of forests and improve the economic feasibility of
managing forests on a sustainable basis. The problem is more acute in Latin
America and Africa where the number of species of timber traded in the
international market is more limited compared with that of timbers from South-
east Asia. This has resulted in a smaller logging intensiveness in Latin
America and Africa, of about 10-15 m3 per hectare (ha) compared with that in
South-East Asia, which amounts to about 30-40 m3 per ha.
16. There are several signs of progress being made in the increased
utilization of lesser-used species in the international market. It was
reported in an ITTO publication 4/ that, in Cameroon, export of secondary
species had doubled in the past three years. In Malaysia, the export of logs
under the mixed-hardwood category accounted for about 600,000 m3 in 1993,
representing more than the export of any individual traditional species.
17. There are ongoing efforts to support the promotion of lesser-used
species for the international market. These efforts include ITTO's projects
on the technical characteristics of lesser-used species coupled with various
trade promotion efforts. Although there have been some improvements in the
number of species upgraded as "more popular species", those improvements were
rather limited. In addition, it has not been conclusively established whether
the improvements are due mainly to the efforts made in promoting lesser-used
species or to the decline in the availability of more popular species in the
market. This has been a common phenomenon in forest history where the
movement of unused species, in both temperate and tropical forests, moved from
rejected to accepted and even to preferred status in the markets, without any
assistance from trade policy measures.
F. Increasing market transparency
18. Market transparency is recognized as an important factor in enhancing
trade in forest products. The difficulties in making intermarket and
interproduct comparisons, at present, is a reflection of the lack of
transparency in markets in forest products. This low level of market
transparency is probably the most intractable of all the obstacles to
promoting sustainable forest management through trade in forest products.
19. There are considerable ongoing activities in the improvement of
statistical and marketing reporting that support efforts to increase the
transparency of market in forest products. The ITTO and FAO national and
regional training courses focus on the improvement of data collection on
forest resources, production and industry. Furthermore, the International
Trade Centre (ITC)/ITTO joint initiative provides market reporting on forest
products in international trade through its Market News Service. These
activities have already shown a notable effect on the quality of data and
market information. Consequently, strengthening of these kinds of activities
will contribute to increased market transparency in forest products trade.
G. Market access
20. International concern over trade in forest products has been focused
mainly on how to overcome obstacles in protectionist policies. As about three
quarters of international trade of forest products takes place among developed
countries, where protectionism has not been a major obstacle, market access
is, relatively speaking, not a major problem on a global scale.
21. While the issue of tariff and non-tariff barriers may be regarded as
insignificant at the global level, they are still important for the developing
countries. Some studies indicate that, while tariff rates are not seen as a
restriction on the export of wood products from developing countries, the
non-tariff barriers on processed products imposed by developed countries could
still pose a danger in hindering the effort to increase downstream activities.
A wide range of non-tariff barriers that affect forest products trade include
quantitative restrictions; measures influencing prices, including variable
levies; health and technical standards, such as those for pest and disease
control; and customs and administrative entry procedures.
22. The negative impacts of imports barriers by developed countries on the
pace of forest-based industrialization in developing countries are not
expected to lead to increased export of raw wood because of the many
restrictions on raw wood exports imposed by most tropical timber exporting
countries. Several developing countries (Cameroon, Ghana, Co^te d'Ivoire and
Malaysia) have revised their policies and the export tax on their forest
products to encourage further downstream processing.
23. Removal of import barriers especially on processed timber products will
most likely increase trade flow, as well as investment and the value of
forests. Although there are some pessimistic views that argue that increased
processing will further increase demands for timber and ultimately promote
deforestation, it is also recognized that increased activities in value-added
processing will further increase economic benefits and consequently enhance
the potential for sustainable forest management in the developing countries.
24. The improvement of market access for forest products is strongly linked
to the issue of environment. The work of the Panel in this aspect is
facilitated by the ongoing work of the Committee on Trade and Environment of
the World Trade Organization in analysing the environmental benefits of
removing trade restrictions and distortions; and the work by the Organisation
for Economic Cooperation and Development (OECD) on the effects of trade
liberalization on the environment.
H. The types of trade-induced environmental impacts
25. The types of trade-induced environmental impacts for the utilization and
management of forests begin with harvesting. Modern timber harvesting
employing heavy machinery could severely damage the soil, the natural drainage
system and watercourse, and the residual stand if the operation is not
conducted according to strict rules and regulations of sustainable forest
management. The second stage of environmental damages occurs during
processing. Industrial waste in the form of various types of chemicals used
during processing will flow and pollute the water stream which will inflict
greater damage to the human population. Current international debates on
forestry have so far been giving greater attention to management of resources
compared with manufacturing processes. This may be due to urgent efforts to
address the issue of deforestation.
26. None of those potential damages are a direct result of international
trade in forest products. They occur regardless of whether the products are
exported or not, albeit possibly at a lower level when products are not
exported. However, as about 15 per cent of global roundwood production is
exported, and prices in domestic markets are strongly linked to prices of
export products, it is expected that international trade in forest products
will have significant influences on the production and processing of forest
products and the forest-related environment.
I. Feasibility of "full cost internalization"
27. The main issue as regards full cost internalization, as mandated by the
Commission on Sustainable Development at its third session and the Panel at
its first session, is to explore the incorporation of the cost of sustainable
forest management into market mechanisms. The incorporation of this
additional cost into market mechanisms would effectively enable trade to
support the attainment of sustainable forest management especially in the
developing countries.
28. The development of a methodology for full cost internalization could be
closely linked to the development of criteria and indicators (C&I) for
sustainable forest management. Costs for additional activities to be carried
out as determined by C&I could form a good basis for addressing the issue of
full cost internalization of the production of forest products.
29. Although there is still uncertainty as to what would constitute the full
cost of production of forest products, it is almost certain that this cost
would be higher than the current cost of production. The implications of full
cost internalization for sustainable forest management therefore warrant much
more critical analysis concerning its feasibility and application. For some
products involving high-value species and grades, a higher price will allow it
to absorb the additional cost for sustainable forest management. For other
products, however, the prospects may be less favourable. Industrial solid
wood, for example, will have fewer prospects in future, as its main
application is in the construction industries where prices are much lower.
30. Further analysis in the Panel's work on full cost internalization would
take advantage of the ongoing work by UNCTAD on the assessment of the impact
of internalization measures on various social-economic variables, and of
lessons learned from the work of FAO in the development of methodologies for
the economic valuation of agricultural commodities.
J. Certification of origin from sustainably managed forests
31. Timber certification was introduced with the main objective of informing
consumers of the origin of timber and the sustainability of the forest areas
where the timber was produced. The scheme was given greater attention and has
now been identified as an important strategy for promoting sustainable forest
management. There are several examples of important processes that have been
initiated in this vein: the Lembaga Ekolabelling Indonesia (LEI)
certification scheme, the Canadian Standard Association (CSA) certification
scheme, the "Swiss Wood" scheme, the "Woodmark" scheme in the United Kingdom
of Great Britain and Northern Ireland, the Forest Stewardship Council (FSC)
and International Organization for Standardization (ISO) 14000.
32. The significance of the current patterns of trade in forest products
becomes evident in relation to the effectiveness of forest product
certification in different markets. As stated earlier, most trade in forest
products takes place within and between developed economies where the
conservation ethic is both strongest and spreading. Certification could well
become an effective trade measure in promoting sustainable forest management
in these markets especially in the major exporting countries.
33. That the situation in developing countries, particularly tropical
countries, is somewhat different can also be seen in their trade patterns, as
discussed earlier. Only a small share of the roundwood produced in developing
countries goes into international trade, with just a couple of countries
accounting for a dominant share of the export value of tropical timber. The
effectiveness of consumer-driven certification, as a trade measure to promote
sustainable forest management, is then limited, mostly to those countries that
are major exporters in the international trade of forest products.
34. As 85 per cent of global roundwood production is used domestically, it
is recognized that consumer-driven certification in international trade alone
is not sufficient to promote sustainable forest management at the global
level. The concepts and principles of wood certification could, however, also
be applied in the management of forests, irrespective of whether the timber
produced is for export or domestic consumption. The scheme could be used
effectively to strengthen monitoring and enforcement aspects of implementation
as well as compensation so as to overcome the lack of manpower to supervise
and enforce regulations in many developing countries.
35. Despite the many processes that have been initiated both nationally and
internationally on certification, there are still too many gaps for the scheme
to be fully implemented. For instance, there are some basic questions
including who will be responsible for the certification? Who will agree on
the principles concerning producer participation in, and geographical
distribution and harmonization of, different schemes? Who will certify the
certifiers? How are the products from forests that are being cleared for
non-forest uses to be dealt with? Who will finance and authorize the field
inspections to calibrate certification? And, even, what are the criteria and
indicators by which the quality of forest management can be assessed?
36. At the first session of the Panel, the following two government-
sponsored initiatives were proposed in support of the work of the Panel
relevant to this issue. They were as follows:
(a) International Conference on Certification and Labelling of Products
from Sustainably Managed Forests. This conference, sponsored by Australia,
will take place in Brisbane, Australia, 26-30 May 1996, and will consider, in
particular, the issue of voluntary certification and labelling of forest
products, so as to contribute to a better understanding of its role with
regard to sustainable management of forests, including its impact in
developing countries;
(b) Expert Working Group Meeting on Trade, Labelling of Timber, and
Certification of Sustainable Forest Management. This expert group meeting,
co-sponsored by Germany and Indonesia, will take place in Bonn, Germany,
12-16 August 1996, and will consider issues of trade and labelling, and the
impact of certification on demand, as well as sustainable forest management.
37. In addition to these two government-sponsored initiatives on the issue
of wood certification, the issue will be further discussed in a workshop on
"Ecological, social and political issues in certification of forest
management", to be held in Kuala Lumpur, Malaysia, from 12 to 16 May 1996.
The workshop is being jointly sponsored by the University of British Colombia
(UBC), Canada, and the University of Agriculture, Malaysia (UPM).
38. To further support the Panel's work on forest products trade, the
Government of Norway is sponsoring a study on "Long-term trends and prospects
in supply and demand for wood products and possible implications for
sustainable forest management". The main issues to be covered include factors
affecting long-term trends of industrial and non-industrial supply and demand
for wood, and possible implications of such trends for sustainable forest
management. A progress report of the study is expected to be available at the
second session and results of the completed study will be presented at the
third session of the Panel.
II. FINANCING AND TECHNOLOGY
A. Investment patterns and their influence on trade
39. It is acknowledged that successful forest management is closely related
to the ability to increase the value of forests through value-added downstream
processing. As future forest products-related trade and industry will have to
become more efficient and will require better technology, higher investment is
needed in developing countries to increase the productivity and quality of the
products as regards gaining competitive advantages in international trade.
40. Investments in wood-based industry and trade are carried out mainly by
the private sector. This is in contrast to the development of forest
resources in the developing countries, where the public sector is largely
involved. In the countries where forest industry is an important sector of
the economy, medium- and large-scale enterprises dominate. In the majority of
developing countries, however, most of the industries are small-scale and the
expansion of the industry is hampered by lack of capital and technology.
41. Foreign investment is carried out mainly by the transnational
corporations that are operating in many developing countries. Foreign
financial and technical assistance, however, is mainly coming through official
development assistance (ODA). In view of the large involvement of the private
sector in forest industry and trade, the donors have a tendency to give lower
priority to the development of forest industry and marketing. This is
reflected in the share of only 3.3 per cent of ODA received for development of
forest industries in 1993.
42. Lack of investment is therefore likely to limit the ability of
developing countries to develop their downstream processing activities as well
as to produce products requiring heavy investment such as medium-density fibre
(MDF) board and paper products.
B. Technology and research
43. Investment in forestry research in most developing countries has
traditionally been low. This has resulted in a smaller number of forest
scientists and research institutes. Most of the research and technology
transfer activities in forestry in developing countries is carried out by
institutions with an international mandate and scope whose perspectives differ
from a much-needed national focus on industry and marketing. As a result, the
promotion of downstream processing does not benefit from local research; and
the promotion of, for example, lesser-used species in the international market
will have to rely heavily on market forces rather than on their actual
technical properties.
III. PROPOSALS FOR ACTION
44. The Ad Hoc Intergovernmental Panel on Forests at its second session may
wish to take note of the present progress report and provide further guidance
for the preparation of the report scheduled for substantive discussion at the
third session of the Panel.
Notes
1/ Official Records of the Economic and Social Council, 1995,
Supplement No. 12 (E/1995/32), chap. I, annex I, sect. III (IV).
2/ See document E/CN.17/IPF/1995/3, sect. II (II.1).
3/ See FAO Yearbook on Forest Products, 1981-1992, FAO Forest Series,
No. 27, FAO Statistics Series, No. 116 (Rome, 1994).
4/ ITTO Annual Review and Assessment of the World Tropical Timber
Situation, 1993-1994 (Yokohama, Japan, ITTO, 1995).
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