| United Nations | E/CN.17/IPF/1996/22 |
Economic and Social Council
Distr. GENERAL
22 August 1996
ORIGINAL: ENGLISH
COMMISSION ON SUSTAINABLE DEVELOPMENT
Ad Hoc Intergovernmental Panel on
Forests
Third session
9-20 September 1996
TRADE AND ENVIRONMENT RELATING TO FOREST GOODS AND SERVICES
Programme element IV
Report of the Secretary-General
SUMMARY
The present report, prepared in response to a request of the
Intergovernmental Panel on Forests at its second session, discusses how the
linkages between international trade in forest products and sustainable forest
management are affected by market access and trade barriers to forest
products; certification and labelling in promoting sustainable forest
management; full cost internalization of environmental impacts; market
transparency for forest products; promotion of less used species; and
financing and technology for value-added downstream processing.
International market access will be a key factor in determining the
long-term success of a global policy to encourage sustainable forest
management through trade. The Uruguay Round Agreement has achieved reductions
in most tariff barriers for forest products, and perhaps more importantly, has
reduced uncertainty by binding tariffs in major importing markets and reducing
the degree of tariff escalation. In addition, some progress has been made in
curtailing certain important non-tariff barriers and other measures which
affected the trade in forest products in the past.
Competition between different wood products, products from different
regions of origin, and wood and non-wood substitutes is inevitable. The
available evidence suggests that such competition should not unduly constrain
a global initiative to improve sustainable forest management.For promoting
sustainable forest management globally, the development of
an internationally agreed and voluntary system of certification for boreal,
temperate and tropical forest products has been proposed. It is important,
however, for the current focus on certification to be put in perspective. To
date, only a tiny proportion of the global trade in forest products and a
small area of the world's forests are influenced by certification, and the
impact is not likely to increase significantly in the foreseeable future.
The transition to sustainable forest management is likely to impose
significant costs on timber operations and forestry industries in both
temperate and tropical regions. The overall economic impact may be less than
initially feared. The burden may be greater for tropical countries since they
are likely to face higher production and harvesting costs than boreal and
temperate countries. It may no longer be economically worthwhile to harvest
certain forests, and if that becomes the case on a large scale, significant
portions of the forest resource base of certain countries may have to be taken
out of production. The likely result would be some loss in forestry income
and export earnings.
Without greater market transparency, progress in all of the areas
discussed in the report is likely to be hampered. Current efforts to improve
market transparency, however, are very limited.
There is considerable scope for the international institutions that
address the issues of trade and environment in relation to forest products to
collaborate, coordinate their activities and jointly identify additional areas
for further work. It is suggested that they form an ad hoc working group to
address the proposals in the report for action on improving trade-related
incentives for encouraging sustainable forest management globally.
CONTENTS
Paragraphs Page
INTRODUCTION ............................................ 1 - 7 4
Scope of analysis and general considerations ..... 5 - 7 5
I. TRENDS IN TRADE IN FOREST PRODUCTS ............... 8 - 15 5
A. Global trade ................................ 8 - 9 5
B. Price trends ................................ 10 5
C. Regional trade .............................. 11 - 12 6
D. Future trends in supply and demand .......... 13 - 14 6
E. Status of global forest resources ........... 15 7
II. MARKET ACCESS AND TRADE BARRIERS ................. 16 - 44 8
A. Trade barriers before the Uruguay Round ..... 16 - 19 8
B. Implications of the Uruguay Round ........... 20 - 25 8
C. New barriers to trade ........................ 26 - 35 10
D. Relative competitiveness .................... . 36 - 40 13
E. Less used species ............................. 41 - 44 14
III. CERTIFICATION AND LABELLING ........................ 45 - 67 15
A. Certification of forest products .............. 46 - 60 15
B. Country certification ......................... 61 - 67 19
IV. FULL COST INTERNALIZATION .......................... 68 - 75 21
V. MARKET TRANSPARENCY ................................ 76 - 78 23
VI. CONCLUSIONS AND PROPOSALS FOR ACTION ............... 79 - 90 25
INTRODUCTION
1. Programme element IV of the work programme of Ad Hoc Intergovernmental
Panel on Forests (IPF) is concerned with trade and environment relating to
forest products and services. As defined by the Commission on Sustainable
Development, the broad aim of the programme element is to "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". 1/
2. At its first session, IPF defined the mandate of programme element IV
(E/CN.17/IPF/1995/3) and at its second session, endorsed the mandate
(E/CN.17/IPF/1996/11). It also agreed that substantive discussion at its
third session should focus on how the linkages between international trade
in forest products and sustainable forest management are affected by market
access and trade barriers to forest products; certification and labelling
in promoting sustainable forest management; full-cost internalization of
environmental impacts; market transparency for forest products; promotion
of less used species; and financing and technology for value-added
downstream processing.
3. The present report takes into consideration paragraphs 14 and 15 of
the Forest Principles 2/ and paragraph 11 of the Statement on Biological
Diversity and Forests from the Convention on Biological Diversity to the
Intergovernmental Panel on Forests (UNEP/CBD/COP/2/19).
4. The report was prepared by the International Tropical Timber
Organization (ITTO), as the lead agency for programme element IV, in
consultation with the secretariat of the Intergovernmental Panel on Forests
in the Division for Sustainable Policy Coordination and Sustainable
Development of the United Nations Secretariat. The report benefited from
several meetings, conferences and studies - in particular, the
International Conference on Certification and Labelling (Brisbane, 26-30
March 1996), sponsored by the Government of Australia; a Norwegian-
sponsored study on long-term trends and prospects in the supply of and
demand for timber and implications for sustainable forests, carried out by
the European Forest Institute; and the International Experts Working Group
Meeting on Trade, Labelling of Forest Products and Certification of
Sustainable Forest Management (Bonn, 12-16 August 1996).
Scope of analysis and general considerations
5. The linkages between environmental considerations and trade in forest
products and services will be assessed below mainly in terms of wood
products - roundwood, sawnwood, plywood, furniture and pulp and paper
products. Non-wood forest products, such as rattans, wildlife products and
medicinal plants, are not covered because of their relatively small
contribution in terms of volume and value to international trade and the
scarcity of trade statistics on them. There is also a lack of statistical
information on the key cross-border ecological services and amenities
supported by forests, such as eco-tourism, watershed management, carbon
sequestration and biochemical prospecting. Nevertheless, to the extent
that the sustainable management of forests affects trade in wood products,
it will also affect the availability and quality of non-wood forest
products and forest services. Where appropriate, the linkage will be
examined explicitly.
6. Although the production of charcoal and fuelwood is significant as a
percentage of the volume of total roundwood production, especially in
developing countries (i.e., 55 per cent), only a very small percentage
(less than 0.3 per cent) of non-industrial roundwood production enters
international trade. The value of imports of fuelwood and charcoal
compared to the value of imports of all timber products is also very small
- less than 0.2 per cent. For these reasons, and because it rarely
qualifies as a traded good, owing to its low value per unit of volume,
fuelwood is excluded from further consideration in this document.
7. Most available information on international trade in wood products has
been assembled by the Food and Agriculture Organization of the United
Nations (FAO), and that source will be used primarily in the present
report. Following FAO convention, wood and/or timber products will be
referred to as "forest products" generally.
I. TRENDS IN TRADE IN FOREST PRODUCTS
A. Global trade
8. Global trade in forest products has been expanded throughout the past
few decades. The volume of industrial roundwood produced grew steadily, to
1,600-1,700 million m3 in the early 1990s, of which around 6-7 per cent
entered international trade. In contrast, just under 20 per cent of wood
pulp and around 20-25 per cent of sawnwood, wood-based panels and paper and
paper board are traded internationally. Although the proportion of wood
pulp that is traded has remained fairly constant since the 1960s, the share
of sawnwood and wood-based panels that are traded has doubled (from 11.8 to
22.8 per cent and from 12.0 to 25.5 per cent respectively). The proportion
of paper products that is traded has also gone up substantially, from 16.5
to 24.9 per cent.
9. While the value of industrial roundwood imports has been rising
steadily over time, the share of logs in total trade in forest products has
nearly halved, from a peak of around 20 per cent in the 1970s to 10-12 per
cent in the early 1990s. The shares of wood pulp and sawnwood in global
trade in forest products has also declined steadily since the early 1960s,
from 19.4 to 11.3 per cent and 27.2 per cent to 21.4 per cent,
respectively. In contrast, over that period the share of wood-based panels
doubled, from 6.4 to 12.3 per cent, and the share of paper and paper board
increased, from 33.1 to 42.6 per cent. These trends reflect the increasing
importance of higher valued forest products in global trade.
B. Price trends
10. Although prices of forest products have risen steadily, the real
forest-product price index has been fairly stable since the 1960s. The
index fell gradually in the early 1980s but has been increasing since 1985.
Within the broad forest products category, the real price of tropical logs
has followed a rising trend since the early 1970s; prices briefly declined
between 1979 and 1985, only to pick up again thereafter. The real price of
tropical sawnwood has followed a similar trend, although with larger
fluctuations and a steeper decline in the mid-1980s and a more rapid rise
recently. The real prices of other industrial timber products, including
wood-based panels, pulp, and paper and paper board, sustained that rise
throughout the 1980s. The real price increases may reflect increasing
product scarcity owing to declining forest inventories and increasing
demand for tropical timber products, whereas the recent downturn in certain
real prices may reflect the depressed state of the global economy during
the late 1970s and early 1980s.
C. Regional trade
11. The pattern and direction of trade suggests that the global market in
forest products is still largely dominated by developed countries, in terms
of both exports and imports. Nevertheless, two distinct trends are also
discernible. First, the trade is highly regionalized 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.
Much of the demand reflects increased growth in the 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
export-oriented processing industries.
12. Secondly, the major global exporters of forest products still tend to
be developed countries with boreal and temperate forest resources and
processing industries. However, developing countries such as Indonesia and
Malaysia have emerged as dominant world exporters of certain forest
products, such as non-coniferous wood-based panels, logs and sawnwood.
Other developing countries, notably Brazil, Chile and the newly
industrialized Asian countries, are beginning to have an impact on
international trade in wood pulp and paper products. In general, the trade
in forest products has shifted towards value-added processed products.
D. Future trends in supply and demand
13. A number of recent studies have attempted to forecast future trends in
supply and demand in the forest sector on a global and regional level. 3/
The studies confirm the increasing dominance of value-added products and
continuing shifts in the pattern and direction of trade, particularly for
tropical products. As boreal and temperate countries look more to their
own forest resources to meet their needs, as North/North trade continues to
expand, and as domestic consumption in tropical producer countries grows,
the international trade in tropical timber products is likely to decline in
relative importance. While the total volume of the tropical timber trade
may decline, producer countries may export a higher proportion of
value-added wood products, and thus any decline in the value of the trade
may be less significant. In addition, an increase in South/South trade -
particularly in sawnwood - will be a counteracting force. Asia will
continue to be the dominant producer and exporter of tropical timber,
although with proportionately fewer exports of logs and more of value-added
timber products. As a result of Asian producers moving into downstream
markets, Africa and Latin America may become relatively more important
exporters of logs and sawnwood, respectively. However, changes in
technology and preferences will favour growth in the world consumption of
pulp and paper products as opposed to that of roundwood and sawnwood.
14. Recent short- and long-term projections of the trade in forest
products, conducted by the Centre for International Trade in Forest
Products (CINTRAFOR), the European Forest Institute and others, confirm the
increasing importance of developing countries as both exporters and
importers of value-added forest products. Although there may be an
increasing scarcity of tropical hardwood resources, particularly given
current rates of exploitation and consumption in South-east Asia, temperate
and boreal resources, secondary forests and plantations, and new tropical
hardwood resources in Latin America and Africa are expected to meet any
global shortfalls in supply. The extent to which the scarcity of tropical
hardwood resources may become a constraint on processing activities, as
reflected in increased real prices for tropical logs and sawnwood, will
depend on the willingness of major developing country producers to pursue
sustainable management of remaining old-growth production forests and
coordinate processing capacity with supply.
E. Status of global forest resources
15. From the standpoint of environmental services, closed forest resources
are the most important. In tropical countries they have been subject to a
higher rate of deforestation than in temperate and boreal countries.
Reforestation is generally higher in temperate and boreal countries as
well. This changing pattern of forest resources is thought to have two
important implications for trade in forest products:
(a) Declining tropical resources and expanding temperate resources
will offset each other, leading to stable prices for wood products
generally, except for highly valued tropical woods;
(b) 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 of the United States and the
tropics to plantation 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 per cent annually.
II. MARKET ACCESS AND TRADE BARRIERS
A. Trade barriers before the Uruguay
Round
16. Since the Second World War, trade in forest products has generally
benefited from the General Agreement on Tariffs and Trade (GATT). Tariff
barriers have continued to decline in recent years, particularly since the
post-Tokyo Round. The extent of the decline differs with the market and
product. With few exceptions, the tariff rates in developed country
markets had fallen generally to very low levels even before the schedules
of the Uruguay Round were agreed.
17. However, tariff escalation - the extent to which tariff levels rise
with the level of value-added processing of a forest product - has
continued in most developed countries, with specific processed products
such as wood-based panels, joinery, coated and corrugated paper, kraft
paper, and furniture generally receiving relatively higher rates. Tariff
rates have consistently been higher - often substantially - in developing
country markets then in developed country markets. Some developing
countries have preferred a high uniform rate applied across all forest
products.
18. One important impact of the decline in tariff rates for forest
products in developed country markets is that the tariff differential
between most favoured nation (MFN) and generalized system of preferences
(GSP) rates have been reduced significantly. Most tariff reductions have
led to a general decline in the MFN rate, while the GSP rate (often 0) has
been left largely unchanged. This suggests that exporters facing the full
MFN rates for certain forest products may have gained more from falling
tariff rates than developing countries that previously benefited from the
GSP and other preferential schemes.
19. The most common non-tariff measures applied to trade in forest
products over recent decades have been quantitative restrictions and/or
quality controls that have targeted specific products, wood species and
even individual exporters. However, a diverse range of non-tariff measures
has been employed, and their use was both prominent and increasing for some
products in the period leading up to the conclusion of the Uruguay Round.
B. Implications of the Uruguay Round
20. The Uruguay Round Agreement, formally signed in Marrakesh in April
1994, has a number of important implications for trade in forest products.
Tariff elimination on pulp and paper items was agreed to by Canada, the
European Union, Japan, the United States and several other major importers,
including Finland, the Republic of Korea and New Zealand. The major
developed country importers are also committed to reducing tariffs by
50 per cent on solid wood products on an average trade-weighted basis over
a five-year period starting in 1995. In the case of furniture, some major
importers such as the European Union, Japan and the United States have
agreed to eliminate tariffs completely over the next 8-10 years. Most
other countries have also agreed to reduce tariffs for solid wood products
and furniture or at least to declare bound rates. Many other countries are
also reducing tariffs on forest product imports significantly.
21. Although tariffs were not eliminated on all forest products, the
average rate of Uruguay Round tariff reductions for forest products in the
import markets of developed countries compares favourably with that of
other industrial goods. On a trade-weighted basis, forest products will
have the highest percentage of all imports (85 per cent) without duty in
developed country import markets - almost double the proportion of imports
of all other industrial goods that have zero tariffs (see the table).
Tariffs will be significant mainly on wood-based panels. A second major
contribution of the Uruguay Round has been to reduce further the degree of
tariff escalation faced by forest products in developed country markets.
Table. Changes in tariff escalation of selected forest
products in developed countries
--------------------------------------------------------------------------
Product category Pre-Uruguay Post-Uruguay Change in
by stage of Round Round Reduction tariff
processing (percentage) (percentage (percentage
escalation
--------------------------------------------------------------------------
Wood
In the rough
(logs) 0.0 0.0 0 ..
Wood-based panels 9.4 6.5 31 -30
Semi-manufactures 0.9 0.4 50 -50
Wood articles 4.7 1.6 67 -67
Subtotal 2.0 1.1 43 ..
Paper
Pulp and waste 0 0 0 ..
Paper and paper board 5.3 0 100 -30
Printed matter 1.7 0.3 83 -50
Paper articles 7.3 0 100 -67
Subtotal 3.5 0 99 ..
--------------------------------------------------------------------------
Source: GATT, The Results of the Uruguay Round of Multilateral Trade
Negotiations. Market Access for Goods and Services (Geneva, 1994).
Note: Tariffs are based on weighted averages on imports from all
sources. Tariff escalation is defined as "the tariff wedge between
processed and unprocessed, or raw, products".
22. The implications of the Uruguay Round for the non-tariff barriers
increasingly faced by forest products are 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), do
provide the basis for tackling certain non-tariff measures that have been
used as trade barriers against forest products. The SPS agreement could
reduce the use of inspection, quarantine and treatment of imported forest
products as prohibitive measures beyond what is necessary to protect
domestic human, animal and plant populations from pests or diseases. The
TBT agreement could limit the use of technical regulations on forest
products as non-tariff restrictions rather than as legitimate means of
protecting human health and safety, preventing environmental degradation
and ensuring adequate product quality and design standards.
23. Other provisions of the Uruguay Round that may help to reduce barriers
to trade in forest products include limitations and clarifications on the
use of anti-dumping and countervailing duties, customs valuation and
licensing procedures, and market access restrictions. A possible indirect
impact of the Uruguay Round is that it may have prompted other
long-standing non-tariff barriers in individual markets to be lessened.
For example, the European Union has recently proposed eliminating for
1995/96 its plywood tariff/quota scheme for beneficiaries of the
Generalized System of Preferences.
24. A recent analysis of the likely impacts of the Uruguay Round tariff
reductions on trade in forest products for selected products and markets
indicates that the total trade effects on selected forest products may
range from US$ 340 million to US$ 472 million in key developed and
developing country markets. However, these impacts amount to only 0.4 per
cent of total 1991 imports of forest products in the markets analysed,
which had an aggregate value of $85.6 billion. This suggests that,
although the real trade gains from the tariff changes are positive and
significant, they may not have a substantial impact on global trade. One
factor limiting the gains from the Uruguay Round for forest products is
that the pre-Uruguay tariff rates for most of the products in major
importing markets were already very low.
25. Now that the Uruguay Round has led to international commitments to
reduce forest product tariff rates significantly in major markets, it is
unlikely that tariff rates will be increased unilaterally. The new and
often lower rates in developed country markets will be bound, as will an
increasing proportion of tariffs in developing country markets. (Binding a
tariff means that a country has agreed officially to a ceiling on the
tariff rate.)
C. New barriers to trade
26. In recent years there has been a proliferation of additional policies
and regulations that have the potential of becoming new barriers to trade
in forest products. Those barriers include:
(a) Export restrictions by developing countries to encourage domestic
processing of tropical timber for export;
(b) Environmental and trade restrictions on production and exports in
developed countries which affect international trade patterns;
(c) Quantitative restrictions on imports of "unsustainably produced"
timber products;
(d) The use of eco-labelling and "green" certification as import
barriers.
27. 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 trade flows in forest
products significantly.
28. Developing countries are continuing to use export restrictions on wood
in rough and semi-processed products to support domestic processing
industries and improve export prospects for more highly valued forest
products. The general conclusion is that timber export taxes and bans have
proved only moderately successful in achieving the desired results in
South-east Asia, and in many cases they were achieved at high economic
cost, in terms of both the direct costs of subsidization and the additional
costs of wasteful and inefficient processing operations.
29. Despite the losses in terms of economic inefficiencies, 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 generally in import markets for forest
products, this argument is less valid.
30. Developed countries are increasingly employing a variety of
environmental regulations in their forest industries - both alone and in
conjunction with export restrictions - which 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 North-west of the United States - such as the
spotted owl reservations and the state-level logging bans - had 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.
31. 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. The trade implications for Canada - the world's largest producer
and exporter of newsprint - of United States state and federal recycled
content laws for newsprint is an example of this issue. In particular, the
United States 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 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. 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.
32. In most cases, the lack of international consensus and agreement on
environmental criteria and standards lies at the heart of disputes as to
whether unilaterally imposed measures are restricting market access. For
example, Brazilian manufacturers and exporters of pulp have expressed their
concern that the criteria developed by Denmark would largely benefit
European paper producers at the expense of foreign exporters of pulp and
paper products.
33. Many developed countries are also under pressure to adopt quantitative
restrictions to limit the import of "unsustainably" produced forest
products or to impose countervailing duties on imported products that
benefit from an "environmental" export subsidy - i.e., unsustainable forest
management that leads to lower harvesting costs and thus lower export
product prices. The arguments against imposing unilateral sanctions, such
as singling out tropical timber products for trade bans or other
restrictions on environmental grounds, are fairly formidable and now
generally accepted. However, the establishment of the Trade and
Environment Committee of the World Trade Organization (WTO) has shifted the
debate over environmental restrictions on trade to the multilateral arena.
34. Although the rationale behind WTO's work programme on trade and
environment is to link the benefits of trade liberalization more directly
to policies to achieve better environmental protection and sustainable
development, the popular perception is that the real objective should be
"greening" the GATT/WTO - i.e., subjugating trade rules to environmental
criteria. This in turn has led to repeated calls to amend GATT/WTO rules
to allow for quantitative restrictions and countervailing duties where
there are environmental justifications for employing these measures. If
such a broadening of the GATT/WTO rules is achieved, then the use of
quantitative restrictions and even countervailing duties by importing
countries - e.g., to restrict imports of timber products that are not
sustainably produced or to counter perceived environmental export subsidies
- will increasingly become a feature of trade in forest products.
35. 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 WTO.
What clearly needs to be avoided is indiscriminate and widespread
application of new barriers to trade in forest products which could easily
override the gains in market access resulting from the recently concluded
Uruguay Round.
D. Relative competitiveness
36. In addition to trade barriers, 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. Changes in long-run returns may, in turn,
influence the incentives for sustainable forest management.
37. 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 interrelated and whether there are essentially two
different markets for two distinct commodities. The available evidence
indicates that the elasticities of substitution between temperate, boreal
and tropical wood products are very low. 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
and boreal softwoods from different regions are still closer substitutes
for one another than tropical hardwoods, and vice versa. In general,
substitution by origin for tropical sawnwood and plywood in certain
importing countries appears to be very high, especially for plywood. 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.
38. 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 a 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.
39. To summarize, empirical studies suggest that substitution between
tropical and temperate timber products in importing markets has not been
very significant. However, in response to export bans on logs by tropical
producers, some importers are increasingly diversifying their sources of
supply. Substitution of non-wood products for timber may be occurring, but
the evidence is largely anecdotal. Substitution between tropical timber
products originating from different countries or regions does appear to be
very high, particularly 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.
40. Thus the available empirical evidence indicates that producer
countries 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. 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.
E. Less used species
41. Provided that markets exist, there is substantial potential for
expanding utilization of forest resources, particularly in tropical
countries, by exploiting commercially less used species. For example,
recent FAO statistics suggest that only about 26 per cent 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 sawlogs and
logs for plywood and veneer. In 1988-1992, saw and veneer logs comprised
92 per cent of the total industrial roundwood harvest in Indonesia,
97 per cent for Malaysia and 93 per cent for Papua New Guinea.
42. If the less used species are to play an expanded role in both the
temperate and tropical forest products industry, it is unlikely that the
additional supply would be suitable for traditional solid wood products
such as sawnwood and plywood. Instead, the likely use of the less used
species 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, suggests 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.
43. However, there are important considerations for any global strategy to
promote the less used species. 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 products. Any new form of virgin wood
pulp would be competing in terms of quality and price with more traditional
sources but also with recycled pulp. As noted above, the problem of market
access for any new products generated from the less used species 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.
44. Secondly, in many countries, particularly in tropical regions, the
potential for identifying - let alone exploiting - the less used species is
limited by lack of basic information on the availability and commercial
viability of those 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 has been
promoted as a means for tropical producer countries to assess their forests
regularly, including the identification of the less used species for
potential commercial exploitation through sustainable forest management.
Basic assessment of this kind is essential if the less used species are to
be utilized more in the forest products industry. In addition, further
analysis of market demand and the costs of exploitation and utilization is
required to determine the commercial viability of these species.
III. CERTIFICATION AND LABELLING
45. The number of eco-labelling and certification initiatives applied to
trade in forest products has increased rapidly in recent years. As noted
in the section above, 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. If
such regulations and schemes are non-discriminatory, transparent and
justified, are agreed mutually between trading partners or through
multilateral negotiations, comply with GATT rules and conform with
internationally recognized guidelines, their potential use as trade
barriers will be drastically reduced.
A. Certification of forest products
46. Certification is strongly related to criteria and indicators. 4/ The
term "certification" has been used indiscriminately to cover a wide range
of processes. In the present report the term, applied to forest products,
will be used to mean a process that 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. To be effective in reassuring consumers that wood products
originate from sustainably managed sources, certification of forest
products requires both certification of the product process and
certification of the sustainability of the forest management practices.
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. The former involves inspection of the entire product processing
chain of supply from the forest to final product, through domestic and
export markets, if necessary.
47. 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 interested parties 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.
48. However, others suggest that the evidence for considerable additional
demand for certified wood products is unproven and that only in certain
small niche markets may customers be willing to pay more for certified
timber. In fact, there is concern that the impact 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. 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 with international
and national commitments to sustainable forest management. Finally, it is
argued 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.
49. Despite the proliferation of certification schemes, the evidence to
date suggests that certified timber is currently having only a limited
impact on the global market. In 1993, around 1.5 million m3 of forest
products and 35 suppliers were certified. This amounted to less than
0.5 per cent of global trade. Recent estimates indicate that only about
3.5 million m3 from 5.1 million ha of forests have been certified so far.
In fact, certified production accounts for only 0.23 per cent 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 per cent of traded wood products are
expected to be affected by certification by the year 1999.
50. Nevertheless, from recent experience with certification of forest
products, it is possible to obtain a better idea of the benefits and costs
involved. First, certified timber sales in export markets are expected to
attract a "green premium" in consumer markets; that is, certified timber
could be sold at a higher price than uncertified timber. Secondly, in the
absence of certification, some forest products may lose substantial market
share in those consumer markets of importing countries that are currently
developing legislated or voluntary schemes and even quantitative
restrictions and environmental regulations on imports, which will
ultimately affect non-certified timber products. Thus one of the
additional benefits of certification is that it will allow timber exporters
to avoid losses of market share and revenues.
51. An attempt to estimate these benefits for tropical timber
certification was made by the World Bank. 5/ A key assumption of the
analysis was that certification of tropical timber products would attract a
green premium of 10 per cent in certain niche markets in North America and
Europe. This leads to a gain of $62 million. On the other hand, in the
absence of certification, those markets would be lost to uncertified
tropical timber products, although some of the loss could be recouped from
diversion of the exports to non-European/North American markets. Thus the
avoidance of net revenue losses without certification amounts to $366
million. The total gain from certification of tropical timber products is
$428 million, or 4 per cent of the current timber product exports of
developing countries. An interesting aspect of this estimate is that the
vast majority of the gains from certification arise 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 per cent and with no substitution
effects.
52. Such an estimate is of course not without controversy. Although there
is now some evidence from surveys that there is willingness to pay a higher
price for certified products in certain importing markets, the actual size
of such a premium is debatable. More importantly, the higher the premium
and thus final product price, the more likely it is that competing non-wood
and domestic wood-based products might be substituted. The estimated gains
do not take into account such substitution effects in importing markets.
53. In addition, there is considerable debate about the size of the niche
markets ultimately affected by certification. The analysis indicates that,
in the absence of tropical timber certification, the markets affected would
result in a revenue loss of around 6 per cent of developing country export
markets. However, this would affect only 0.64 per cent of the global trade
in forest products. Some have suggested that if both tropical and timber
products were certified, more markets would certainly be affected, and as a
result around 15-25 per cent of the total share of global forest trade
could be influenced by certification. However, it is not clear on what
basis the latter estimates are made. The ultimate impact on revenues and
markets is also not clear. As certification is extended to more temperate,
boreal and tropical products, then the "green premium" differential between
certified and non-certified wood products will be substantially smaller and
may eventually disappear. However, if global certification results in
higher prices for wood products generally in consumer markets, then there
may be a problem of substitution by non-wood alternatives on a large scale.
54. The issue as to whether certification of forest products inevitably
leads to higher prices for forest products in final consumer markets is
also controversial and 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.
55. The direct costs of certification include both the costs of assessing
or auditing forest management practices in the country of origin and the
costs of identifying, monitoring and assessing the entire processing chain
of supply from the forest to final products. These costs will clearly
vary, depending on the type and size of forest being certified, the type of
final product being produced, and the location of processing activities and
their degree of vertical integration, both domestically and
internationally. For example, for tropical products the costs of assessing
or auditing have been estimated at about $0.3-1.0 per ha per year in
developing countries, and the costs of certifying the chain of supply for
processing could be up to 1 per cent of border prices. For temperate and
boreal products in developed countries, cost estimates for certifying
forests are roughly similar - $0.3-0.6 per ha. It was suggested that as a
rough approximation, the minimum costs of certifying forest management
would be a fixed assessment cost of $500 plus $0.40 per ha for the initial
assessment and $0.15 per ha for each subsequent visit.
56. Many analysts suggest that an additional direct cost of certification
is the incremental cost of improving current forest management practices to
satisfy the criteria and standards specified. These costs are likely to be
considerably higher than the costs of the certification process itself.
For example, it is estimated that, to meet established certification
criteria, forest management costs in North American temperate and boreal
forests will rise by 20-30 per cent, and might rise as much as
100 per cent. Many of these costs are assumed to result from reduced
timber yields and higher operating costs, although the latter could
actually be reduced by better planning, improved residual stands, and
reduced-impact harvesting techniques.
57. However, to the extent that the costs of improved forest management
are really connected to a transition to sustainable forest practices
management and not to certification per se, then it is not completely
accurate to attribute all those additional costs to certification. From
the perspective of global policies to encourage sustainable forest
management, it is probably best to turn this viewpoint around: the costs
of assessing and auditing forests and the processing chain of supply from
forest to final products are the additional direct costs of certifying
sustainably produced timber, on top of the costs of transforming existing
forest practices into sustainable practices.
58. There may also be indirect costs of certification as a result of
higher prices for certified products in import markets. As discussed
above, these costs are related to the size of price differentials for
certified products, substitution effects, and the extent of products and
markets affected. So far, the available evidence suggests that the number
of wood products and markets affected by certification will remain fairly
small for the foreseeable future. Moreover, higher sustainable forestry
costs plus any additional certification costs in the country of origin may
not necessarily translate into substantially higher final product prices in
importing markets. On the other hand, the analysis of the impacts of
Uruguay Round tariff reductions suggests that only minor changes in prices
for wood products in import markets are required for trade creation (or
loss) and diversion to occur. Thus there are likely to be some trade
losses and diversion for certified timber products in importing markets,
although the precise magnitude of those indirect costs of certification is
difficult to determine at present.
59. Finally, and most importantly, there is now an emerging international
consensus that an international framework is needed, both to ensure
harmonization and mutual recognition of certification systems and to
guarantee an effective international accreditation of certification bodies.
The most important criteria for any internationally accredited
certification body are that it be independent, impartial, and able to
demonstrate that its organization and personnel are free from any
commercial, financial or other pressure. Equally, to achieve harmonization
and mutual recognition, a voluntary international certification system
must:
(a) Be comprehensive and cover all types of forests and wood
products;
(b) Be based on objective and measurable criteria;
(c) Produce reliable assessment results and thus be fully independent
from any vested interests;
(d) Be transparent and involve a balanced participation of the
interested parties and stakeholders, thereby ensuring their commitment;
(e) Represent all involved parties;
(f) Be goal-oriented and cost-effective.
60. Establishment of such an international framework covering all existing
and proposed forest product certification schemes is clearly a long-term
process. The Intergovernmental Panel on Forests may wish to endorse this
process and encourage the parallel and cooperative development of existing
and proposed international schemes, as well as national and regional
schemes, with the overall objective of achieving international
harmonization and mutual recognition of standards. In addition, IPF may
wish to express support for WTO's efforts to ensure that existing and new
certification and eco-labelling schemes for forest products are not used in
a discriminatory way as a form of disguised protectionism. The purpose of
certification of forest products 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.
B. Country certification
61. Given the proliferation of certification schemes and the increasing
threat to wood products of being targeted for quantitative restrictions and
other market barriers in major consumer markets, the need to develop
internationally agreed, accredited and transparent timber certification
rules is important. However, it is important to emphasize that 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. Even under very optimistic scenarios for the expansion
of certification schemes, this is unlikely to change in the foreseeable
future. Thus timber certification cannot be considered the main instrument
for promoting sustainable forest management globally; in fact, given the
pressing needs to promote sustainable forest management, it is imperative
to develop urgently other instruments complementary to timber certification
which are more directly aimed at wholesale improvements in forestry
management policies and regulations in producer countries.
62. One such approach is the concept of country certification. Originally
proposed in a report to ITTO, 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 and consumer countries
through an international agreement on all types of forests.
63. The main purpose of country certification is to ensure an
international commitment by both producer and consumer countries to adopt
policies and practices that encourage sustainable management of production
forests and timber products while simultaneously improving international
market access of those products. The overall objective is to tackle the
two major obstacles to sustainable forest management identified in the
present document: restrictions on market access, and forest-sector policy
failures. Country certification would also assist with the problem of
market transparency. To be effective, country certification would require
two broad sets of policy commitments from timber-producing and timber-
consuming countries.
64. The first set of policies would require producer countries to review
their forest-sector policies and regulations in order to determine the
implications of those policies and regulations on timber-related
deforestation and the extent to which their timber export policies might
also be affecting deforestation, either directly or by exacerbating
problems caused by poor domestic forestry policies and regulations.
Producer countries ought to correct the policy distortions that work
against sustainable timber production objectives, since such distortions
are believed to be at the heart of inefficient and unsustainable forest-
sector development and timber-related deforestation.
65. 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, particularly for those producer countries
that demonstrate a commitment to forest-sector policy reform. For example,
the removal of specific tariff and non-tariff barriers on imports of forest
products could proceed on a case-by-case basis, depending on demonstrable
progress by each exporting country in promoting sustainable forest
management policies and forest-sector policy reform. This could occur
through normal bilateral trade negotiations or through multilateral
agreements and organizations. In addition, consumer countries should
actively promote, through information and market intelligence campaigns,
the use of tropical timber imports from exporting countries that are
implementing sustainable management policies. Finally, consumer countries
should also undertake not to resort to the use of any of the new barriers,
identified above, to imports from participating producer countries.
66. With its emphasis on policy reform, country certification is not
necessarily an alternative to certification of forest products but
complementary to it. The widespread adoption of practices supportive of
sustainable forest management in producer countries would make it much
easier for more forests and timber products to qualify for timber
certification. The global impact of existing timber certification schemes
and their coverage of forests and products would likely increase.
Moreover, implementation of a global country certification process could
initiate increased cooperation between producer countries, consumer
countries, timber traders and independent monitors to develop more
internationally recognized, transparent and detailed criteria for
establishing and evaluating forest management practices globally. Since it
may be easier to negotiate and implement, country certification may not
only lay the groundwork for more comprehensive international forest product
certification agreements but also buy time, by initiating immediate
incentives for action on sustainable forest management while the details of
more complicated agreements on certification for all global forest products
from natural and plantation forests are concluded.
67. 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
forest management globally. It would neither take advantage of the
trade-related incentives needed for encouraging the sustainable management
of forests nor provide a stimulus for fostering further cooperation in
related areas, such as certification of forest products. A country
certification process that encourages further cooperation by major tropical
timber-exporting countries while at the same time being sufficiently
comprehensive to cover major temperate and boreal producers as well would
be an important undertaking. However, where technical and financial
constraints limit the ability of some poorer tropical producers to
implement forest resource assessments, management regulations and policy
reforms, additional financial assistance may be required.
IV. FULL COST INTERNALIZATION
68. 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 which 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.
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, although producer countries may incur significant short-
term costs by supporting policy reforms and regulations that encourage
sustainable forest management, 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.
69. The transition to sustainable forest management may impose additional
costs at the stand level for residual stand management and increased
environmental protection. The increased costs may be attributed to five
different factors: the setting aside of certain areas; lower harvesting
yields; additional silvicultural and harvesting costs; additional costs of
planning, and monitoring; and a 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 which lower operating costs. In addition, the current income
foregone with reduced yields initially may be more than compensated for
over the long run by 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.
70. Estimating the additional costs - to 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:
(a) The transition to sustainable forest management is likely to
impose some increase in production costs in the short term, both at the
industry level and the stand level;
(b) The additional costs may be higher for tropical than for
temperate countries;
(c) It may no longer be economically worthwhile to harvest certain
forests, and large areas of the forest resource base in certain countries
may have to be "set aside", or taken out of production, which could result
in some income losses;
(d) Increases in costs and stumpage prices at the stand level do not
necessarily mean significantly higher prices for final forest products.
71. Several studies have found that the costs of implementing sustainable
forest management are likely to vary significantly across forests,
countries and regions. It was estimated that 5-50 per cent additional
production cost is possible. For temperate and boreal forests, the
available estimates suggest generally an increase of around 20-30 per cent
in costs. For tropical countries, the variation in estimates is much wider
but, on average, higher than for temperate regions. Most estimates suggest
that the cost of sustainable forest management per cubic metre of log
produced is 10-20 per cent of the current average international tropical
log price, of about $350.
72. The higher costs of sustainable forest management on overall timber
production are likely to make it unfeasible to harvest certain 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 those operations have remained financially
profitable even though they are socially inefficient. A comparison of the
private and social returns on selective logging on steep
(30 per cent-50 per cent) slope of old-growth forest in the Philippines
illustrates this point. The magnitude of the estimated damage to
downstream activities indicates that the Philippines would be better off
not harvesting old-growth forests on such steep slopes, even though the
private concessionaire would gain financially from unsustainable harvesting
on the steep terrain.
73. On the other hand, the widespread implementation of sustainable forest
management across many regions in a 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. A recent policy simulation which examined the impact on
tropical forest countries of setting aside 10 per cent of their forest
resource base concluded that such a reduction in supply would result in a
loss of wealth for the countries. Over the long run, taking areas
permanently out of production would mean that the remaining production
forest inventory could not support as high a level of sustainable harvest
as under base-case projections.
74. 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 cost of harvesting. This is particularly the case for products
traded globally. For example, typical stumpage values in tropical
countries of $6-30 per cubic metre of log equivalent end product often
represent less than 1 per cent of the final value of the product being sold
in foreign consumer markets. As a consequence, even reasonably large
increases in harvesting costs and the stumpage value of timber can have
only a modest impact on the final product price in consumer markets. Thus
the evidence for both traded tropical, boreal and temperate wood products
suggests that a doubling of harvesting costs may lead to an increase of
10-15 per cent in the costs at the importer or wholesaler level and less
than a 10 per cent increase in the retailer's costs.
75. A model of Indonesia's forestry sector was developed to simulate a
policy initiative for implementing sustainable management of its remaining
production forests. Scenarios depicting 25 per cent and 50 per cent
increases in harvesting costs across the forestry sector were examined.
Although domestic log prices were affected significantly by increased
harvest costs, any resulting impact on the rest of Indonesia's forestry
sector seemed to be somewhat dissipated. Indonesia's sawnwood and plywood
exports seemed to be the least affected by the increased harvest costs,
which would suggest that factors of external demand exerted an important
counteracting influence.
V. MARKET TRANSPARENCY
76. Improved market transparency is a key element in progress in the
reduction of 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 of these
areas is likely to be hampered.
77. As was suggested above, one potential threat to trade in forest
products is the development of new non-tariff trade barriers, such as
export restrictions set by developing countries, environmental and trade
restrictions set in developed countries on production and exports, and
quantitative restrictions on imports of "unsustainably produced" timber
products. Another threat is the potential use of certification of forest
products as an import barrier. Finally, the lack of detailed information
on the distribution of costs and rents in the global trade in forest
products makes it difficult to assess accurately the likely economic
impacts of sustainable forest management and any loss of consumer markets.
78. 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:
(a) Countries importing forest products should routinely review and
make publicly available information on domestic standards and regulations -
environmental, health, building etc. - 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
of restricting access to its domestic market on environmental or health
grounds, then the information should not only be made publicly available
but also periodically assessed by an appropriate international authority,
such as WTO;
(b) Countries that use export restrictions to promote value-added
processing should also routinely review and make available detailed
information on such policies. The policies should also be periodically
reviewed and assessed by an appropriate international body, such as WTO.
The trade policy review in WTO provides opportunities to do this;
(c) International harmonization and mutual recognition of standards
on certification of forest products will require detailed information on
both forest management practices globally and the process chain of supply
from the forest stand in producer countries to final products in consumer
countries for the wide variety of forest 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 supplied by intermediate
processors, exporters, importers and wood-based manufacturers on which
improved international standards on certification of forest products can be
developed;
(d) The country certification process, advocated as a complementary
approach to the development of internationally agreed standards for
voluntary timber certification, is one form of providing periodic reviews
and assessment and improved information on producer and consumer country
policies affecting the trade in forest products and sustainable forest
management;
(e) Assessments of the cost of implementing sustainable forest
management in producer countries and of its long-term impact on patterns of
forest-based industries in those countries, use of the forest resource
base, the returns to different harvesting systems and the competitiveness
of forest products in consumer markets will require that more market
information be made available by producing countries, consumer countries
and industry sources. Again, cooperation in providing this information may
be more forthcoming if such assessments are officially sanctioned through
an internationally agreed process, such as country certification;
(f) Improved market intelligence for forest products is also required
generally, since such intelligence is lacking for most wood-based products.
Both consumers and producers would benefit from better market intelligence,
which would lead to more competitive and efficient markets;
(g) Finally, as will be discussed below, improved information on
markets and revenues is required in order to assess the additional
financial assistance that may be needed by low-income producer countries if
they are to adopt sustainable forest management and the most efficient and
equitable international mechanism for providing that assistance.
VI. CONCLUSIONS AND PROPOSALS FOR ACTION
A. Market access
79. The Uruguay Round Agreement made significant progress in improving
market access for forest products, especially in terms of reducing tariffs
for all types of forest products. Yet there are still international trade
barriers in forest products, particularly new non-tariff barriers, which
will hamper better access of forest products to the international market.
1. Proposals for action
80. IPF may wish to:
(a) Support efforts by the World Trade Organization further to reduce
tariff and non-tariff barriers to trade in forest products;
(b) Bring to the attention of WTO the proliferation of new barriers
to trade in forest products;
(c) Urge developed countries and international organizations such as
ITTO, the United Nations Conference on Trade and Development (UNCTAD) and
FAO to support efforts by developing countries to increase their
productivity and efficiency in downstream processing activities.
81. The competition between different wood products, products from
different regions of origin, and wood and non-wood is inevitable.
Available evidence suggests that such competition, although unlikely to
unduly constrain a global initiative to improve sustainable forest
management, would have serious implications to future markets of specific
forest products.
2. Proposal for action
82. IPF may wish to propose that UNCTAD and ITTO support efforts to gather
information and conduct more independent market and economic studies of
potential competition between different wood products, products from
different regions of origin, and wood and non-wood substitutes, analysing
in particular the likely substitution effects of any increases in the
prices of forest products accompanying a global initiative to improve
sustainable forest management.
B. Less used species
83. Although there have been many efforts and initiatives by international
institutions and producer countries to promote less used species in the
international market, progress is still very limited. Concerns have been
expressed as to the potential environmental impact on forests of increased
exploitation of less used species. It is important, therefore, while
intensifying efforts to promote less used species, to address concerns on
the potential impact of their exploitation on forests.
Proposals for action
84. IPF may wish to:
(a) Propose that ITTO continue to promote less used species in the
international market;
(b) Urge producer countries to ensure that any policy for exploiting
less used species and increasing the volume of timber removed from stands
is compatible and consistent with improvements in the overall sustainable
management of production forests.
C. Certification
85. The long-term process of developing an internationally agreed and
voluntary system of certification for forest products is currently being
hampered by a proliferation of schemes. There is need to achieve
international harmonization and mutual recognition of standards and to
encourage cooperation and common agreement among competing international
accrediting schemes. In fact, the current international attention paid to
certification of forest products needs to be put into perspective. To
date, only a tiny proportion of the global trade in forest products and a
small area of the world's forests are influenced by certification. In
addition, international efforts should ensure that existing and new
certification and eco-labelling schemes for forest products are not used in
a discriminatory way as a form of disguised protectionism.
Proposals for action
86. IPF may wish to:
(a) Propose that ITTO and UNCTAD provide leadership in bringing the
current emphasis on certification into perspective and promote
international harmonization and mutual recognition of standards among
various certification schemes;
(b) Bring to the attention of the World Trade Organization the need
to ensure that existing and new certification and eco-labelling schemes for
forest products in importing and consumer markets are not used in a
discriminatory way, as a form of disguised protectionism;
(c) Propose that agencies dealing with trade in forest products, such
as ITTO, UNCTAD, WTO and FAO, form a working group to consider the
formulation of procedures for country certification schemes.
D. Full cost internalization
87. The transition to sustainable forest management is likely to impose
significant costs on timber operations and forest industries in boreal,
temperate and tropical regions. The burden may be more for tropical
countries since they are likely to face higher production and harvesting
costs than temperate countries. There is still uncertainty on the long-
term economic implications, in particular the possibilities of losses in
forestry income and export earnings.
Proposal for action
88. IPF may wish to support efforts by ITTO, UNCTAD, the European Union
and other international institutions to carry out more independent market
and economic analyses of the potential additional stand-level and
industry-wide costs resulting from a transition to sustainable forestry
management and from policy reforms. Such analyses should also examine the
potential long-term benefits of improved efficiency and sustainability at
all levels of the forestry industry and the development and coordination of
international efforts for improved market intelligence.
E. Market transparency
89. Despite some ongoing efforts by ITTO, ITC and FAO, there has been
little progress in improving market transparency for trade in forest
products. Without greater market transparency, progress in the areas
discussed in the present report is likely to be hampered.
Proposal for action
90. IPF may wish to call upon ITTO, FAO and ITC to expand their work on
market transparency and provide leadership in establishing a global
database, drawing upon expertise and information from relevant agencies and
national institutions, to improve market transparency for trade in forest
products.
Notes
1/ Official Records of the Economic and Social Council, 1995,
Supplement No. 12 (E/1995/32), chap I, sect. D.5, annex I, sect. III (IV).
2/ Report of the United Nations Conference on Environment and
Development, Rio de Janeiro, 3-14 June 1992, vol. I, Resolutions Adopted by
the Conference (United Nations publication, Sales No. E.93.I.8 and
corrigenda), resolution 1, annex III.
3/ For example, London Environmental Economics Centre, The Economic
Linkages between the International Trade in Tropical Timber and the
Sustainable Management of Tropical Forests (London, LEEC, 1993).
4/ See the report of the Secretary-General on programme element
III.2, Criteria and indicators for sustainable forest management
(E/CN.17/IPF/1996/10).
5/ P. N. Varangis, R. Crossley and C. A. Primo Braga, "Is there a
commercial case for tropical timber certification?" Policy Research
Working Paper, No. 1,479 (Washington, D.C., World Bank, 1995).
-----
This document has been posted online by the United Nations Department of Economic and Social Affairs (DESA). Reproduction and dissemination of the document - in electronic and/or printed format - is encouraged, provided acknowledgement is made of the role of the United Nations in making it available.
Date last posted: 7 December 1999 12:45:30
Comments and suggestions: DESA/DSD