Trade and Sustainable Forest Management

Alastair Sarre (ITTO)

For delivery at: UNFF Intersessional Experts Meeting on the Role of Planted Forests in Sustainable Forest Management, 24-30 March 2003, New Zealand

Abstract

International negotiations stress the positive potential role of trade in forest products in sustainable development and have identified obstacles that might limits this positive influence. In this paper we examine some of the issues at the global level, and provide a brief assessment of the potential role of trade in plantation-grown products on the sustainable forest management (SFM).

The international trade in tropical timber primary products has declined in many countries in the last decade, both in volume and value terms. Conversely, the trade in value-added products such as furniture, builders’ joinery and profiled wood has been increasing, particularly in Asia and Latin America. Global data on the origin of the timber used in the value-added trade – whether from natural forests or plantations – are not available. Nevertheless, it is clear that the plantation resource is expanding.

Many developing-country producers perceive lack of market access for timber as an impediment to trade and therefore to SFM. Forest certification, for example, is much further advanced in temperate, developed-country forests and may therefore penalize developing countries that are making efforts to achieve SFM but have not progressed to a point where certification is possible.

It has been suggested that the increasing availability of industrial plantation timber will reduce the pressure on natural tropical forests by providing an alternative source of industrial wood. However, this argument presupposes that timber harvesting is a main cause of deforestation, which generally it is not. In fact, the increased availability and trade in plantation timber is more likely to undermine SFM by reducing the role of the natural forest in timber production and therefore its value to its owners.

However, developing-country exports in forest products, including from plantation-grown timber, can play an important indirect role in forest conservation by assisting economic development, which will lead to a greater capacity for forest conservation. Direct payments for forest services such as biodiversity conservation and carbon storage and sequestration could also play a crucial role in the conservation of natural forests. The development of remuneration mechanisms for such services is a matter that must be addressed by the international community as a matter of urgency.

Introduction

International negotiations over more than a decade have repeatedly stressed the positive potential role of trade in forest products in sustainable development and have identified obstacles that might limits this positive influence. In this paper we first examine some of the issues at the global level, and then provide a brief assessment of the potential role of trade in plantation-grown products on the sustainable management of tropical forests.

International negotiations

Under the plan of action adopted by the United Nations Forum on Forests (UNFF) at its first substantive session, trade is recognized as having an important role in the achievement of sustainable forest management. Accordingly, international trade and sustainable forest management have been identified as one of the 16 elements important to the implementation of the Intergovernmental Panel on Forests/Intergovernmental Forum on Forests (IPF/IFF) proposals for action. It has been acknowledged that the buying and selling of wood and non-wood forest products and services, including across international borders, have a profound effect on sustainable forest management, forest harvesting and the value of forest products. Therefore, trade issues have been stressed as an integral part of the Forum’s work and feature prominently in the IPF/IFF proposals for action. In addition, trade will be a principal part of the Forum’s deliberations on economic aspects of forests at its third session to be held in May/June this year.

The Rio Declaration on Environment and Development, Chapter 11 on combating deforestation and other relevant chapters of Agenda 21, and the Non-legally Binding Authoritative Statement of Principles for a Global Consensus on the Management, Conservation and Sustainable Development of All Types of Forests (the Forest Principles), provide a holistic framework for addressing issues relating to the world’s forests, including the relationship between trade and sustainable forest management. In identifying international cooperation as one of the critical social and economic dimensions in the effort to achieve sustainable development, particularly in developing countries, Chapter 2 of Agenda 21 underlines the importance of the international economy for providing a supportive international climate in the realization of environmental and development goals by promoting sustainable development through trade liberalization and making trade and environment mutually supportive (para. 2.3). For forests, this translates into the pursuit of three interrelated objectives:

Promoting sustainable forest management through trade liberalization;
Making trade and sustainable forest management mutually supportive; and
Promoting trade in forest products and services, particularly those derived from sustainably managed forest resources.

Further guidance on the issue of trade provided by the framework of the United Nations Conference on Environment and Development (UNCED) includes the following:

Trade policy measures for environmental purposes should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade (Rio Declaration on Environment and Development, Principle 12);
Efforts of developing countries to strengthen the management, conservation and sustainable development of their forests should be supported, taking into account the problem of achieving at least the replacement value of forests through improved market access for forest products, especially processed products (Forest Principles, Principle 9 (a));
Trade in forest products should be based on non-discriminatory and multilaterally agreed rules and procedures consistent with international trade law and practices. In this context, open and free international trade in forest products should be facilitated (Forest Principles, Principle 13 (a));
Reduction or removal of tariff barriers and impediments to the provision of better market access and better prices for higher value-added forest products and their local processing should be encouraged (Forest Principles, Principle 13 (b));
Forest conservation and sustainable development policies should be integrated with economic, trade and other relevant policies (Forest Principles, Principle 13 (d));
Trade and other policies and practices that may lead to forest degradation should be avoided (Forest Principles, Principle 13 (e));
Unilateral measures, incompatible with international obligations or agreements, to restrict and/or ban international trade in timber or other forest products should be removed or avoided, in order to attain long-term sustainable forest management (Forest Principles, Principle 14).

Global trade and wood resource trends

Global production and international trade in forest products have continued to expand. According to the Food and Agriculture Organization of the United Nations (FAO), world roundwood production increased from 3.25 billion cubic metres in 1996 to 3.38 billion cubic metres in 2000, with over half of this used as fuelwood, primarily in developing countries. Global production of industrial roundwood rose from 1.50 to 1.515 billion cubic metres over the same period, with about 60% of this being saw and veneer logs and the rest destined for pulping or other uses. The global value of primary forest products exports (logs, sawnwood, panels, pulp and paper) grew from $134.57 billion in 1996 to $141.56 billion in 1999, with pulp and paper products accounting for almost two-thirds of this. Global trade in secondary processed wood products has grown more rapidly than that in primary products, rising almost 25% from about $32 billion in 1996 to almost $40 billion in 2000.

Although expanding, international trade in forest products remains a relatively small proportion of global production. Approximately one-quarter of wood-based panels and paper products and one-fifth of sawnwood and wood pulp are traded internationally, while only 7% of global industrial roundwood output is currently traded. Trade is still dominated by a limited number of (mostly developed) countries, although some developing countries are making an impact on certain segments of international trade. The share of secondary processed wood products in the overall international trade in forest products has also expanded, particularly in respect of developing countries; Figure 1 shows how the trade of processed timber products has expanded in ITTO tropical timber-producing countries. Trade remains concentrated in the three major regions of the Pacific Rim, North America and Europe, with Japan, the USA and the European Union (EU) continuing to be the biggest markets. China has emerged, however, as a significant importer of raw materials and a growing exporter of finished products in recent years. At the same time, the domestic consumption of wood products in developing countries has been increasing rapidly.

Role of plantation timber in trade

The volume of forest products derived from plantations will continue to expand and compensate for the anticipated reduction in the availability of timber derived from natural tropical forest in the international markets. However, the current contribution of the plantation estate to the international timber production and trade is difficult to determine. The ITTO/UNECE/FAO/EUROSTAT Joint Forest Sector Questionnaire started soliciting information on plantation timber production in 2002, but few data have been provided to date. Nevertheless, it is clear that the plantation resource is expanding in developing countries (Figure 2). Moreover, plantation timber is becoming more important in the further-processing sectors. For example, the further-processing industries and the trade in their products in Brazil and Malaysia are already heavily reliant on locally grown plantation timber; in Malaysia, plantation rubberwood constitutes about 80% of the timber used by that country’s highly successful furniture export industry. The further-processing industry in other tropical countries, particularly the Philippines and to a lesser extent Thailand, depend more on imported timber, including the relatively homogenous timbers grown in the Pacific Northwest of the USA.

Figure 1: Value of ITTO producer member exports (Asia-Pacific, and Latin America and the Caribbean) of processed timber products, 1989–2000 (billion US$)

Current status and assessment of developments concerning trade in forest products and services

Market access

In recent years, the international trade in forest products has benefited from the provisions of the Uruguay Round of multilateral trade negotiations, which secured further reductions in most tariffs for forest products, reduced uncertainty through the binding of tariffs in major markets, and reduced the degree of tariff escalation. However, the continuing use of barriers, particularly non-tariff barriers which are aimed, inter alia, at encouraging domestic processing, promoting products from sustainably managed forests and restricting imports of unsustainably and/or illegally produced forest products, has affected market access for many forest products. Furthermore, in the context of the IPF/IFF process, consensus has yet to be reached in respect of some important issues including: removal of unilateral measures to the extent that these are inconsistent with international agreements; removal of unilateral bans and boycotts inconsistent with the rules of the international trade system as called for under Principle 14 of the Forest Principles; increased market transparency in order to improve market access for forest products and services, including those coming from sustainably managed forests; and removal of trade restrictions that constrain market access, particularly for value-added forest products.

The promotion of trade in forest products and services produced from sustainably managed forests is an important part of efforts aimed at making trade and sustainable forest management mutually supportive. It is thus a matter of priority that appropriate and workable measures be found to ensure market access for these products while addressing the concern of developing countries regarding the implications this would have for their exports of products derived from forests that have are still in the transition to sustainable forest management. Following the outcome of the fourth Ministerial Conference of the World Trade Organization, held at Doha from 9 to 13 November 2001, opportunities for further improvement of the multilateral trading system are likely to have a salutary effect on the trade in forest products and services if further efforts are focused on reducing tariffs on higher-valued and processed forest products and dismantling existing non-tariff barriers on forest products.

Figure 2: Increases in the plantation estate in developing countries, 1990–2000

Relative competitiveness of forest products

The competitiveness of forest products relative to non-wood competing products and substitutes are determined by technical, specification, marketing, supply and cost/price factors. Despite their renewability and comparatively low energy requirements, forest products are being increasingly subjected to requirements of sustainability and certification (see below) generally not applied with corresponding zeal to competing products that are non-renewable, non-biodegradable and presumably less environment-friendly. Forest products’ competitors, especially those from the steel and plastics industries, are utilizing simplified comparisons with wood to aggressively promote their products. The IFF also recommended that further work be undertaken on full life-cycle analysis (LCA) of the environmental impacts of forest products and their substitutes. LCA is an assessment of the environmental impact of the product over its full life: including the activities that go into extracting, processing, transporting, using and disposing of a material/product. LCA differs from other methods of evaluating environmental impacts in its wide-ranging approach and because it is based on quantifiable data. On the basis of this, it is seen as an objective way to identify environmental impacts and make useful comparisons. Highly positive LCA results for some wood products have already been obtained, suggesting that it could be used for positive market promotion of these products, and more such analyses should be encouraged. The costs of meeting the requirements of sustainability and certification could possibly affect the price competitiveness of forest products vis-à-vis competing products. Substitution of temperate forest products for tropical forest products in some uses has also taken place as a result of technological advancement and product development coupled with the stability of supply and price competitiveness of temperate forest products, and the aggressive and highly effective promotional efforts of the temperate forest sector.

In the context of the IPF/IFF process, proposals for action have been recommended for the gathering of information and the conduct of studies on the potential competition between wood and non-wood substitutes and the supporting of developing countries in their efforts to increase productivity and efficiency in downstream activities. Appropriate measures are necessary to safeguard and enhance the competitiveness of forest products and to ensure that efforts to meet the requirements of sustainability and certification will not adversely affect the price competitiveness of forest products.

Certification and labelling

The voluntary certification of forest management and labelling of forest products have made notable progress in recent years as a market-based tool to promote sustainable forest management and to promote trade in forest products from sustainably managed forests. In mid 2002, the area of certified forests was estimated at about 130 million hectares, compared with 5 million hectares in 1998. More than 90% of the 130 million hectares were located in temperate countries. Certified forests in developing countries accounted for less than 8% of the total (including ITTO tropical member countries which made up 6% of the total), with more than half of this being tropical plantations. Tropical and developing countries are clearly lagging behind developed, temperate countries in their certification endeavours; given the increasing requirement of some markets and buyers for certified timber this constitutes a significant and growing barrier to trade. The idea of certification has been adopted enthusiastically in some quarters, notably by many environmental non-governmental organizations and also some governments, particularly in developed countries. However, it continues to be perceived in many developing countries as a barrier to trade that inevitably reduces the competitiveness of their timber compared to that produced in developed countries. Certification requirements put developing countries at a distinct market disadvantage given the comparative lack of the financial and human resources and infrastructure needed to improve forest management, the smaller area of forest already being managed for at least sustained yield, and, in the case of tropical countries, the greater costs of sustainable forest management in their heterogeneous natural forests. There is thus a need to support the efforts by developing countries, and by small and medium-sized forest owners and enterprises in both developing and developed countries, that want to engage in voluntary certification and labelling to enhance market acceptance of their forest products.

In spite of the progress that has been made in the field of certification and labelling, its effectiveness in promoting sustainable forest management and related trade has yet to be conclusively affirmed. The uncertainty of securing premiums for certified and labelled forest products in international markets underscores concerns about whether certification and labelling will in fact provide a incentive for the transition to sustainable forest management and meeting its attendant costs. Other concerns that remain to be adequately addressed include the proliferation of initiatives, the credibility of schemes, compatibility with World Trade Organization and international trade rules, transparency, non-discrimination, costs and affordability, impact on markets and needs for capacity-building. There are ongoing efforts to enhance comparability of international certification and labelling schemes by examining the possibilities and requirements for a framework and criteria for recognizing credible and accepted schemes, possibly on the basis of mutual recognition. Another topic that has become more prominent recently in the certification debate is that of phased or staged approaches to certification to allow developing countries to maintain market access for their wood products while undertaking the transition to sustainable forest management. Debate on this issue is ongoing within the International Tropical Timber Council and in a series of regional-level ITTO-funded workshops on the topic.

Public procurement policies

Public procurement policies are increasingly being used as a potential means of illustrating a commitment to sustainable forest management. In the previous decade, several local governments in some importing countries undertook to restrict or prohibit the use of (tropical) timber in public projects or to require that the product be certified. For example, the Danish Parliament recently took a decision to restrict the use of tropical timber by public institutions to timber that is legally and sustainably produced. The Government of the United Kingdom has implemented a policy making it compulsory that timber purchases by government departments shall be from documented well-managed sources.

The Agreement on Government Procurement signed by member countries of the Organisation for Economic Cooperation and Development (OECD) through the World Trade Organization appears to allow sufficient scope for public procurement policies aimed at purchasing forest products from sustainably managed sources, provided that the policies are not expressly aimed at products from particular countries. This is attributed to the exceptions contained in the agreement and its plurilateral nature in that its membership is limited to OECD countries. Nevertheless, the implications of these policies, particularly in the context of Principle 12 of the Rio Declaration on Environment and Development and Principle 14 of the Forest Principles, for efforts to promote sustainable forest management, especially in developing countries, should be examined.

International obligations and agreements

Under its adopted work program, the World Trade Organization has agreed, inter alia, to negotiations on market access for non-agricultural products aimed at reducing, or, as appropriate, eliminating tariffs including the reduction or elimination of tariff peaks, high tariffs and tariff escalation, as well as non-tariff barriers, in particular on products of export interest to developing countries. For forest products, most tariffs on primary products in developed countries are already at low or zero levels; they are, however, higher for further processed wood products. The same is true in developing countries (Table 1), but their rates are considerably higher than for developed countries. Hence, the reduction or elimination of tariffs on higher-value and processed products including tariff peaks and tariff escalation, together with the dismantling of existing non-tariff barriers, should be the focus if the new round of negotiations is to have further salutary impact on the trade in forest products and services. The impact of further trade liberalization and globalization in relation to forest products and services on sustainable forest management and the environment should also be examined.

With regard to trade and environment, the World Trade Organization has agreed to negotiations on the relationship between existing World Trade Organization rules and specific trade obligations set out in multilateral environmental agreements (MEAs) procedures for regular information exchange between MEA secretariats and the relevant World Trade Organization committees, and the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services. The World Trade Organization Committee on Trade and Environment has been instructed to give attention to the effect of environmental measures on market access, especially in relation to developing countries, the relevant provisions of the Agreement on Trade-related Aspects of Intellectual Property Rights and labelling requirements for environmental purposes. The direction and outcome of the deliberations on these elements of the World Trade Organization work program are expected to have some implications for the work of the UNFF in enhancing the mutually supportive relationship between trade and sustainable forest management.

A comprehensive assessment of the progress made towards the achievement of the International Tropical Timber Organizations (ITTO) Year 2000 Objective was carried out in 2000. The objective embodies the commitment of all producing and consuming members by which they, through international collaboration and national policies and programs, would progress towards achieving sustainable management of tropical forests and trade in tropical timber from sustainable resources by the year 2000. The assessment indicated that encouraging progress has been achieved, particularly in the area of policy and legislation reform. Nevertheless, problems of full implementation still exist, including with regard to illegal logging and poaching, the application and enforcement of rules and guidelines, and the uptake of sustainable harvesting and reduced-impact logging. Following the assessment, producing and consuming members of ITTO reaffirmed their full commitment to moving as rapidly as possible towards achieving exports of tropical timber and timber products from sustainably managed sources under the ITTO Year 2000 Objective.

Trade, plantations and sustainable forest management

The impact of the expansionary trend in the international trade in forest products on the state of the world’s forests, which have generally been suffering from destruction, degradation and decline over centuries, is a subject of critical importance. In particular in the context of this meeting, how will the increasing role of plantations in timber supply affect the relationship between trade and sustainable forest management?

It has been suggested that an increased availability of plantation timber will reduce the pressure on natural tropical forests by providing an alternative source of industrial wood and therefore reducing logging in natural forests. However, this argument presupposes that timber harvesting is a main cause of deforestation in the tropics, which it is not. In fact, there is probably a stronger argument that the increased availability and trade in industrial plantation timber will increase tropical deforestation by reducing the role of the natural forest in timber production and therefore its value to its owners.

Such an argument is based on the uncompetitiveness of natural tropical forests in the sustainable production of timber against plantations and some natural temperate forests. For example:

natural tropical forests are not efficient producers of timber or income from timber, because they:

provide a low yield compared to plantations (eg 1–2 m3/ha/yr in natural forests vs 10–40 m3/ha/yr in plantations) and
are highly heterogeneous—this has implications for both sustainable forest management and marketing, because maintaining biodiversity becomes an extremely complex task and steady supplies of preferred species are difficult to ensure; and

many other forests for timber production are supported by subsidies. Identifying these subsidies is often difficult, but a recent report by the World Resources Institute found that developed countries subsidise their forests and forest management to the tune of several billion dollars annually. Subsidised forests keep timber prices low. Therefore, and for other reasons as well, the prices obtainable for tropical timber in international markets are too low to cover sustainable production costs in natural forests.

If the export of timber from natural forests declines because of competitive disadvantages we might expect a decline in the harvesting of timber in such forests, and certainly in efforts to produce timber on a sustainable basis. In many developing countries, this will be counterproductive to forest conservation because with the loss of income will come a loss of interest in maintaining the forest, particularly when there are attractive agricultural alternatives such as oil-palm and soybean production.

Natural tropical forests do have several assets—particularly their vast pools of biodiversity and carbon—that plantations, temperate forests and alternative land-uses don’t have, or have to a lesser extent. But markets that would allow income to be earned from such assets are insignificant. Indeed, most often biodiversity becomes a cost—because of the extra management required to maintain it—rather than a cashable asset. Potential income-earning, biodiversity-based industries such as ecotourism and pharmaceuticals have not been realised to any great extent in the tropics due to a lack of infrastructure and, in the case of pharmaceuticals, a lack of mechanisms to capture the value of the goods together with the rapid industrialization and artificial manufacture of any useful compounds discovered.

Plantations don’t produce the same quality of timber that can be derived from a natural forest, at least for certain species. But the substitution of many natural-forest tropical timbers by alternatives is apparent; in Japan, for example, tropical plywood has been making way for softwood plywood across a range of end-uses. We can expect even more substitution to occur as wood and fibre technologies improve; in Malaysia, for example, oil-palm husks and fronds are being tested successfully in the manufacture of medium-density fibreboard.

The least substitutable products are those at the very high end of the market, particularly where critical technical specifications exist. It will probably be some time before technology comes up with an adequate substitute for old-growth mahogany, teak or okoumé in the production of high-value furniture, panelling and etc, and in marine uses. Here plantations and natural forests may be complementary, but unless a very high percentage of the final value of the product is captured by the forest owner or occupant this is unlikely to be enough, on its own, to save the natural forest.

Thus, it seems likely that the increased availability of plantation-grown timber will result in a decrease in the trade of timber produced in many natural forests, decreasing the financial incentive for the pursuit of sustainable natural forest management. In developed countries, this is likely to increase the conservation status of natural forests, because in most cases they will be protected. But in many developing countries it will most likely often increase the risk of wholesale forest clearance for agriculture.

There is an important caveat to this scenario, which focuses on the role of trade in plantation-grown timber. Community plantations grown to produce fuelwood and other locally important forest goods, though rarely significant in international trade, can indeed reduce the extent to which natural forests are subjected to exploitation and degradation; according to FAO data, about one-third of the total plantation estate was grown primarily for fuelwood in 1995.

Moreover, trade in forest products can play an important indirect role in forest conservation in those countries that cannot otherwise afford to keep their forests intact. First, trade is an important ingredient in economic development; as economies grow forest conservation tends to become a more important part of social and political agendas; this happened in Malaysia and Brazil, to name two tropical countries. Second, direct payments for the services that such forests perform so well—biodiversity conservation and carbon storage and sequestration—could play a crucial role in the conservation of natural forests. The development of international markets—and even non-market remuneration mechanisms—for such services is a matter that must be addressed by the international community as a matter of urgency.

Annex (Excel Document)

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