List of Acronyms and Abbreviations
1. Introduction
1.2 Objectives of the Analysis
1.3 Approach and Conceptual Framework
1.3.1 Methods and Activities
1.3.2 Definitions
2. Facts and Figures on Forest Resources, Products and Services
2.1 Introduction
2.2.1
Forests and Current Status of Forest Cover
2.2.2 Trends in Forest Cover
Change and Sustainable Forest Management
2.2.3 The Changing Origin of Forest Production: Natural and Planted Forests
2.3 Wood and Wood-based Products: Production, Consumption and Trade
2.3.1 Production
Processed Wood Product Categories
Secondary Processed Wood Products (SPWPs)
2.3.2 Changing Consumption Patterns
2.3.3 Trade
Developments and Value of Trade
Wood and Wood-based Products
Trends for
Tropical and Non-Tropical Countries
Value of Wood Products
Trade
Directions of Trade in Wood Products
2.3.4 Forecasts and Implications
2.4 Wood Fuels and Wood Energy
2.5 Non-Wood Forest Products (NWFP): Trends, Prospects and Constraints
2.6 Markets for Forest Environmental Services
3 Trade and Market Development in Forest Products and Services
3.1 Trade, Sustainability, Policy and Planning
3.1.1 Forest Product Trade and Policies
3.1.2
Specific Issues to Forest Products
3.1.3 Value and Sustainability
Issues in Forest Product Trade
3.1.4 Forest Sector Planning and Trade
Issues
3.1.5 Conclusions
3.2 Analysis of Trade Flows of Forest Products
3.2.1 World-wide Trade Dynamics in Roundwood,
Sawnwood and Wood-based Products
3.2.2 Trade of the Tropics and Developing Countries
Issues of Deforestation and Sustainability
Tropical Trade in Logs, Sawnwood and Plywood
Tropical Share
in Consumption of Other Regions
Prices of Tropical Timber
Value Added Forest Products from Tropics
Imports of SPWP
3.2.3 Conclusions
3.3 Trade Restrictions for Forest-based Goods and Services
3.3.1 Market Access and International Trade Measures
Factors and Measures Related to Market Access
International Trade Instruments
International Trade
Agreements
Multilateral Environmental Agreements
3.3.2 Tariff Barriers for Wood and Wood-based Products
Exporter Related Barriers to Trade
Importer Related Barriers to Trade
3.3.3 Development of Tariffs, Taxes, Quotas and
Subsidies
3.3.4 Non-tariff Measures 89
Technical Standards and Plant Health
Standards
Technical Standards
Plant Health Standards
Conclusions on Market Access Issues and Forestry
3.3.5 Summary: Trade Liberalisation and Sustainable Forestry
GATT Negotiation Rounds and Impacts of Tariff
Liberalisation
Accelerated Tariff Liberalisation Proposal and
Simulation Results of Impacts
Single Country Case: Trade Agreements
and New Zealand
Core of Forest Governance from a Trade
Perspective
Complementary Instruments
Policies on Environment
and Development
Linkage with Forest Products Trade and Forest Management
3.4 Market Development of Wood and Wood-based Products
3.4.1 Distribution and Dynamics of Forest Product Markets
Shifts in Supply and Demand
Changes in
Directions of Trade
Changes in Sensitive and Dynamic Markets
Chinese Markets
Japanese Markets
3.4.2 Consumer and Distributor Actions and Campaigns
Market Abstinence: Campaigns and Boycotts
Retailer and Wholesaler Actions
3.4.3 Criteria and Indicators for Sustainable Forest Management
Criteria and Indicators to Evaluate and to
Implement Sustainable Forest Management
Relationships Between
Criteria, Indicators and Certification
Implications of Criteria and Indicators
to Trade
3.4.4 Certification, Labelling and Other Market Instruments
Purpose and Forms of Certification
Environmental Management Systems
Forest Management Certification
Supply Chain Certification
Certification, Policy and Trade
3.4.5 Codes of Conduct and Other Voluntary Initiatives
Codes of Conduct
Supply-Chain Management
Ethical Investment Funds
Environmental Liability
Corporate Social Responsibility
3.4.6 Public Procurement Rules
3.4.7 Future
Prospects of Market Based Instrument for SFM
3.5 Market Development for Environmental Services of Forests
3.5.1 Essential Attributes for Effective Market
Creation: Framework for Analysis
3.5.2 Linkages with Trade Agreements and
Negotiations
3.5.3 Potentials, Impacts and Trends in Market
Mechanisms
and Market Creation
Carbon Offsets
Forest Biodiversity
Watershed and Soil Protection Services
Landscape Beauty and Recreation
3.5.4 Verification and Certification
3.5.5 Impact
of Environmental Services on SFM and Trade
3.5.6 The case study:
Conservation Easements in the USA
3.5.7 Conclusions and Recommendations
Forest Environmental Services and Market Mechanisms
with Potential
Impacts on Trade and Forest Management
Socio-economic
Impacts
Limitations with Market-based Approaches, and the Role of the
Government
Recommendations for Consideration at the National and
International Levels
Recommendations to Enhance Poverty Alleviation
Impacts of MES
Priority Areas for Research and Development
4. Public Policy Instruments, Rural Development and Forest Industry Development
4.1 Framework for Analysing Trade, Policy and Forest Management Interactions
4.1.1 Patterns of Forest Development and Determining
Factors
4.1.2 Analytic Methodology, Forest Frontier Approach
4.1.3
Analysing the Impact of Trade and Policy Interventions on Forests
4.2 Extra-sectoral Influences and Factors
4.2.1 External and Internal Economic
Impacts
4.2.2 Macroeconomic Policies; Structural Adjustment and Poverty
Reduction Strategies
4.2.3 Fiscal and Monetary Policies
4.2.4 Policies
on Agriculture, Energy, Mining, Demography and Health
4.2.5 Impacts of
Regional Development Programmes
4.2.6 Impact of General Economic
Growth
4.2.7 Conclusions
4.3 Policy Instruments and Processes Affecting Trade in Forest Products and Services
4.3.1 Introducing the Range of Policy Instruments
and Processes
4.3.2 Domestic Forest Policies and Processes
Forest Polices for Enabling Environment
Forest Decentralisation
Forest Resource Allocation Policies
Regulations on Forest Management
Forest Taxation
Policies on
Forest Resource Development
Policies on Downstream Processing of
Forest Products
Government Policies to Promote Forest Environmental Services
4.3.3 Environmental Assessment of Trade in the Context of SFM
Definitions
International Initiatives, Programmes, Approaches and Institutions Related
to Trade
Applications and Initiatives
In What
Ways can Trade Measures Impact the Environment?
What Challenges as far as the Interactions between Trade and
SFM are Concerned?
4.4 Developments in Forest Based Industry Sector
4.4.1 Links between Trade, Financing and Structure of the Forest Products Industry
Changes in the Structure of the Forest Products Sector
4.4.2 Market Concentration and Vertical Integration
Temperate and Boreal Regions
Diversification and Specialisation
4.4.3 Resource Base and Processing in Tropical Regions
Vertical Integration in Tropical Regions
4.4.4 Transnational Involvement
4.4.5 The
Relation between Industrial Structure and Trade
The Impact of Trade Liberalisation on Market
Structure
The Impact of Trade Restrictions on Industrial Structure
The Impact of Increasing Market Concentration
4.4.6 The Impact of Vertical Integration on Forest
Management
4.4.7 Conclusions
4.5 Investments and Capital Movements in Forestry Sector
Structure of Forest Financing
Financing
for SFM in the Context of Developing Financing
Differences in the
Structure of Financing between Developing Countries
4.6 Innovations in Timberland Investments the Case of the USA
Timber Stumpage Markets and Prices
Property Values
Income and Capital Appreciation
Different
Approaches
US Investments in the Southern Hemisphere
International Investment in SFM in Natural Forests in Developing
Countries
A Rainforest Fund
5 International Regime on Trade and Environment
5.1 An Overview of the Regime
5.2 Policy Issues, Instruments and Processes
5.2.1 Trade Debate in Global Forest
Dialogue
5.2.2 Analysis of the Intergovernmental Debate on Trade in Forest Products and Services
Multilateral Environmental Agreements (MEAs)
and The WTO
Meaning of Special Trade Obligations (STOs)
Relationship between Existing WTO Rules and Specific Trade
Obligations
Dispute Settlement Body (DSB)
The CBD and TRIPS
Article 27.3: Traditional knowledge and Access to Genetic Resources of
Forests
Biosecurity and biosafety
Differing Views on Whether
the CBD and TRIPS Conflict
Early Quest for Solutions
Labeling
Public Procurement
5.2.3 Current State of Discussion and Implementation Related to Illegal Logging and Trade in Forest Products
What is Illegal Logging and Trade?
What
Acts Should be Included in a Definition of Illegal Logging and Trade?
The Communication from the Commission to the Council and the
European Parliament
Conclusions
5.2.4 Role of Market-based Instruments and the Private Sector Initiatives
Trade Certified Forest Products and the Role of
Labels
Supply-chain Management
Socially Responsible
Investment
Conclusions
6. Interface of Trade and Forest Governance
6.1 Trade and Governance: Definitions and Problematique
Governance: an Evolving Concept
Trade and
Governance: What is at Stake?
6.2 Conflicts of Values in Debates on the Trade-SFM Nexus
6.2.1 Major Issues at Stake
Mutual Gains or Winners and Losers?
Rising Returns or Deteriorating
Terms?
Intensifying Competition or Increasing Market Power?
Rise to Integrity or Slide to Corruption?
Free Choice or
International Conditionality?
Environmental Efficiency or
Environmental Exhaustion?
Pollution Havens and Regulatory Chill
6.2.2 Key Areas of Conflict and Convergence
6.3 Actors and their Perspectives: The Basis for Forest Governance
6.3.1 Background: Complexity of Stakeholder
Involvement
6.3.2 Societal Groupings and Their Networking
6.4 Governance Dynamics and Linkages between Trade and SFM
6.4.1 Theories and Analytic Frameworks on Impacts
of Trade Liberalization on Forest Governance
6.4.2 Attempts to
Establish Holistic Societal Processes of Forest Governance at the National
Level
6.4.3 Empirical Evidence on Trade-Related Governance
Impacts at the National Level
Impacts on Demand for Improved Policy and Regulatory Frameworks
Impacts on Capacity to Internalize Social and Environmental
Externalities
Impacts on Corruption and Rent Seeking
Impacts of
Economic Growth on Forest Governance
6.4.4 Evolving dynamics in Global Governance Related to Trade and SFM
Governance Issues Deriving from the International Trade Regime
Global Forest Policy Debate, Trade and Governance
Regional Processes
- Intermediaries or Independent Governance Tools?
6.4.5 Role of Information and Transparency
6.4.6 Linking
International and National Levels in the Trade-SFM Nexus
6.4.7
Initiatives in Multi-layer Governance: Models, Instruments and
Experiences
FLEG(T): an Evolving Multi-layer Governance Model for Trade and SFM
Forest Certification
6.5 How to Harness Trade to Create Enabling Environment for SFM?
6.5.1 Introduction to Governance Issues for an Enabling
Environment
6.5.2 Macroeconomic/Fiscal Reform/Development Processes and
Structural Adjustments
6.5.3 Interactions between Foreign Direct Investment
and Governance
6.5.4 Ownership and Control of Forest Land and Socially
Environmentally Acceptable Solutions
6.6 Conclusions on Trade, Governance and SFM Interface
6.6.1 Trade Liberalisation as a 'magnifier' of
Forest Governance?
6.6.2 National Preparedness and Capacity to Engage
in Dialogue on Forest Trade Issues
6.6.3 Other Factors of Impact at the trade-SFM Nexus
7. Impacts of Trade on Forest Management
8. Conclusions of the Overall Analysis
List of References
Annexes
The Government of Japan and FAO agreed in 2001 to implement the research and analysis project entitled "Impact Assessment of Forest Products Trade in the Promotion of Sustainable Forest Management" (GNP/INT/775/JPN). This important contribution of the Japanese Government to FAO's regular programme enabled the Forest Products and Economics Division (FOP) of FAO to undertake a broad analysis of the impact and interactions between trade in forest products and services and forest management. The German Agency for Technical Cooperation (GTZ) in Germany contributed financially to carry out a peer review of the analytic material at the end of project implementation.
The analytic process engaged international organizations, the private sector and the NGO community. The project formed part of the regular work of FAO on trends in trade of forest products and services. It extended and complemented previous analysis by adding to the debate important issues like governance interactions and forest-related policies. The project aimed to provide information, analysis and a platform for informal debate in order to assist governmental institutions, international organisations, the private sector and civil society groups such as NGOs in the elaboration of trade policies that encourage sustainable forest management. The very fruitful collaboration with and the constructive support of ITTO, in particular Mr Amha bin Buang, who also co-chaired the Expert Consultation in Rome in February 2003, was greatly appreciated..
The project was supported by a project advisors' group (PAG), composed of eminent individuals from a range of international institutions, including NGOs and the funding agencies contributing to the success of project implementation at different stages. Members of the PAG included:
Amha bin Buang, ITTO
Josuah Bishop, IUCN
Chris Elliott, WWF International
Jun Fukuda, Ministry of Agriculture,
Forestry and Fisheries, Japan
Kota Hiranuma, Ministry of Agriculture,
Forestry and Fisheries, Japan
Kazuh Ohnuma, Ministry of Agriculture,
Forestry and Fisheries Japan
Saskia Ozinga, FERN
Hendro Prastowo,
Indonesia
Kenichi Suzuki, Ministry of Agriculture, Forestry and Fisheries
Japan
Ivan Tomaselli, STCP Brazil
Eric Wijkstrφm, WTO
The project was initiated by Mr Jim Bourke in his function as the responsible FAO specialist on trade and marketing. He also contributed through his ongoing work at FAO. After Mr Bourke's retirement, Mr. Christian Mersmann was charged with project coordination.
Project implementation was coordinated through FAO in-house analysis, drawing upon the expertise of many FAO colleagues in the Forestry Department as well as others working in FAO's Inter-Departmental Working Group on Trade. Their contributions, comments and guidance were highly appreciated. The full background material of this analytic process, which was revised and complemented by Messrs Christian Mersmann and Sven Walter, is available on FAO website .
The International Institute for Environment and Development (IIED) contributed a basic document on a variety of relevant issues. In particular, it is acknowledged that Ms Marianne Grieg-Gran, Mr James Mayers, Mr Duncan Macqueen and Mr James MacGregor have supported this analytic work throughout the process of project implementation, inter alia through their involvment in the preparation for and conduct of the international expert consultation in February 2003, as well as through presentations of analytic findings. The presentations of William Hyde and Michael Richards at that consultation meeting were also appreciated.
The study strongly draws upon the analytical contributions of:
Arnoldo Contreras-Hermosilla
Katrin Erdlenbruch
(CIRAD)
Bengt Hillring (University of Uppsala)
Alain Karsenty
(CIRAD)
Marko Katila (INDUFOR)
G. Horgan
Peter Lees
Jeanette Leitch
Teresa Mulliken (TRAFFIC International)
Pedro
Moura-Costa (EcoSecurities)
Rodney Neufeld (WTO consultant)
Tapani
Oksanen (INDUFOR)
Saskia Ozinga (FERN)
Esa Puustjδrvi (INDUFOR)
Michael Richards
Laura Russo (FAO)
Ralph Schmidt (Arlington
Consult)
Antti Rytkonen (FORCO)
Kari Sann (LTS)
Kirsti Thornber
(LTS)
Tiina Vδhδnen (FAO)
Also highly appreciated was the assistance received from the UNECE Trade Development and Timber Division in Geneva, (Ms Carol Cosgrove-Sacks, Director, and Mr C.F.L. Prins) and the FAO Liaison Office in Geneva (Mr Themba N. Masuku and Mr Ed Pepke) in organising and contributing to the Joint UNECE/FAO Roundtable Trade, Environment and Forests - Working Together for Sustainable Development, which took place at the Palais des Nations on 9 July 2003. Special thanks go to the keynote speakers during the Round Table: Mr Rupert Schlegelmilch (EU), Mr David Brooks (Office of the US Trade Representative), Mr Suboh Mohd Yassin (Ministry of Primary Industries Malaysia), Mr Owen Cylke (WWF US), Mr Markku Simula (INDUFOR Finland) and Mr Ivan Tomaselli (STCP Brazil).
The important contribution made by Mr Markku Simula (INDUFOR) to the organisation of the analysis and in structuring and commenting on the work in progress is hereby acknowledged. Heiko Liedeker (FSC) and Ben Gunneberg (PEFC) provided helpful information and views on a range of issues with regard to forest certification.
Markus Nordanstad, Mariapaola Malgeri and Marco Perri provided strong support to the project through their valuable expertise in searching for and checking information, as well as overcoming IT problems.
Wulf Killmann
Director
Forest
Products and Economics Division
Food and Agriculture Organization (FAO)
ADB Asian Development Bank
AfDB African Development Bank
AFLEGT African Forest Law Enforcement, Governance and Trade
AFTA Asean Free Trade Area
APEC Asia-Pacific Economic Cooperation
ARD Afforestation, Reforestation and avoided Deforestation
ASEAN Association of South East Asian Nations
ATIBT Association Technique Internationale des Bois Tropicaux
ATL Accelerated Tariff Liberalization
ATO African Timber Organization
BDV Brussels Definition of Value
C&I Criteria and Indicators
C&L Certification and Labelling
CBD Convention on Biological Diversity
CDM Clean Development Mechanism
CEFACT United Nations Centre for Trade Facilitation and Electronic Business
CEPT Common Effective Preferential Tariff
CERFLOR Certificate of Origin of Forest Raw Material, Brazil
CFE Community forestry enterprise
CGTM Cintrafor Global Trade Model
CIF cost, insurance, freight
CIFOR Centre for International Forestry Research
CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora
CO2 carbon dioxide
COC chain of custody
COP Conference of Parties
CPF Collaborative Partnership on Forests
CSD Commission on Sustainable Development (United Nations)
CTE Committee on Trade and Environment
DESA United Nations Department of Economic and Social Affairs
DIY Do-it-yourself
DSB Dispute Settlement Body
EC European Commission
ECA Export credit agency
ECE Economic Commission for Europe
ECOSOC Economic and Social Council of the United Nations
EEA European Economic Area
EFI European Forest Institute
EIA Environmental Investigation Agency
EMAS Eco-Management and Audit Scheme of European Union
EMS Environmental Management System
ENGO Environmental Non-governmental Organisation
EU European Union
EVSL Early Voluntary Liberalisation
FAO Food and Agriculture Organization of the United Nations
FCCC See UNFCCC
FD Forest department
FDI Foreign direct investment
FIELD The Foundation for International Environmental Law and Development
FLEGT Forest Law Enforcement, Governance and Trade
FLEG Forest Law Enforcement and Governance
FLONAS National Forest logging concessions, Brazil
FOB free on board
FSC Forest Stewardship Council
FTAA Free Trade Area of the Americas
G8 Group of Eight (leading economies)
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
GEF Global Environment Facility
GFTN Global Forest and Trade Network
GFPM Global Forest Products Model
GHG greenhouse gas
GIS Geographical information system
GMO genetically modified organism
GNP Gross National Product
GPA Plurilateral Government Procurement Agreement
GSP Generalized System of Preferences
GTZ Deutsche Gesellschaft fόr Technische Zusammenarbeit GmbH
HPHH Hak Pemungatan Hasil Hatan concessions, Indonesia
IADB Inter-American Development Bank
IBAMA Amazon Environmental Institute, Brazil
ICA International Commodity Agreement
ICCI International Conference on C&I for Sustainable Forest Management
IDB Inter-American Development Bank
IEA International Environmental Agreement
IEC International Electrical Commission
IFC International Finance Corporation
IFF Intergovernmental Forum on Forests
IHPA International Hardwood Products Association
IMF International Monetary Fund
INGO International Non-Governmental Organisations
IPC Integrated Programme for Commodities
IPCC Intergovernmental Panel on Climate Change
IPF Intergovernmental Panel on Forests
IPPK Izin Pemungatan dan Pemanfaatan Kayu concessions, Indonesia
ISO International Organization for Standardisation
ITC International Trade Centre
ITTA International Tropical Timber Agreement
ITTC International Tropical Timber Council
ITTO International Tropical Timber Organization
IUCN The World Conservation Union
IWPA International Wood Products Association
LCA Life Cycle Analysis
LEEC London Economic and Environmental Centre
LEI Indonesian Ecolabelling Institute
LULUCF Land Use, Land Use Change and Forests
MEA Multilateral Environmental Agreement
MERCOSUR Southern Common Market
MFN Most Favoured Nation
MIGA Multilateral Investment Guarantee Agency
MOU Memorandum of Understanding
MTTC Malaysian Timber Certification Council
NAFTA North American Free Trade Agreement
NGO Non-Governmental Organisation
NHLA National Hardwood Lumber Association
NRRP Natural Resources and Rights Program
NT National Traetment
NTB non-tariff barrier
NTCC National Timber Certification Council
NTFP non-timber forest product
NTM non-tariff measures
NWFP non-wood forest product
OECD Organization for Economic Co-operation and Development
OTO Office of Trade and Investment Ombudsman
P&C Principles and Criteria
PEFC Pan-European Forest Certification Framework
PGA Plurilateral Agreement on Government Procurement
PNG Papua New Guinea
PPM production and processing method
PPP Polluter Pays Principle (other meaning Purchasing Power Parity)
RIIA Royal Institute of International Affairs
RIL reduced impact logging
RFE Russia Far East
RTA Regional Trade Agreement
RWE roundwood equivalent
SAP structural adjustment programme
SFM sustainable forest management
SGS Sociιtι General de Surveillance SA
SPS Sanitary and Phytosanitary Measures
SPWP Secondary Processed Wood Products
TBT Technical Barriers to Trade
TFF Tropical Forest Foundation
TFRK traditional forest-related knowledge
TNC Transnational corporation
TRAINS Trade-Basic Indicators of UNCTAD
TREM trade-related environmental measures
TRIM Trade Related Investment Measures
TRIP Trade-Related Aspects of Intellectual Property Rights
UK United Kingdom
UN United Nations
UNCCD United Nations Programme to Combat Desertification
UNCED United Nations Conference on Environment and Development
UNCSD United Nations Committee on Sustainable Development
UNCTAD United Nations Conference on Trade and Development
UNESCO United Nations Economic and Social Council
UNDP United Nations Development Programme
UNECE United Nations Economic Commission for Europe
UNEP United Nations Environment Programme
UNFCCC Framework Convention on Climate Change of United Nations
UNFF United Nations Forum on Forests
US, USA United States of America
USD United States Dollar
USTR Office of the US Trade Representative
WB World Bank
WCMC World Conservation Monitoring Centre
WCO World Customs Organisation
WSSD World Summit for Sustainable Development
WTO World Trade Organization
WWF World Wide Fund for Nature
