Original: ENGLISH I T T O

TWENTY-SIXTH SESSION 28 May - 3 June 1999 Chiang Mai, Thailand

REPORT ON THE IMPEDIMENTS TO MARKET ACCESS FOR

TROPICAL TIMBER

[Pursuant to Decision 2(XXIII)]

A Report prepared for ITTO by:

Tan Sri Dato’ Wong Kum Choon J. Michael Ginnings

INTERNATIONAL TROPICAL

TIMBER COUNCIL

Distr. GENERAL ITTC(XXVI)/9 Rev.1 30 December 1999 Original: ENGLISH

I T T O

-i-

INDEX

Terms of Reference 1 Definition & Scope 2 Methodology 3

Introduction 5

Market Access: Current Situation, Problems & Impediments 15

Consuming Countries

EUROPEAN UNION

Market Developments 25 Secondary Processed Wood Products 26 Substitute & Alternative Material 27 Market Impediments 29 Environmental 30 Certification 30

NETHERLANDS

Market Developments 32 Secondary Processed Wood Products 33 Environmental 33 Substitute & Alternative Material 34 Certification 34

UNITED KINGDOM

Market Developments 35 Secondary Processed Wood Products 36 Environmental 36 Certification 37

GERMANY

Market Developments 38 Secondary Processed Wood Products 39 Substitute & Alternative Material 39 Certification 40

USA

Market Developments 41 Secondary Processed Wood Products 42 Substitute & Alternative Material 43 Market Impediments 43 Certification 45

JAPAN

Market Developments 46 Secondary Processed Wood Products 48 Substitute & Alternative Material 49 Market Impediments 50 Environmental 51 Certification 51

Producer Countries

MALAYSIA 52

BRAZIL 55

Conclusions 60

Recommendations 62

Appendix 1: Sub-National Activities 64 Appendix 2: Tariff Issues 70 Appendix 3: Regulatory Issues 72 Appendix 4: Other Relevant Organisations 74 References 76

ITTC(XXVI)/9 Rev.1 Page 1

/ . . .

TERMS OF REFERENCE FOR MARKET ACCESS STUDY

DECISION 2(XXlII) 1. To undertake a survey to determine impediments to market access of tropical timber in exporting and

importing member countries. 2. Analyse tropical market access vis-à-vis other tropical and relevant competing materials and

products. 3. Assess how market access for tropical timber products is influenced or regulated by governments,

professional associations, industrial and retail sectors, international organisations and other relevant non-government groups.

4. In developing the Study, the consultants shall also take into consideration the work of the

Intergovernmental Panel on Forests (IPF) and other relevant international organisations as far as the discussions of trade and environment are concerned.

5. Where necessary, the consultants shall propose actions to improve market access of tropical timber. 6. Prepare a preliminary report for the Twenty-Fifth Session and a final report for the Twenty-sixth

Session. The consultants were instructed to: I. Review relevant new and evolving developments regarding market access; II. Prepare and distribute a questionnaire to solicit information from members of ITTO on market

access: III. Visit selected member countries to follow up the questionnaire in greater detail; IV. Discuss any other issues considered relevant to the market access of tropical timber and timber

products, in particular the state of any discussions within the IFF on this matter; V. Undertake travel to finalise the report by September 30, 1998; VI. Prepare and present the report at the Twenty-Fifth Session of the ITTC to be held in Yokohama, from

3 to 9 November, 1998 and based on the discussion, review and amend the report as necessary.


/ . . .

DEFINITION The consultants have been assigned "to undertake a study to determine impediments to market access of tropical timber in all member countries (of ITTO) and where necessary, to propose actions to improve market access of tropical timber" as per given Terms of Reference. “Impediment” is defined in the Oxford and Macquarie Dictionaries as ‘a hindrance, an obstacle’. Roget offers a wide range of synonyms for ‘hindrance’ (730) which can be helpful to graduate emphasis from the modest level of a problem, to a difficult, to a restriction, to a barrier. Our research attempts to draw the appropriate emphasis as each issue is discussed. "Impediments to market access" cover both tariff and non-tariff measures. Tariff is an impediment to the extent that it inhibits market access by making the imported tropical timber less competitive. In a "sellers' market", tariff as an impediment is less obvious; but in a "buyers' market" its effect is accentuated. Tariff poses a more serious problem when it is discriminatory between directly or indirectly competing products, such as between tropical and temperate plywood. Discriminatory tariffs have the effect of artificially creating an advantage for one type of product over the other, which has been disadvantaged. If the tariff is computed on an advalorem basis, higher freight costs would further accentuate the degree of 'discrimination'. Tariff is linked in certain cases to the provision of concessionary arrangement such as GSP or duty-free quota, which could be looked at as part and parcel of the tariff structure. Another feature of tariff affecting market access is tariff escalation. This is particularly relevant for timber, given the range of products from logs to semi-processed and secondary processed wood products. It is also relevant in the sense that tariff escalation could adversely affect tropical log producers aspiring for more efficient use of raw materials to achieve higher value-added production. Non-tariff measures cover arrangements or impositions relating to, say, safety, technical and health standards and plant protection. Non-tariff measure may or may not create an impediment to market access depending on how a particular measure affects cost, and also whether it necessitates undue extra documentation and cumbersome procedural arrangement. Measures connected with environmental issues which limit the sale, purchase and use of tropical timber may be considered as trade impediments. They are discriminatory if there is no proper and scientific basis to their determination and if similar standards of environmental requirement are not applied to other timber and competing substitutes. Timber certification can be a marketing tool or a non-tariff barrier depending on how it is formulated and accepted. If it is simple and literally costless to apply, then it can be the former. If otherwise, it can turn out to be a major difficulty for tropical timber. This takes into account also whether the availability of certified tropical timber would make uncertified tropical timber products even more circumspect in environmentally sensitive markets. For producing countries, export taxes can create a problem of market access unto themselves if their cost structures are already high and the burden of the taxes would render their products even less competitive. Inconsistent and frequent changes in policies in producing countries which create uncertainty and loss of confidence in supply assurance and availability can also act as an impediment to market access. On the other hand, in a globalised market, the loss to one is the gain to another. Overall, there are various areas where exporting countries can act together for mutual benefit, such as the promotion of wood as a renewable and environmentally friendly material to improve market access.

SCOPE OF STUDY For the purpose of this study, “tropical timber and timber products’ were defined on 3 August, 1998 by the ITTO Secretariat to cover “tropical logs, lumber, veneer and plywood and - if possible - builders woodwork and furniture.” Within the time and budget constraints they have encountered, the co-consultants have endeavoured to address the full range of products mentioned.

METHODOLOGY


/ . . .

The consultants attended ITTO headquarters in Yokohama, Japan August 3, 1998 where the objectives of the study, and its timing and budget constraints were reviewed. Because of these, it was resolved to use - with permission - the In-Press publication “Trade Restrictions and their Impact on International Trade in Forest Products” by I.J. Bourke & J. Leitch. FAO 1998 as the basis of their response to TOR no. 1 and to help categorise the questionnaire. It was felt that although the FAO publication provided a comprehensive review of the wide range of tariff

and non-tariff measures encountered in international timber trading, it would be helpful to determine how

significant - if at all - these were considered by ITTO members producing and/or consuming tropical timber products. Accordingly, a questionnaire was prepared and circulated to members which used a scale of 1 to 5 (with 5 being not at all significant) in some questions to obtain country specific responses. Concurrently, the consultants met with the relevant Japanese authorities as well as two of the largest prefectural authorities as required in the brief. Subsequently, the consultants organised their visits to selected member countries. Because of the northern summer vacation season continuing through August into September, it proved difficult for some meetings with some organisations to be finalised. Consultant Tan Sri Dato’ Wong Kum Choon visited the UK., Brussels (ECE), The Hague, Bonn and also while in London met with the Ghana Timber Export Development Board. Additionally his base in Kuala Lumpur facilitated his research with the Malaysian Authorities. Consultant J. Michael Ginnings visited the WTO in Geneva, Washington, DC, Brasilia, Curitiba and Sao Paulo. Upon completion of their field work, the consultants met together in Kuala Lumpur to review their visits, discuss their impressions, examine those questionnaires that had - by then - been returned and agree the format of the Preliminary Report. The consultants noted, however, that some issues were frequently raised during their interviews and will certainly require further examination within - or beyond - the completion of this study. These include:

the lack of precision concerning the causes of changes in consumption of tropical timber products affected to a larger or smaller extent by:

resource depletion;

national economic and construction cycles;

currency fluctuations;

substitution by non-tropical species;

use of alternative materials;

environmental constraints;

consumers exercising free choice;

changes in fashion;

graduation from primary to secondary wood products;

availability of tropical timber products;

competitiveness of tropical timber products;

tariff & non-tariff measures;

inadequate marketing & promotion.

the involvement of governments in the market access debate, which several see as purely a trade issue;

a quantification of the present and likely future significance and impact of Sustainable Forest Management to trade, with - or without - associated certification and labelling schemes;

doubts concerning the achievability of a price premium for certified timber products;


/ . . .

the inter-relationship between environmental and development issues and how these are being addressed and where possible, harmonised;

the actions of sub-national groups within a few - but significant - ITTO consuming countries which can be at variance with the international obligations which the country has entered into as a signatory of the ITTA, and how these might be reconciled.

The Preliminary Report was jointly presented to the Twenty-Fifth Session of the ITTC in Yokohama early November, 1998, and drew comment, discussion and suggestions. The Executive Director subsequently wrote to member countries inviting the completion and return of the Questionnaire if not already done so, and/or provide written comments and observations on the Preliminary Report in general, and on the Questionnaire in particular. The consultants eventually received communications from 18 producer countries, and 8 consumer countries. (These are listed at the beginning of Chapter 2.)

The co-consultants again met in Kuala Lumpur, late March, 1999 to review the new communications, discuss their impressions, and agree on the finalisation of the report.

The finalised complete report will be jointly presented at the Twenty-Sixth Session of the ITTC in Chiang Mai, Thailand at the end on May, 1999.


/ . . .

INTRODUCTION

Changes In World Timber Consumption

Over the past thirty years, the patterns of world production, trade and consumption of timber and timber products has undergone significant change. These changes have impacted on the whole timber spectrum, covering coniferous and non-coniferous timbers, (softwoods, temperate hardwoods and tropical hardwoods.)

Table 1 details world timber consumption from 1970 - 1996. Sawnwood grew from 414 million to 475 million cubic metres, a 15% increase. Wood-based panels, however, jumped 220% from 66 million to 145 million cubic metres.

Table 1: Wood Products Consumption 1970 - 1996

Million m3

1970

1980

1990

1996

% p.a.

change

Sawnwood1 414 448 483 475* + 0.5

Wood-based Panels2 66 98 128 145 +3.0

% Share on Panels 14 18 21 23

Source: Intermark, UK 1 = Coniferous and non-coniferous global production assumed to be consumption 2 = Plywood, particleboard, MDF, other fibreboard and OSB only. Based upon FAO world estimates

(with some modification.) * = FAO and ECE Timber Committee report major decline in sawn softwood consumption in the former

Soviet Union since 1991 and actual number this reported is somewhat lower than shown before. In the 26 years since 1970, world consumption of sawnwood and panels grew by about 1% per annum. In the same period, population grew by 1.7%. This is a surprising result but it reflects the dominance of sawnwood within the share of total wood material consumption (77%) over panels (23%.) It must be noted, however, that woodbased panel’s share of consumption over the period has increased from 14% in 1970, to 23% in 1996, steadily eroding the dominant market share enjoyed by sawnwood. While sawnwood consumption continued to climb, the market share gains of wood-based panels were of minor consequence, if even noticed. However, when sawnwood consumption began to decline, attention became focused on the new market situation. As a more detailed Table 2 reveals, sawn hardwood has, globally, maintained a steady 25% share of sawnwood consumption throughout the period. This figure conceals, however, changes in market share ratio between tropical and temperate hardwoods.

Table 2: World Wood Products Consumption 1970 - 1996

Million m3 (rounded to nearest million m3)

1970

1980

1990

1996

Market Share

% 1996

Sawn softwood 316 334 361 355 57.2

Sawn Hardwood 98 114 122 120 19.4

Plywood 33 40 50 55 8.9

Particleboard 19 41 50 53 8.5

MDF - 1 5 11 1.8

Other Fibreboard 14 16 18 13 2.1

OSB - neg. 7 13 2.1

480 546 611 620 100.0

Source: Intermark, UK


/ . . .

Also worthy of note is the development of individual panel products. In 1970, MDF and OSB were of no importance. Over the period, they have grown to a combined total of 24 million cubic metres (1996) seizing 3.9% market share. Plywood grew over the period by over 65%, with some of the growth coming from SE Asia where efficient, large scale tropical hardwood plywood factories took over - and expanded on - earlier industries in Japan, Taiwan and Korea. Market share has grown 2%. More remarkable has been the growth in particleboard consumption, from 3.9% market share in 1970, to 8.5% in 1996 (a 275% increase.) In 1980 - 1990, particleboard and plywood consumption was almost identical. In this decade, plywood has edged ahead, as MDF starts to bite into some particleboard markets. Fibreboard market share also reflects the impact of MDF, and - over the period - has seen market share dip, losing 5 million cubic metres between 1990 and 1996 at the same time MDF gained 6 million cubic metres. What has been the impact of all these developments on tropical hardwood products? Detailed research is recommended, and could focus on:

the extent to which softwood lumber has taken over traditional structural hardwood markets in construction. Temperate hardwoods have had a larger share in that end-use market than tropical hardwood, in the main timber frame housing markets around the world;

the extent to which tropical hardwood lumber has been replaced by temperate hardwood or softwood lumber, or by MDF in many building applications (e.g. flooring, mouldings, windows, doors etc.,)

the extent to which tropical hardwood lumber has been replaced as flooring by particle board;

the extent to which tropical hardwood lumber has been replaced by temperate hardwoods, particle board and MDF in furniture manufacture;

the extent to which tropical hardwood lumber has been replaced by hardwood plantation species like rubberwood, eucalyptus and other fast growing species, in furniture, woodenware and a variety of miscellaneous wood products;

the extent to which tropical hardwood plywood has been replaced by MDF, particleboard or OSB, in various applications;

Secondary Processed Wood Products (SPWP) As some ITTO producers have continued a downstream, added-value rationalisation of their primary activities of producing and exporting logs, lumber and plywood, the development of secondary processed wood products began to evolve. Initially, simple dowels and mouldings, but later more complicated mouldings and components for doors, windows, floors and other builders woodwork, as well as components for furniture. This graduation from primary to secondary products has seen ITTO consumer imports of SPWP increase from US$23.6 billion in 1991 (of which ITTO producers enjoyed only 8%) to US$27.8 billion in 1995 (of which ITTO producers enjoyed 14%, or almost US$4 billion. They also shipped another US$1 billion to non-ITTO member markets.) In 1995, ITTO producers shipped in total US$11.4 billion of primary wood products, plus US$6.7 billion of SPWP. This compares with a total export of SPWP in 1991 of US$2.2. billion. Growth has tripled over the 1991 - 1995 period. The following tables show, however, that imports of SPWP in selected major markets have not all seen such dramatic growth. Table 3 indicates that the European Union, as a whole, saw virtually no change when comparing its 1992 and 1996 imports. Within those apparently static totals, however, some considerable changes were occurring, notably with furniture which accounts for about two-thirds of the total SPWP import. A 6% drop was offset by corresponding increases in the other product categories.


/ . . .

Table 4 confirms the static nature of EU SPWP imports. The individual figures for Netherlands, Germany and the UK tell the same story. In contrast, the US market shows a remarkable 65% increase over the period in total SPWP imports from all world sources. Only two product categories (shingles and shakes and cane seats) declined. Dominating US SPWP imports is wooden furniture, with US$2.7 billion (1992) rising to US$4.5 billion (1996.) Builders woodwork rose almost 70%. Japan posted an even more remarkable 220% increase over the period. Although furniture more than doubled from US$0.74 billion to US$1.56 billion, the increase in builders woodwork, from US$369 million to US$913 million (247%) is even more impressive. It reflects, no doubt, the move offshore by Japanese manufacturers tapping in to lower cost production facilities and workers.

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/ . . .

Resource Depletion For most tropical countries, the forest resource is a primary development asset. The forest industries sector is of critical importance for the economies of many developing countries as it accounts for a large share of GDP, and is a significant source of employment and hard-currency foreign exchange. But tropical deforestation has been continuing at a serious rate, estimated at over 13 million hectares a year. Between 1990 and 1995, ITTO producers overall lost 4 million hectares annually, or a decline of 0.8% per year. Although the countries losing the largest areas of forest in absolute terms are those with the largest forest area anyway, the highest relative rates of forest loss is occurring in countries with smaller forests, as detailed in Table 5.

Table 5: Deforestation in ITTO Producer Countries, 1990-95 Annual Area Annual Percentage

Country (1000 ha) Country %

1 Brazil -2554 1 Philippines -3.2 2 Indonesia -1084 2 Thailand -2.5 3 Congo, D.R. -740 3 Malaysia -2.3 4 Bolivia -581 4 Honduras -2.2 5 Venezuela -503 5 Panama -2.0 6 Malaysia -400 6 Ecuador -1.6 7 Myanmar -387 7 Cambodia -1.5 8 Thailand -329 8 Togo -1.4 9 Philippines -262 9 Myanmar -1.3

10 Colombia -262 10 Ghana -1.2

Source: FAO SOFO-1997 Factors contributing to tropical deforestation include:

changes in land use by conversion to other agricultural uses. This has been especially evident in Brazil, Indonesia, and to a lesser extent, Malaysia;

forest fires caused - in part - by the land clearance programmes but also by the traditional forest dwellers practising shifting agriculture, and small holding farmers. In 1997, the El Nino drought phenomenon severely exacerbated the situation, and fires in the Brazilian Amazon, and in Indonesia became uncontrollable;

unsustainable forest management practices in some areas. Public awareness of the deforestation issue has increased substantially, and is being reflected by mounting pressure on both governments and international organisations to adopt policies leading to sustainable forest management, proven by independent, third party certification.

Availability of Tropical Timber Products Total ITTO production of tropical veneer/sawlogs has been declining 2 - 3% annually in recent years. Although production in Brazil and India remains stable, Malaysian production has fallen from 37.5 million cubic metres in 1993, to only 30.2 million cubic metres in 1997, a reduction of one fifth in just five years. In Africa (primarily Cameroon, Congo and Ghana) production also declined as controls were introduced to limit production and exports. Log availability is reducing for several reasons:

moves to sustainable forest management;

reduction or completion of conversion forest programmes;

production and/or export controls;

moves to reduce/eliminate illegal trade in logs;

loss by forest fire;

etc. In particular, the trend by many tropical producers to reduce or eliminate log exports and add-value themselves by making lumber, veneer and plywood has become well established since the late 1980s.


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This has further evolved with some producers reducing the volume of lumber they will export, in favour of higher value products including the development of secondary processed wood products. But volume reduction is not the only constraint. The availability of the old growth, prime logs has significantly diminished and secondary regrowth logs are increasingly harvested. This has severely impacted on the availability of higher grades, on which tropical hardwoods established their reputation. The increasing difficulty in obtaining preferred top quality hardwood has accelerated the move to substitutes. As a consequence of these developments, log and lumber consumers took steps to protect their own investments in production facilities by seeking out alternative wood supply to enable their own conversion industries to continue. The change from tropical hardwood logs to softwood logs for plywood manufacture in Japan and Korea is particularly evident. And as this necessitates investment in different machinery to process the smaller, softwood logs, once effected the change becomes mainly irreversible (as log producers in Indonesia and Sabah have discovered recently when reversing their log export bans.)

National Economic & Construction Cycles Consumer confidence and strong housing demand, supported by low mortgage rates, are major drivers of wood product consumption. The level of housing construction is also influenced by population trends and the rate of household formation. It is generally accepted that about 70% of consumption is directly related to housing construction in those markets which build timber frame houses. North America, Australia and - to a lesser extent Japan and Europe - are prime examples. Furniture consuming patterns follow the housing cycle by about one year. The increasing demand for repairs and renovation in older properties in some markets is less cyclical, and has affected the overall picture somewhat. The Asian financial crisis is an example of severe impact when economies lose their way. The consequential currency devaluations, of extreme severity under several circumstances (including the repayment of loans in foreign currency) nevertheless offer opportunities for more profitable, foreign currency denominated prices which increase export sales. The reunification of East & West Germany had a severe impact on their combined economies over the past decade. This, together with a rapid industrialisation of DME countries in Europe and the need to meet European Monetary Union fiscal criteria forced Germany into a prolonged period of recession. Japan’s substantial growth in housing construction enjoyed during 1993 - 1996 abruptly changed into a 16% decline (1997) which is forecast to continue for several years. This will have a severely dampening affect on consumption of wood products.

Competitiveness of Tropical Timber Loss of market due to unavailability, resulting in substitution by alternative wood and non-wood products are not the only reasons for change. Before the Asian crisis, there was a tendency for tropical timber producers to attempt to drive prices up using the scarcity factor for justification. The market where topical hardwood is irreplaceable and unique is exceedingly small, and therefore product prices have to be set at levels appropriate to the competition from other products, not just other tropical producers. But product price is only part of the equation. Today, consumers are increasingly conscious of total cost. This takes into account several other factors, including machining costs (time, yield and maintenance); handling costs (damage, OH&S); finishing costs (materials, time, OH&S) and long term maintenance (refinishing cycles.) Increasing consumer protection legislation is forcing specifiers and builders into performance guarantees. In turn, they are adopting a more holistic approach to the materials they use in view of the significant costs of litigation if problems develop. Hardwoods, both tropical and temperate, have some vulnerabilities (resins, shakes, densities etc.)

Lifestyle Changes


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As the economic circumstances of countries (and their people) continue to improve, a number of factors emerge affecting the consumption of timber products in general, and tropical timber in particular:

Media promotion sells concepts... homes, interiors, kitchens, furniture etc. where the consumer is attracted to the final package, rather than the timber product from which it is made;

growing affluence widens the choices for consumers;

the multi-generational family, needing large houses, is giving way to an increasing number of single-person homes which are housed in multi-family (or high rise) buildings;

sub-urban sprawl requiring expensive infrastructure has reached such proportions in many cities, that there are moves toward urban renewal and higher density occupation within the cities;

such developments prompt fashion changes in the size, shape and colour of these different - and often smaller - home units and their furnishings. Darker coloured tropical timbers previously popular are being replaced by lighter species, particularly temperate hardwoods.

Marketing & Promotion of Topical Timber Several ITTO producer countries have established commendable marketing and promotion activities, including - among others - Malaysia, Indonesia and Ghana. Other ITTO producer members lack the resources to emulate them. The efforts of individual countries, however, naturally focus on their own products, rather than generally promote tropical timber. Furthermore, awareness of tropical forest depletion particularly in those countries highlighted by NGO activities undermines and questions the veracity of their promotional programmes in the minds of the consumer. Consideration should be given as to what additional role - if any - ITTO - as the tropical trades own organisation - could contribute in this regard.

Environmental Constraints I.J. Bourke and Jeanette Leitch in their study entitled “Trade Restrictions And Their Impact on International Trade In Forest Products” (FAO 1998) mentioned that “trade controls to encourage sustainable forest management (certification, eco-labelling, CITES i.e. Convention on International Trade in Endangered Species of Wild Flora and Fauna) …. taking place around environmental issues ….. are currently having an impact on trade levels and patterns in a number of areas.” Bourke and Leitch also stated that while “technically not NTBs (Non-Tariff Barriers), the effects of these and their purpose is to all intents and purposes the same.” Trade impediments relating to environmental issues tend to create greater difficulties for tropical countries than non-tropical countries because of the heavy emphasis on tropical deforestation as a prime cause of global environmental ills, and because sustainability is more difficult to evaluate for natural tropical forests as compared to temperate forests which are largely plantation-based. The earth’s deteriorating environment has been of growing concern to the world at large especially since the second half of the eighties and in the years leading to the UN Conference on Environment and Development (UNCED) or Earth Summit in Rio in June 1992 and in the post-Rio era. In Europe and particularly in countries like the UK, the Netherlands and Germany, environmental NGOs (Non-governmental Organisations) have been especially active in highlighting the gravity of the problem and the dire consequences for humanity and Planet Earth. With widespread media publicity and intense political interests aligning themselves to the cause of the ‘green movement’, the environmental issue soon became a highly charged topic in public and political discussions centring around the need for urgent remedial action. Environmental concerns have from an early stage been focused on tropical forests in regard to: a) the destruction of the world’s remaining tropical forests at the rate of some 15.5 million hectares a

year throughout the eighties, as reported by FAO, and continuing albeit to a lesser degree through the nineties;


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b) the threat to global warming from the extensive loss of tropical forests from the point of view of reduced carbon sequestration on the one hand and higher carbon release (from burning) on the other with serious consequential effects on sea-level rise, desertification, water, food, and agricultural production;

c) the loss of valuable genetic plants in particular as more than half the world’s biodiversity

resources are found in the tropical forests; d) the deprivation of indigenous forest dwellers and others similarly affected from uncontrolled

logging operations. As compared to the loss of nearly 200 million hectares of natural forests in developing countries during 1980 to 1995, forests in the developed world expanded by some 20 million hectares during the same period (FAO "State of the World's Forests 1997). Hence, the focus of environmental concerns and criticisms on tropical rather than temperate and boreal forests. The European Co-ordination Office of the Climate Alliance in a circular leaflet dated July 1996 wrote: "Every year an estimated 20 million hectares of rainforests are destroyed - this amounts to half the surface area of Holland. At this rate, the year 2040 will see the destruction of the last rainforests….….". This typifies the kind of concerns and criticisms directed at tropical forests by environmental activists in Europe.

Action Against Tropical Timber The declared goal of NGOs was to "save the rainforest". In the eighties and early nineties environmental pressures were brought to bear on governments, at national and subnational levels, to boycott and ban the use of tropical timber. The trade dealing in tropical timber was accused as "the culprit" of tropical forest destruction. Pressure was exerted on wholesale and retail outlets against selling products of tropical timber while builders, contractors and architects were advised to substitute tropical with temperate timber and other relevant materials. The NGO's used the anti-tropical campaign as a platform for fund-raising while heightening public awareness and concerns over the risks of using tropical timber. Thus, NGOs such as Greenpeace, Friends of the Earth (FOE) and World Wide Fund for Nature (WWF) are well equipped with funds to finance their campaigns on a large and effective scale. With the issue of environment high on the public and political agenda, governments at national and subnational levels responded in varying degrees in taking decisions and enacting regulations discouraging if not prohibiting the use of timber in public funded projects. There were also instances where the authority of subnational governments was used to influence private developers in the choice of building materials to the detriment of tropical timber (see Appendix 1.)

Certification In recent years, the environmental pressure tended to shift from demands for boycott and ban to that of certification. There is now also a tendency to relate certification to all timbers, rather than only tropical timber as environmental concerns extend to problems of forest management in temperate countries. Initiating the move towards certification is the Forest Stewardship Council (FSC), set up by WWF, Greenpeace, FOE and other environmental groups in 1991. FSC has established its scheme of timber certification according to its Ten Principles for forest management which will satisfy the ecological, social and economic needs. Accredited to FSC are certifying agencies as follows:

The Soil Association (UK) Societe Generate de Surveillance (SGS) Scientific Certification Systems (SCS) Smart Wood (Rainforest Alliance US) Skal (Netherlands)

The FSC aims to use its certification scheme to create a world-wide market mechanism to influence international sustainable forest management (SFM). In this connection, it sees its role as: Setting policies for the sustainable management of forests. Implementing systems to put these policies in place. Ensuring the credibility of such systems.


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In promoting the FSC Certification Scheme and the FSC logo, WWF Buyers Groups have been set up in the UK, the Netherlands, Belgium, Germany, Switzerland and Austria and in the US. Efforts are being made for such groups to be set up in Ireland, Denmark, Greece, France, Spain and Sweden as well as in Australia and Japan. Comprising DIY chain stores, supermarkets and other retail outlets, wood product manufacturers, building contractors and timber importers, members of WWF Buyers Groups commit themselves to increasingly and preferentially purchase and sell timber products certified under the FSC logo. FSC certified products already include sawntimber, kitchen utensils, flooring, panelling, doors, accessories and garden furniture, the intention being to expand the range of FSC certified products as time goes on. Besides WWF, several other NGOs, including FOE and Greenpeace, are supportive of the FSC Certification Scheme as the only scheme applicable on a global basis and are attempting to obtain its exclusivity in the European market Other factors affecting tropical timber consumption include:

use of alternative materials;

tariff & non-tariff measures; These are discussed in detail in the following chapters.


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MARKET ACCESS: CURRENT SITUATION, PROBLEMS & IMPEDIMENTS The consultants received completed questionnaires or written comments from the following countries:

Producers:

Bolivia Fiji Myanmar Thailand Cameroon Guyana Nepal Togo Colombia Honduras Panama Venezuela Congo Indonesia Papua New Guinea Ecuador Malaysia Philippines

Consumers:

Australia Canada European Union Germany Italy Japan Netherlands USA There were significant divergence of viewpoints on many of the issues raised within the producers group. The following summarises the salient points raised on each issue.

1. Factors influencing consumption of tropical timber products. The extent to which respondents feel consumption is influenced by the factors of price, availability and alternative products is as follows:

Influenced PRICE AVAILABILITY ALTERNATIVES totally 13% 17% - a lot 67% 58% 33% some 17% 13% 33% a little - 4% 29% not at all - 4% - N/A 3% 4% 5% All three factors are clearly important: price (97%) is the dominating factor, followed by availability (88%.) Alternatives are of lesser importance, rating only 66% in the comparable categories.

2. Alternative Wood & Non Wood Substitutes which are replacing tropical timber products. Almost all respondents cited a variety of alternative wood products which they are encountering in their markets including:

temperate hardwoods (from N. America, Europe, Australia);

medium density fibreboard (mainly softwood);

particle board (mainly softwood);

softwood lumber (from N. America, Russia, Australia and New Zealand);

coniferous plywood and engineered wood products (from N. America & Brazil);

plantation hardwoods (e.g. rubberwood, eucalyptus... from SE Asia, S. America);

veneer/reconstituted wood composites. Many of these products can be used instead of tropical timber in structural house construction, in furniture and cabinetry, mouldings, doors, windows and flooring. The factors of price and availability (point 1 above) become relevant. The use of alternative wood products is also attributed to uncertainties concerning the future availability of tropical timber species resulting in part from depleting resources, but also from export restrictions by some producer countries. There are not only concerns about price and availability, but also about the likely


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reduction of particular species, or qualities on which some end uses depend. Softwood and temperate hardwood producers are benefiting. In addition, most respondents also cited non-wood substitutes competing in their tropical hardwood end-use markets, including:

ceramic tiles (for flooring);

cement/concrete (for structural construction, transmission poles);

plastic laminates (for veneer);

concrete (for railway-sleepers);

vinyl tiles (for flooring);

plastics (for windows, doors and furniture);

gypsum panels (for partitions, wall lining);

plastic cladding/siding;

cement fibreboard (for ceilings, wall lining, cladding);

bricks (for construction);

aluminium (for window and door frames, siding);

steel (for structural joists, beams, studs etc.);

glass (for doors, furniture);

steel (for furniture);

plastics (for packaging). Opinions differ on whether substitute materials represent a market impediment. Some feel that the unique technical or visual characteristics of some species of tropical timber make them safe from competition. Others argue that any competition from substitutes becomes a market impediment. The environmental cost of alternatives such as aluminium, steel and plastic should be factored into this topic, Venezuela suggests. It is worth noting, however, that although some respondents see little - if any - impact by alternatives and substitutes on their present tropical timber trade, several indicate that they expect this to change in future.

3. Market access problems due to export restrictions. Some producer countries have restrictions on the export of certain products for various reasons including:

membership of the Washington Conference on International Trade in endangered species, affecting the export of certain species in their forests. Cumbersome internal documentation procedures can result in delays and - sometimes - cancellation of the order;

high royalties, and/or export taxes which affect the price and thus the competitiveness of their tropical timber products in world markets;

log and lumber export reduction, restriction or elimination to encourage further downstream processing for added value in the producer country.

A few respondents noted that some consumer countries may have imposed quotas on tropical timber products which restricts the volumes traded, even when tariffs have been zeroed.


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Although respondents provided no evidence of any direct price subsidies for tropical timber, mention was made of subsidised international marketing and promotion by some producer governments.

4. Export market development & promotion programmes. The lack of the means or skills to establish appropriate policies, disadvantages some of the developing producer countries. They call this an impediment to market access. Some producer countries are, however, able to provide government assistance by way of their Foreign Trade Departments permitting their overseas trade attaches to provide support, market research and some promotions of the country’s products. These are not specific to the timber trade. Many also become involved in bi-lateral and uni-lateral tariff negotiations intended to assist market access through WTO/GATT, APEC, ASEAN and various other Regional Groups. Some Governments also assist exporters through tax and other rebates or incentives to assist with their competitiveness. Also mentioned was one instance of reduced royalties to help penetration of new markets. A few countries mentioned the development of industrial policies designed to enhance the export of domestically produced forest products. A few respondents mentioned the existence of government supported agencies for generic export promotion, and some for specific tropical timber export promotion through media and electronic advertising, international and local tradeshows, and overseas trade missions for exporters. Several respondents noted that in their specific cases, the most significant export efforts had been achieved by the private sector through the activities of their respective trade associations.

5. Export credit and credit guarantee programmes. Only 30% of respondents indicated elements of such programmes were available to exporters, including Australia, Bolivia, Congo, Ecuador, Malaysia, Philippines and Thailand. The absence of such facilities, in the opinion of one respondent, inhibited its market growth and as such, constitutes an impediment.

6. Illegal trade in tropical timber products. Opinion was precisely divided between those countries which felt illegal trade in tropical products was a problem in international trade, and those who did not. Respondents were slightly more certain that it was a constraint to market access. One respondent pointed out that smuggling is often the consequence of distortions in the market, which should be addressed.

7. The influence on consumption of environmental considerations pertaining to sustainable forest

management. The extent to which respondents feel consumption is influenced at present, and will bein the future by environmental considerations, is as follows:

Influenced Currently In future

totally 4% 13%

a lot 4% 54%

some 46% 20%

a little 38% 13%

not at all 8% -

This result clearly indicates that although the current situation has 54% rating some influence, or higher... this will dramatically increase to 87% in future.

8. The development of environmental awareness in tropical timber markets.


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Respondents have rated the impact of activities of the sources of environmental awareness as follows:

Influence Media NGOs Timber Trade Politicians

totally 8% 42% - -

a lot 38% 21% 4% 12%

some 29% 12% 29% 29%

a little 8% 4% 17% 17%

not at all 4% 4% 25% 17%

N/A 13% 17% 25% 25%

It is hardly surprising that NGOs are strongly rated scoring 63% with ‘a lot’ or ‘total’ influence. (This would increase by a further 8% were ‘teachers’ and ‘pressure/interest groups’ - cited in the category for others - added.) The Media rated 46% in the same categories, and equalling NGOs (were the top three categories compared) has strong influence. The influence of Politicians rated 41% (‘some’ and ‘a lot’) outscored the Timber Trade (33%) in the same categories. Those few respondents who separately mentioned Government influence, rated it highly. Specifiers and end users were also mentioned as having influence.

9. Tariffs Respondents were invited to assess the significance - if any - of high and/or discriminatory tariffs affecting market access. Respondents also rated the significance of other factors affecting market access. The results (all of which are detailed in Appendix 2) generally indicate an overall perception that tariff issues are of low significance (‘a little’, ‘none’ or ‘no answer’,) across the whole range of tropical hardwood products:

high tariffs are of low significance, 65 - 85% of respondents agree, depending on product, because - in realty - they no longer exist, having steadily reduced in recent years. However Indonesia, Malaysia, Congo, Bolivia and Australia cited furniture as a product thus affected, while Guyana, Indonesia and Venezuela expressed concern about high tariffs affecting their primary and secondary tropical product exports, especially plywood.

discriminatory tariffs are of low significance, 65 - 85% of respondents agree, depending on product. However, some countries have higher tariffs for tropical hardwood products than for some coniferous products.

other market factors, in most cases, were of more significance than high or discriminatory tariffs. A variety were mentioned, including:

- high operational costs; - export taxes; - high transportation/shipping costs; - low priced competition; - different specifications and standards; - economic/currency downturns.

Despite the apparent perception that tariffs are of relatively low significance, it is noted that only a few of the respondents had industries that had developed downstream beyond the primary or (even fewer) the secondary stage of conversion. The handful of respondents with tertiary industry indicated their concerns about high tariffs, which reflects the problem of tariff escalation.

10. The effect of regulatory arrangements on tropical timber markets. The results (all of which are detailed in Appendix 3) similarly indicate an overall perception that regulatory issues are of low significance. A group of countries (Panama, Ecuador, Bolivia, Guyana and Venezuela)

mentioned problems with Safety Standards, and Health & Sanitary Standards. In part, this refers to phyto-sanitary requirements in some markets for tropical timber products, such as in North Africa, India and Australia. Suppliers with kiln and treatment facilities have less problem. Formaldehyde emissions from plywood, and furniture using plywood or particleboard is also subjet to strict limits in some markets like Japan, Europe and the USA, but suitable technology now exists to meet these requirements.


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Quantity restrictions on primary and secondary products were concerns of Indonesia, Guyana and Venezuela, although the responses suggest that log restriction concern may be the result of their own policies rather than consumer market activity. This also applies in Malaysia. GSP quotas were also mentioned.

Market factors, including CITES requirements, court proceedings to reduce or stop tropical imports and official foreign exchange controls were also cited in this category of regulatory arrangements.

11. How significant a market problem is CITES?

Opinions differed between public and private sector respondents. Bolivia, for example, replied that while their public sector rated CITES market problem significance as 80%, their private sector rated it as 20%. The US private sector also rated its significance as 40%, or quite high. The actual responses summarise as follows:

Significance Producers Consumers very 20%

1 -

a lot 20% 25%2

some 10% - a little 20% 25% none 40% 50%

1: includes Bolivia’s private sector, whereas their public sector rates the significance as ‘a little’. 2: includes US private sector.

12. The implementation of CITES Respondents were asked what weaknesses - if any - they thought needed rectification. One third answered that there were none to be rectified. 17% did not answer. The other 50% offered the following comments:

CITES relates primarily to game products and by-products (Togo);

the processes involved increase product costs and hinder sustained yield harvesting (Panama);

CITES procedures are highly technical... we believe their lists should be revised more frequently to ensure ongoing updating of information (Ecuador);

CITES should respect ITTO’s view regarding timber species which are supposedly endangered. (Bolivia - private sector);

CITES should cut the red tape involved in the process of issuing permits and/or certificates. (Bolivia - private sector);

control measures and co-ordination of joint actions by CITES parties should be improved. (Bolivia - public sector);

Fiji objects to CITES preparing to put mahogany on the list as it all comes from Fiji Government sustainably managed plantations; it is an exotic species, and not from Fiji’s rainforest;

each country needs to be assessed individually (Guyana);

inclusion of certain species in CITES should not be generalised. Although mahogany is becoming extinct in some regions - and its trade prohibited - in Indonesia the specie has been successfully cultivated in plantation forests;

the legislation of a country may be inadequate to implement CITES especially for unprotected species from other countries already included in CITES. This should be taken into account. (Indonesia);

criteria and procedure for listing of pant species (Malaysia);


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there are concerns that the mere listing of species may deter consumption of that species regardless of whether it is traded consistently within the convention. (Australia);

there are concerns that industry is not conversant with CITES requirements for trade in listed species. An information campaign could be undertaken to ensure the operation of CITES is understood by industry and the general public, and that it does not act as a complete barrier to trade in a specie. (Australia);

CITES listing could also even be used to enhance product marketing on the basis of environmental sustainability. (Australia);

there is a lack of expeditiousness in the administrative approval arrangements, rather than in the controls applied. (Honduras);

CITES authorities in consuming countries need to act pragmatically without undue influence by activists (US - private sector);

CITES was never intended to address issues of heavily traded, commercial species for wood products. (US - private sector);

13. Sourcing of harvesting & processing machinery.

From the information provided by respondents it appears that most producer countries, with the probable exception of Brazil, are heavily dependant upon imported equipment to support their forest industries. Dependence upon imported equipment requires foreign exchange, which has to be earned through hardwood product exports. If prices are affected by trade constraints then such equipment could become unaffordable and efforts to get a better and sustainable return from the resource will be impeded. Additionally, efforts to add value could be deterred.

harvesting equipment is supplied from Sweden, European Union, USA/Canada and Japan to Asian, African and Central & South American producers. Brazil also supplies neighbouring countries.

sawmilling machinery is also sourced from those supply areas, as well as from Taiwan, Australasia and India.

kiln drying equipment comes mainly from Germany, Italy, Taiwan and Japan. Australasia, Korea, USA, India and Brazil also feature.

plywood machinery is sourced from Japan, China and Taiwan, as well as from Germany, Finland and Sweden. The US also features.

woodworking equipment is very widely sourced. All the above mentioned countries compete, together with Brazil, Argentina and Czechoslovakia.

In a number of countries, some of their equipment is more than 20 years old, and - due to the changes occurring in the type of forests being harvested, and the type and size of logs they produce - different equipment is invariably needed for optimum results both in damage limitation, yield maximisation and efficient handling.

14. Market Access problems connected with environmental issues Most respondents contributed comments on this topic:

Nepal reported no problems;

Colombia, Thailand & Togo reported no problems yet;

Honduras amplified that although they see no major impediments in this field, they anticipate from year 2000 onwards certain countries, including Germany and UK, will exert pressure against the purchase of forest products from unmanaged tropical forests;


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Papua New Guinea advised they had encountered no significant impediments in log exports from environmental issues. They reported some very minor resistance from Australian sawn timber buyers which has not affected their overall export volume to Australia;

Japan reported that since 1992 some local governments recommended the reduction in use of tropical timber concrete shuttering and suggested repeated reuses. The impact on consumption is small;

US trade sector is concerned that continuous efforts to restrict or ban the use of tropical wood is turning customers to alternatives;

Philippines report that some export markets refuse to buy forestry products from rainforest logs;

Myanmar observes that eco-labelling and anti-tropical timber campaigns are believed to reduce the consumption of tropical wood products;

Indonesia considers that when requirements related to environmental issues are discriminately implemented, untransparent, and not based on a scientific approach, they become an impediment to market access;

Venezuela believes that when environmental requirements have to be complied with in different modalities (ecolabelling certification) for different rules of different international organisations (ISO, WWF, etc.) they become an impediment to market access;

Italy, because of environmental issues, has changed from tropical timber to N. American temperate hardwoods;

Panama sees unilateral measures in place according to product origin;

Ecuador reports that a permit has to be obtained from the relevant government authority (the Dept. of Plant Health & Sanitary Standards attached to the Ministry of Agriculture) for the export of timber products, particularly primary processed timber, which has to be treated with preservative;

Bolivia observes that concepts and actions related to SFM are more significant in certain markets such as Netherlands and the UK, and that this tendency seems now to be increasing;

Cameroon refers to campaigns by environmentalists in Netherlands and Germany in 1990 - 92;

Australia indicates that the WWF sponsored purchasing group in the UK is creating market access impediments for non-FSC certified wood products. Australian hardwood producers have also experienced difficulties in the Netherlands and Germany. In the Netherlands, the national government as well as some local governments require third party certification... which is not feasible for the quantities to be supplied. This results in declining market share;

Guyana states that requirements for certification and proof of SFM, especially in Europe, backed by strong campaigns to boycott the use of tropical hardwood timber are impediments to market access Although having revised its legislation with a new forest policy and a new Code of Practice (all of which include criteria for SFM) these are often not accepted;

Sabah, a State of Malaysia, believes Western countries, especially in Europe have banned the import of tropical timber products unless they are certified. Implementation costs are too high because the volume of SFM in the state is too small;

Congo reports that in some European countries such as Germany, actions by environmentalists have made the market almost inaccessible for some tropical timber species. Market access restrictions or bans are also reported in Netherlands and New York City;

Malaysia comments that tropical timber products are discriminated against by local municipalities in Europe, US and Australia as not coming from sustainable forests.

To summarise, very few respondents do not already experience some elements of environmental pressure; and of those, most are anticipating its stronger emergence in future. Almost 60% of


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respondents confirm that they are encountering environmental issues in their tropical timber trade, and identify the European markets of Netherlands, Germany and the UK as the markets with which they have most access difficulties. One third of respondents confirm they believe that the difficulties thus experienced amount to impediments to market access. Problems in the USA and Australia were also mentioned. The detailed situations in the markets of the EU in overview, and of the Netherlands, Germany, UK, USA and Japan are examined in the following chapters of this report.

15. Sustainable Forest Management (SFM)

The individual circumstances concerning the ownership, management and financing of their tropical forests vary considerable, and have some bearing on the ability - or otherwise - of producer countries to create policy and implement SFM. Respondents advised us:

a) Tropical Forest Ownership Wholly State owned : 55% Majority State owned: 15% Majority Private owned: 10% Wholly Private Owned: 5% Private/State (ratio?): 10% No answer: 5%

b) Private tenure is just as varied, ranging from indefinite, to periods ranging from 2 - 35 years.

c) State role in tropical forest management As a policy provider: 90% As a regulator: 90% As an enforcer: 80% As a rehabilitator: 60% (Sabah also mentioned that the State provides technical assistance and training in SFM to long term licensees.)

d) SFM requirements: policy and implication

Embodied in: Policy: Implementation: totally 35% 15% a lot 35% 30% some 15% 35% a little 10% 10% not at all - - no answer 5% 10%

Understandably, implementation lags behind - but not far behind - policy.

e) Financing of tropical forest management Countries finance their forest management from a number of sources, including government allocations, royalties, levies, trade and industry profits and corporation taxes. Most countries have more than one source of funds, which are detailed below in order of frequency:

royalties 31% levies 22% government allocation* 19% trade & industry 16% corporate taxation 12%

(*this can include overseas aid)

16. Sustainable forest management certification

Opinions differed among respondents as to whether or not SFM Certification is considered just a marketing tool or a market impediment:


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a marketing tool 50% an impediment 21% both 21% no answer 8%

One respondent indicated that although certification had not yet reached the degree of being a market impediment, it is still discriminatory against producers and poor countries with tropical forests who cannot afford the costs of certification. Opinions also differed among respondents as to the form preferred should certification proceed: 48% indicated it should be voluntary; 26% said it should be on a multi-lateral basis; 26% said it should be on a national basis. Several respondents indicated a preference for a combination of voluntary and national, or voluntary and multi-lateral. When asked of voluntary certification would be likely to result in a proliferation in divergent schemes, 17% agreed and two thirds said ‘maybe’ (17% did not answer.)

17. Market Access Improvements: done or to be done.

The following information was provided by respondents in response to the question ‘what steps have already been - or will be - taken in terms of tariff and non-tariff arrangements to improve market access’ for tropical timber products;

Australia has made tariff reductions in accordance with its Uruguay Round commitments. Australia will not pursue timber bans, and has argued - and will argue - that timber bans are ineffective and counter productive;

Bolivia has concluded commercial agreements and trading blocks, the most significant being MERCOSUR and - among others - the Andean Community;

Canada supports free trade in forest products and looks forward to tariff reductions as the result of initiatives such as that currently under way among AHEC countries;

Cameroon has new customs codes and tariffs to reduce export taxes on finished and/or semi-finished products;

Colombia has requested restrictions on the import of certain products;

Congo has a proposal to adopt a unified tariff for CEEAC, and a tapering rate/diminishing tax on exports of locally produced timber products;

Guyana says this will be addressed by free trade agreements. It would place, however, an additional burden on local producers producing higher cost products against lower cost competition;

Honduras National Congress has been asked to consider issuing a Decree banning exports of Mahogany in roundwood form or as rough sawnwood, and authorising only the export of processed products from this specie. This will help to substantially improve market access;

Indonesia reports that tariffs have gradually reduced within AFTA, APEC & IMF. For non-tariffs, harmonising and implementing products standards to the international standards such as SFM, and Mutual Recognition Arrangement (MRA) with FSC;

Japan’s plywood industry has provided technical assistance to help Malaysian and Indonesian manufacturers meet the required formaldehyde requirements. Japan is implementing tariff reductions in accordance with the Uruguay Round;

Malaysia has initiated tariff reductions through various bi - and multilateral negotiations with AFTA, APEC/EVSL and WTO;

Nepal is adopting a co-ordinated approach;


/ . . .

Netherlands is implementing a voluntary and independent scheme for the certification of forest management and the labelling of timber and timber products in co-operation with major producer countries;

Panama is establishing low and uniform tariffs for all exports;

Papua New Guinea is embarking on a major tariff reform programme towards gradual trade liberalisation as part of a structural adjustment programme, and also as a member of WTO and APEC;

Philippines has a tariff rationalisation programme where wood and wood products including wood furniture will be subjected to rates of duty ranging from free to 25%. They are also included in the Common Effective Preferential Tariff (CEPT) scheme of AFTA where by 2003 those products will enjoy 0 - 5% tariffs. Under APEC, the EVSL is being studied for forest products;

Thailand: the APEC non-tariff agreement has not yet been finalised; Thailand is proposing zero duties under two time frames, 2004/2010. Under AFTA, tariff will become 0 - 5% in 2003;

USA (private sector) believes any work being done to achieve an eventual zero for zero tariff system will help trade in timber products;

Venezuela has established a negotiated scheme which includes the different priorities for the sector to protect their markets in preference to other products in the local market.


/ . . .

EUROPEAN UNION (EU)

Market Developments

With the enlargement of the European Union (EU) to include Austria, Finland and Sweden, the forest area in EU doubled to 102 million hectares. In sawnwood, EU15 self-sufficiency was 91% in 1996 compared to 55% for EU12 in 1994. For wood-based panels, EU15 self-sufficiency was 92% as against 85% for EU12. With a population of over 368 million people and per capita GDP of US$22,000 in 1996, the European Union (EU) remained a major market for both tropical and non-tropical forest products. In that year, the EU imported tropical logs, sawnwood, veneer and plywood totalling US$2.7 billion, accounting for more than a fifth of ITTO producer countries entire export of these products of US$2.7 billion. In volume terms, the EU took up 13.6% of tropical log export, 25.8% of sawnwood, 27.9% of veneer and 11.5% of plywood export of ITTO producer countries. Over the years, there have been significant changes in the configuration of EU imports of tropical timber. Some of the changes as shown in Table 1 are:

a declining trend in EU import of tropical logs, which fell by almost half between 1989 to 1996 from 3.5 million m³ to 1.9 million m³;

a declining trend in EU import of tropical sawnwood, which fell by slightly more than half during the period from 4 million m³ to 1.9 million m³;

a generally upward trend in EU import of tropical veneer from 230,000 m³ to 340,000 m³, an increase of 48% over the period;

a more or less stable level of EU import of tropical plywood at 1.4 to 1.5 million m³ a year. TABLE 1

EU Import of Tropical Timber, 1989 to 1996 (million m³)

(with 1989 = 100%)

Logs Sawnwood Veneer Plywood

mln.m³ % mln.m³ % mln.m³ % mln.m³ %

1989 3.45 100 4.00 100 0.23 100 1.40 100

1990 3.42 99 3.24 81 0.24 104 1.49 106

1991 3.17 92 2.96 74 0.29 126 1.51 108

1992 2.64 77 2.95 74 0.23 100 1.71 122

1993 2.45 71 2.61 65 0.21 91 1.38 99

1994 2.60 75 2.39 60 0.23 100 1.27 91

1995 2.52 73 2.44 61 0.37 161 1.53 109

1996 1.94 56 1.87 47 0.34 148 1.40 100

Source: ITTO Publications It should be noted that many EU economies experienced slower growth in 1996, with an aggregate increase of 1.7% in real GDP from 2.5% in 1995. The German economy grew only 1.4% in 1996 after a 1.9% growth in 1995 with the construction industry entering into a recession in 1996 after a seven year period of continuous growth. Housing starts registered a drop of 3% to 525,000 units in 1996. Despite a growth of 2.3% in 1996, UK housing starts contracted further to 163,000 units in 1996 from the 5-year high of 199,500 units in 1994. In the Netherlands, housing starts at 96,000 units were the same as in 1995 but down 7% from 1994.


/ . . .

Compared to tropical timber, the import of non-tropical timber fared better. Between 1993 and 1996, the tropical proportion of EU's total timber imports was down from 19.9% to 13.9% for logs, 8.4% to 6.3% for sawnwood and 34.9% to 26.4% for plywood. On the other hand tropical veneer proportion was up from 34.6% to 37.2%. TABLE 2

Tropical Proportion of Total Imports by EU (1,000 m³)

1993 1996

All Logs 12302 14008

Tropical 2453 1941

% Tropical 19.9 13.9

All Sawnwood 31042 29522

Tropical 2610 1865

% Tropical 8.4 6.3

All Veneer 624 900

Tropical 216 335


All Plywood 3956 5322

Tropical 1380 1404


Source: ITTO Publications

Secondary Processed Wood Products A striking feature in the changing pattern of EU import has been the remarkable growth in import of secondary processed wood products (SPWP), comprising wooden furniture, windows, doors and door frames, other builders carpentry and joinery products, picture frames, table and kitchenware, ornaments, pallets, boxes and barrels. In 1995, the EU with its 12 member states, imported US$14.9 billion worth of these products, led by Germany, France and the UK Of this, imports from ITTO producers amounted to US$1.26 billion, which was nearly three times the level obtained in 1990, giving an incremental average growth of a hefty 56% a year over the five-year period. By 1995, import of SPWP represented almost a third of total EU import of all categories of tropical timber products from ITTO producer countries. The decline in importance of tropical logs, sawnwood and even plywood relative to the growing importance of SPWP in the make-up of EU import could be regarded a success in market access of tropical countries seeking to move upmarket for processed wood products.


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TABLE 3

EU Import of Secondary Processed Wood Products from ITTO Producers,

1990 - 1995

Year 1990 1991 1992 1993 1994 1995 1995/1990

US$ million 448.6 680.8 850.7 1,010.4 1,198.2 1,255.5 280%

Source: ITTO Publications

Substitute & Alternative Material Market access for tropical timber involves not only competition with other timber and competing materials but also competition among different product categories and species of tropical timber themselves. The growing preference by German window manufacturers to use laminated scantling has reduced significantly the demand for rough sawnwood. Between 1991 and 1995, the share of laminated scantlings in the manufacture of windows from tropical timber increased from 42% to 73% while the share of rough sawnwood declined correspondingly. Apart from the readily available supply of cheaply priced laminated scantlings from Indonesian sources, when the export tax became too prohibitive for Indonesian sawnwood, the switch to laminated scantlings was due to several advantages it has, including: a) being more stable and having less defects than rough sawnwood; b) deliverable in fixed lengths according to requirements of customers and end-users; c) being easily shipped in containers; d) producing less waste and reducing thereby costs of waste disposal. In the case of plywood, Indonesia and Malaysia were until the early nineties the two largest suppliers to the UK market. However, with the rapid expansion of plywood production in Brazil, it overtook first Malaysia and then Indonesia; and since 1994 it has become the leading tropical plywood exporter to the UK Price plays the key role in competition in the UK market not only between tropical plywood of different origins but also with temperate plywood. But one advantage which Brazil has over its South East Asian counterparts is the faster shipping time and therefore faster delivery to UK buyers, an important factor especially when interest rates are high. Factors thus affecting competition between tropical timber species and other wood products include relative price changes, exchange rate movements, shipping costs and supply availability. Significant changes have and are taking place in regard to competition and substitution of tropical timber

by non-tropical timber and other materials. A case in point is window production. Germany is the largest market for windows in Europe, with about 24 million window units, followed by UK with about 13 million units, Spain 11 million units and France 9 million units. Windows are largely locally manufactured due to the absence of standardisation of window sizes and specifications within the EU. Even in individual countries like the Netherlands and Germany, there are no national standard sizes and specifications for windows. There may be sizes that are more common than others, such as those sold in DIY chains. In housing or building projects, windows are generally made to order from window manufacturers. Timeliness of delivery is important in such cases. The main materials used for window production in Europe are timber, PVC and aluminium. Traditionally, wooden windows were predominant. But by 1995, PVC has caught up with timber, each having a share of 35%, with aluminium taking the balance of 30%. That PVC windows have gained considerable market share from timber windows is reflected particularly in the case of Germany. By 1995, PVC market share has gone up to 48%. Not only has timber lost out to PVC, but within the timber component, more windows were made from non-tropical than from tropical timber by 1990, whereas wooden frames of tropical timber accounted for around 70% in the early 1980s. By 1995, the share of tropical timber in wooden windows was down to 35%. While non-tropical has benefited to a certain extent, it was predominantly PVC that has gained the most in terms of market share.


/ . . .

Environmental concerns over the use of tropical timber played an important part in the decline in popularity of tropical timber windows given that the type of the timber used could easily be identifiable, making the restrictions on the use of tropical timber by the Lander and by local authorities more easily applicable. Aggressive promotion by PVC manufacturers that PVC windows require no painting and no maintenance also helps given that costs of skilled labour for maintenance are not cheap. PVC windows have been very price competitive, being generally 10% cheaper than the wooden equivalent painted with solid colours and 20% cheaper compared to clear finished wooden windows. To meet delivery schedules, PVC windows are faster to produce because the raw material is available precast in various ready-made profiles, and all that is required is the cutting to length and assembly. Wood raw materials on the other hand have to be machined to the required profiles involving additional machinery and tooling; there is also generation of waste, which requires handling, removal and disposal. PVC windows are particularly preferred in refurbishment and renovation. In the UK as in Germany, PVC has won the lion’s share of the replacement window market. As for aluminium frames it would lose further ground as Germany is moving towards implementing stricter rules for the insulation of houses. In regard to wooden windows, the preference for laminated scantlings has led to rough sawnwood being used only to manufacture particular window orders or certain specific window components. At the same time, laminated scantlings of temperate timber like pine, spruce and hemlock have also gained increased usage. Also, wooden window imports from Eastern Europe said to be 20% cheaper have been making inroads into the German market. Not all European countries are as taken up as Germany or UK with the switch to PVC. In the Netherlands tropical timber is still the preferred material for windows; maintenance wise, it is deemed not to be inferior to PVC. However, because of environmental pressure, the switch particularly to softwood has been increasing. It is estimated that 30% - 35% of timber used in window frame manufacture is softwood. According to Karl Heinz Herbert’s study on the European window market, European countries can broadly be differentiated by the frame materials used. In Scandinavia, wood and metal/wood windows predominate while PVC windows are quite negligible. In Southern Europe, aluminium windows are the most popular. On the other hand, Central European countries are characterised by a large and growing share of PVC windows.

As in the case of windows, in the external door sector, alternative materials such as PVC-u and steel have gained at the expense of timber. According to one trader in the UK, instances of poorly constructed hardwood doors over the years have not been helpful. In the patio door market in the UK, PVC-u is now the main material used. However in the replacement market, hardwood is still an important material. With the rapid expansion in MDF production in Germany, UK and other European countries, there has been a tendency for MDF to replace not only the thicker panels but also thin plywood and hardboard as well. On the other hand, the expanding market share for veneered MDF panels has resulted in increased consumption of veneered products as a substitute for solid timber. In this connection, tropical veneer has been able to match up to competition from its temperate counterpart. Another area where MDF has been able to make good headway is in laminated flooring with wood-image plastic surfaces or other synthetic overlays which are extremely price competitive even with the lowest quality parquet. In fact, laminated flooring is one of the fastest growing applications for MDF in the EU. The trend towards increased use of MDF for flooring and wall panelling, and for laminated and overlay products in furniture will continue, as will the substitution of MDF for solid wood. Increasing supply of MDF has also enabled it to displace softwood timber in products such as window boards, skirtings, and architraves, applications which softwood had to some extent taken from tropical hardwood. MDF mouldings are expected to continue gaining market share in the construction and house building sector. As in the case of PVC, active market promotion is being used. Together with the development of new end use applications, this helps boost MDF usage in moulding, joinery and furniture applications and in sustaining its market growth. In recent years, the shift in preference towards lighter-coloured natural wood has tended to favour temperate timber like pine, beech, maple, fir and birch such that tropical species become less popular in furniture production. Nevertheless, the trade believes there will always be a core market in the UK for


/ . . .

darker tropical hardwoods in period-styled houses, refurbishment projects and traditional commercial buildings. While consumer tastes and preferences for lighter or darker-coloured materials can change from time to time, a recent report has pointed to signs of a return to timber in windows in the UK situation. The British Woodworking Federation (BWP) believes that, in terms of competition from PVC-u “the environmental pendulum” is now swinging back in favour of timber in that many builders who went over to plastic windows five to ten years ago are now going back to timber. In this regard, the Timber Industry Alliance (TIA) set up in 1996 in the UK by companies in forestry, wood processing, timber trading and others related to timber interest, has been working towards developing market awareness of timber products and environmental factors in order to increase timber consumption in the UK market.

Market Impediments

Tariff EU tariffs on import of logs and rough sawnwood are at zero level. From the Official Journal of the European Communities dated 14.11.97, the following tariff rates are noted:

Tropical Coniferous

Sawnwood (finger jointed, whether or not planed and sanded) 4.9% 1%

Veneer 4 - 6% 3 - 4.4%

Plywood and similarly laminated wood 10% 7.6%

Wooden frames for paintings, photographs, mirrors, etc. 5.1% 1%

Windows, French windows and frames 3.6% 3.6%

Doors and frames 6% 1.2%

Tableware and kitchenware 3% 0.6%

Ornaments 6% 1.2%

From the above, it can be seen that the tariffs for tropical timber products are in many cases higher than those of coniferous wood. For instance, tropical plywood has to bear a duty of not only 10%, a rate which by itself is on the high side, but is more onerous than the 7.6% duty for non-tropical plywood. At the same time, the EU also accords a duty-free quota of 650,000 m³ a year for coniferous plywood import. Although developing countries under the GSP scheme are eligible to pay duty at the lower rate, i.e. 70% of the full duty rate, it is noted that both Indonesia and Malaysia have since 1998 been graduated out of the GSP scheme. The exclusion from GSP entitlement is based on a formula which takes account of export performance and the general level of development of countries concerned. As countries in Asia have suffered significant drops in per capita income and serious setbacks in several areas of development from the recent economic crisis, there could be a case for a review of the GSP status of both Indonesia and Malaysia.

On the question of whether tariff escalation has in the case of the EU affected market access, this does not appear to be a market impediment given the rapidly growing export of SPWP by ITTO producer countries to the EU. Furthermore, together with the US and Japan, the EU has agreed to a complete elimination of tariffs on furniture over the next 8-10 years under the Uruguay Round, while current rate is only around 2%.

Non-tariff There are no measures of a non-tariff nature that seem to act as an impediment to market access of tropical timber into the EC. In regard to the health standard relating to formaldehyde emission, tropical plywood exporters have been able to meet the maximum allowable level of such emission in EU member countries. In regard to phytosanitary requirement, only the entry of softwood is somewhat affected. This has to do with plant protection regulations against the risk of imported timber transferring pinewood nematodes into European forests. The regulations require coniferous logs imported into the EU to be debarked and for


/ . . .

coniferous sawnwood to be kiln-dried as well. In areas of application where undried timber is deemed acceptable, such requirement obviously means higher cost. Procedurally, it also entails additional documentation such as the need to provide phytosanitary certificate as appropriate.

Environmental Issues

There were instances where the authority of subnational governments was used to influence private developers in the choice of building materials to the detriment of tropical timber (see Appendix 1.) This happened with certain municipalities in the Netherlands where land was allowed for long-term use only if owners did not use tropical timber and sale of building lots carried a penalty clause if tropical timber was used. The timber trade, whether it is in the Netherlands, UK or Germany, agreed that the environmental campaign conducted by NGO's has resulted in a significant drop in imports of tropical timber into their respective markets. Although it is difficult to quantify the exact impact, one trader estimated that up to 30% of the decline in imports of tropical timber into the Netherlands in recent years could be attributed to environmental pressure of one kind or another. The Ghana Export Development Board in UK estimated that Ghana has suffered about 10% loss of market since 1992 largely on account of the adverse developments against tropical timber from the environmental movement. Other tropical timber exporting countries such as Malaysia have also been seriously affected by the negative effects in the European market from the anti-tropical timber campaign. Overall, the market for secondary processed wood products did not appear to be affected given the continued and substantial growth that has taken place; the effects were more evident in sawntimber used in doors and windows. Even the drop in EU import of tropical logs could partly be attributed to supply problems from producing countries.

Certification Besides WWF, several other NGOs, including FOE and Greenpeace, are supportive of the FSC Certification Scheme as the only scheme applicable on a global basis and are attempting to obtain its exclusivity in the European market. While the FSC Certification Scheme is being promoted in Europe, attempts at exclusivity are resisted by national governments, the timber trade and private forest owners. For instance, forest owners in Germany have started the Forest Initiative to develop its own criteria and indicators for German forestry instead of having to follow a management system prescribed purely by environmental organisations. It is also working with several other European countries with the view towards a common European level certification arrangement. Approximately 1.4% of Europe's forest has been certified, 99% under FSC criteria. The FSC claimed that its current area of FSC certified forests around the world amounted to over 6 million hectares covering 85 sites in twenty countries and is expected to reach FSC's target of 10 million hectares by the end of 1998. About 80% of the forests under FSC certification are located in temperate and boreal regions - mostly in Poland and Sweden (with the pulp and paper giant Assi Doman being the largest involved in FSC certified forests). The WWF and the World Bank have also entered into a strategic alliance targeted at the certification of a total of 200 million hectares of forests by the year 2005. This target represents an estimated 6% of the world's production forests and around 600 million m³ of roundwood production annually. On the part of the World Bank, it has made clear it would not exclusively support the FSC scheme. While efforts have started to generate supply of certified timber from Sweden and Finland, several tropical countries like Malaysia, Indonesia, Brazil and Ghana are also looking into systems of certification to meet the needs for certified timber in the European market.

Market for Certified Timber The volume of FSC - certified timber transacted in the EU market in 1996 is estimated to be less than 100,000 m³ of sawnwood. Current market size, controlled by WWF Buyers' Group is said to be around 9.9 million m³ of roundwood equivalent.

Consumer Attitude


/ . . .

While environmental concerns relating to forest management are not confined to tropical forests, the public perception is still one where tropical timber is deemed to be environmentally-unfriendly unless proven otherwise, while temperate timber is presumed acceptable even without proof. A survey recently undertaken by the European Forest Institute in Finland on consumer attitudes in Germany, UK, France and Italy came up with results, the following of which may be noted: The majority of consumers regard the preservation of species diversity and protection aspects as

more important than the role of forests for timber production; People were generally content marginally with the situation regarding domestic forests and not at all

content with the situation of tropical forests; Most people believe poor forestry practices to be the main cause for the miserable situation of

tropical forests, which are either not at all or only little sustainably managed; Regarding labels and labelling, about half were satisfied with existing environmental product

information, about half were not; About 40% say they were not willing to pay more for SFM wood; On average, people regard SFM wood as a feature of product quality they expect rather than an

additional benefit. According to a forestry expert with WWF, it is "of crucial importance that the raw natural timber, an excellent construction material in terms of ecological aspects, is obtained from sustainable operations. Taking up the results of the Rio process, sustainability must be based on ecological, economic and social components." The days when wood was assumed to be environmentally friendly (because of renewability) and harmless in terms of working and usage cannot now be taken for granted. The alleged risk from wood dust and the use of certain adhesives vis-à-vis formaldehyde emission could be overcome. But the problem of coping with environmental perceptions that purchasing tropical timber is undesirable remains largely unresolved. Reports of forest fires and illegal trade in tropical timber, added to environmental concerns, make markets even more wary of tropical timber. Previously, tropical timber could compete on the basis of price, technical suitability and supply availability. Increasingly, it is now necessary to show that the timber is environmentally sound to overcome market inhibitions of one kind or another. To this end, the European trades feel that certification for tropical timber in particular may be unavoidable. They welcome the efforts being initiated by several exporting countries to come up with certified timber. At the same time, the trades feel it is important for more information to be made available to the European public about the progress towards SFM to overcome misperception and ignorance in the market place.


/ . . .

European Commission's Position The European Commission supports timber certification as a marketing tool to increase the trade of timber from sustainably managed forests. Accordingly, certification should be market-based, non-discriminatory, transparent and cost-effective. The Commission would be in favour of a more co-ordinated approach to certification to avoid proliferation of certification schemes. It would be inclined to support a multi-lateral approach leading to if possible an internationally based certification arrangement covering all types of timber. On action by governmental departments and local authorities in deciding against the use of tropical timber, the Commission feels that these reflects individual private choices as consumers and should not be treated as official positions of European governments. In support of efforts towards SFM, the European Commission introduced in June 1998 a scheme for environmental incentives by which tropical timber exporting countries can obtain a remission of the duty payable of 15% - 35% if they can show proof that they "apply legislation incorporating the substance of the standards of the International Tropical Timber Organisation (ITTO)." All countries eligible for the GSP, including those that have graduated out of the Scheme, are eligible to apply for this incentive. This incentive comes within the European framework to establish a link between trade and the environment as with the link between trade and labour rights for which a similar incentive is also provided under a common umbrella arrangement for both these incentives.

Other Factors While the environmental issue has been detrimental in some ways to tropical timber usage and consumption, the market for tropical timber has also been affected by other factors, including the following: the recent shift in preference towards lighter-coloured natural wood has tended to favour temperate

timber like pine, beech, maple, fir and birch, as discussed; unpredictable and large fluctuations in prices of tropical timber accentuated by exchange rate

movements have encouraged substitution to other species and alternative materials; uncertainty about supply as tropical countries opt for policies to restrict the export of logs and even

sawnwood in favour of further processed wood products; competition from domestically produced MDF against imported plywood, as discussed; competition from increasing flow of timber products from Eastern and Central European countries; 'just-in-time' management of raw material supply. Further studies will have to be done if it is deemed necessary to assess more fully the impact of the above and other factors on the market for tropical timber.

THE NETHERLANDS

Market Developments The Netherlands is the largest importer of tropical timber in Europe. In 1996, imports of tropical logs, sawnwood, veneer and plywood totalled US$413.2 million, equivalent to about 15.6% of overall EU import of US$2.7 billion. Sawnwood was by far the biggest item with a share of 61%, followed by plywood at 29%, logs 9% and veneer 2%. It is estimated that a quarter to a third of Dutch tropical timber import is re-exported to Germany, Belgium and other European countries. The table below shows the trend of tropical timber import into the Netherlands.


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TABLE 1

Netherlands : Import of Tropical Timber, 1989-1996

(with 1989 = 100%)


x 1000m³

% x 1000m³ % x 1000m³

% x 1000m³ %

1989 154 100 876 100 12 100 253 100

1990 110 71 570 65 11 92 274 108

1991 117 76 525 60 10 83 287 113

1992 123 80 578 66 13 108 322 127

1993 111 72 587 67 13 108 238 94

1994 120 78 461 53 12 100 162 64

1995 117 76 395 45 14 117 168 66

1996 120 78 390 44 15 125 170 67

Source : ITTO Publications It can be seen that sawnwood import in 1996 was less than half the level of 1989 while plywood import fell by a third; and log import by about a fifth. Only veneer import was up by 25% or a mere 3,000 m³. Against the downtrend in import of primary and semi-finished timber materials, there was an uptrend in Dutch import of secondary processed wood products (SPWP) from ITTO producers from US$57.8 million in 1990 to US$204.3 million in 1995, giving an average growth of about 70% a year. TABLE 2

Netherlands : Import by value of Secondary Processed Wood Products from ITTO Producers

Year 1990 1991 1992 1993 1994 1995 1995/1990

US$ million 57.8 86.8 98.3 145.8 190.2 204.3 353%

Source : ITTO Publications

Environmental Pressure Against Tropical Timber According to the Dutch timber trade, the fall in Dutch timber imports could be attributed in no small measure to the avoidance of tropical timber usage in construction and building projects on account of environmental pressures. The Netherlands was targeted by environmental activists because it was only second to Japan as the largest consumer of tropical timber on a per capita basis. In the eighties, the campaigns by the environmental movement, supported by a considerable part of the Dutch press and politicians, were aimed at banning the use of tropical timber. According to Andre De Boer, Managing Director of the Netherlands Timber Trade Associations (NTTA) "our rational arguments were not strong enough to stand up to the influence which the environmental movement had over political and public opinion". Thus, he said "the use of tropical timber continued to fall" when "not so long ago, the importation of tropical timber into the Netherlands was more than 800,000 cubic meters". One way out of the impasse is for the timber sector and the environmental movement to work towards reconciling their differences affecting the use of tropical timber and according to De Boer, this is happening, albeit slowly.

Action by Subnational Authorities Municipal governments were among the first to take the cue from NGO's. As big consumers of tropical timber through their social housing projects, municipalities tended to be influenced by the pressure and one-sided information from the NGOs. A number of sub-national actions were initiated to reduce tropical timber logging, and unsustainably produced tropical timber. Details of these and the ‘Heart for Wood’ campaign involving 252 municipalities are detailed in Appendix 1.

Substitution of Tropical Timber


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Window manufacturing is a typical area where prior to the emergence of the environmental movement, use of tropical timber was predominant. According to the Dutch Association of Joinery/Carpentry Products Manufacturers (Nederlandse Board van Timberfabrikanten), tropical timber is still technically the preferred material. Nevertheless, the switch particularly to softwood has been increasing. It is estimated that 30% - 35% of timber used in window frame manufacture is softwood. Finger jointed and laminated softwood called "optimised softwood" is gaining acceptance. In the Netherlands, there is less tendency to substitute tropical timber window frames with PVC as compared to say the situation in Germany, notwithstanding promotion by PVC manufacturers that their products can be recycled as well as requiring minimum maintenance. The Association is of the view that use of tropical timber can increase as well as regain some of its lost market share if certified tropical timber is available to prove that it is from sustainable sources.

Certification The Dutch timber trade (VVNH) shares the view of wood product manufacturers that certification can play a meaningful role for tropical timber to overcome the market impediment associated with environmental concerns and pressure from NGO's. The VVNH has together with the timber sector and trade unions set up the Keurhout Foundation (Approved Timber Foundation) with financial support of the Dutch government. The Foundation is coming up with the "Hallmark" for timber that is certified from sustainable production and going through a system of "chain of custody" to the point of delivery in the Netherlands. In this connection, Keurhout Foundation has started an initial scheme for Malaysian timber and has found good response from even municipalities which have a 'hard line attitude' against the use of tropical timber. The Foundation is also working to obtain timber from other supplying countries under its scheme. According to VVNH, Dutch consumers are generally not willing to pay a 'green premium' for certified timber. In niche markets, however, where the governments or government agencies are the customer, certain green premium can be obtained. But these niches are not more than a few percent of the market. In the final analysis, certification should be viewed more importantly as a marketing tool to improve market access for tropical timber. On its part, the Dutch government is strongly supportive of certification in tandem with its declared policy to increase the use of timber as an environmentally friendly material in the building and construction sector. The Dutch government is, however, against the attempt by NGO's to seek exclusivity for the FSC Certification Scheme and had rejected a proposal in the Dutch Parliament to allow only FSC-certified timber to be used as this would pre-empt other certification initiatives. In consultation with environmental NGO's the Dutch government has established minimum requirements for certification as follows :

the forest management has given sufficient attention to secure the integrity of the ecological functions as well as the certainty of the socio-economic and socio-cultural functions of the forest on the basis of internationally agreed criteria and indicators (ITTO 1992, Helsinki 1993, FSC);

the forest manager acts in compliance with an adequate forest management system;

the certifier is independent, complies with international guidelines concerning organisations and procedures and has sufficient expertise in forest management;

the procedures regarding the chain-of-custody are full proof and fully transparent. These minimum requirements have been converted by Keurhout into a set of criteria for certification. Thus in the arrangement for Malaysian timber to be certified, Malaysia establishes sustainability on the basis of its MC&I, (which in turn are based on ITTO's C&I) to comply with the Dutch minimum requirements as have been made operational by the Keurhout Foundation.


/ . . .

Amendment to Housing Act In relation to the stand taken by municipalities on the issue of tropical timber, the Dutch Government has from time to time advised the municipalities of the international obligations which the country has entered into as a signatory of the ITTA. On the other hand, a recent amendment to the Housing Act now makes it possible, in principle, for municipalities to link environmental conditions, including the ban on use of tropical timber, to building permits to private developers.

A call for Detailed Labelling A development which could have aggravated the market for tropical timber was the adoption of a bill by the Lower House in the Dutch Parliament. This arose from an initiative of Groen Links (the Green Party) called the Vos Initiative proposing an amendment to the Dutch Environmental Protection Act. The proposed amendment requires timber and timber products sold in the Netherlands to be labelled either 'green' or 'red', i.e. a green label for products of sustainable forestry and a red label for products not proven to have been produced on a sustainable basis. This is to take effect from a certain date, and the target is year 1999. The European Commission to which the bill was referred for its view ruled that the bill violates European regulations on free trade. The bill is not in line with the rules governing the EU as 'a single market' nor is it with WTO rules of international trade. The EU regulations stipulate that any unilateral trade legislation by a member state can only be enacted if the environment within that state is at stake.. Although the bill has failed to become law, it serves to indicate the thinking of certain influential politicians and NGOs in seeking to put further strictures on tropical and other timbers in the Dutch market.

UNITED KINGDOM

Market Developments Around 85% of UK's annual consumption of timber, paper boards and other wood products are imported. This is notwithstanding that the annual volume of wood produced from British forests has more than doubled from 4 million m³ in the 1970s to nearly 9 million m³ currently. Statistically, the UK was the second largest European importer of tropical timber after the Netherlands in 1996. In terms of actual market size, the UK could well be ahead of the Netherlands as the latter re-exports a fair amount of the timber that it imports. The total value of tropical timber imported by the UK in 1996 covering logs, sawnwood, veneer and plywood amounted to US$413.2 million or approximately 15.3% of overall EU import of US$2.7 billion. Of this, tropical plywood accounted for 51%, sawnwood 44%, veneer 4% and logs a mere 1%. TABLE 1:

UK : Import of Tropical Timber, 1989-1996

(with 1989 = 100%)


x1000 m3 % x1000 m

3 % x1000 m

3 % x1000 m

3 %

1989 57 100 703 100 14 100 532 100

1990 37 65 497 71 13 93 560 105

1991 24 42 435 62 11 79 536 101

1992 19 33 547 78 17 121 634 119

1993 19 33 450 64 18 129 478 90

1994 23 40 330 47 12 86 485 91

1995 14 25 290 41 10 71 498 94

1996 12 21 280 40 9 64 450 85

Source: ITTO Publications As can be seen from Table 1, there has been a significant downtrend of tropical timber import into the UK While import of tropical sawnwood amounted to 703,000 m³ in 1989, by 1996 it was less than half. The fall was less severe for tropical plywood, although in an earlier year in 1988, the UK import figure for this


/ . . .

product was 704,000 m³. The UK has not been a big market for tropical logs and veneer so that the effects of the decline would be less severely felt. Against the fall in imports of the above timber items, import of secondary processed wood products (SPWP) from ITTO producers rose at a healthy level from US$123.2 million to US$288.3 million during the period 1990 and 1996, an average increase of 47% a year. TABLE 2:

UK : Import by Value of Secondary Processed Wood Products from ITTO Producers, 1990 - 1995

Year 1990 1991 1992 1993 1994 1995 1995/1990

US$ million 123.2 154.0 181.1 198.0 271.9 288.3 234%


Tariff barrier Given that plywood constitutes the biggest item of tropical timber import for the UK, market access would be facilitated if the import tariff of 10% could be reduced and especially if the higher tariff for tropical plywood could be brought down to the same level as temperate timber. Furthermore, the high tariff on plywood would make it more difficult to compete with substitute materials such as MDF and PVC.

Environmental Action by Subnational Authorities It is estimated by the WWF that about one third of all district and city councils in the UK have a timber purchasing policy, which is very much targeted against the purchase or use of tropical timber, either in the form of a ban or requiring that the tropical timber must be from a sustainable source. The WWF together with the Soil Association (a certifying agency accredited to the FSC) have launched a project to help local Authorities obtain their timber from sources which are environmentally, socially and economically sound. The project aims to encourage local Authorities to preferentially seek timber from FSC certified sources within their timber purchasing policies. The project has been endorsed by the UK Local Government Management Board. The WWF and the Soil Association are also conducting seminars to get more local authorities to join the project. More local authorities are expected to adopt timber purchasing policies, in consequence.

Buyers' Group In 1991, the WWF 1995 Plus Group was set up as the first timber and timber product buyers' group in Europe. According to WWF, the Group has currently grown to 85 members, comprising DIY stores, supermarkets, home furnishing outlets, wood product manufacturers, timber importers and traders, house builders, construction and civil engineering concerns and other diverse companies dealing in stationery, packaging, cosmetic products, food, paint, toilet rolls and kitchen towels. The Group was first committed to purchase and sell timber products made from sustainably produced timber as from 1995. However, the Group has since extended the deadline to year 2000 by which the members would only deal in FSC or similarly certified products. The 95+ Group claimed its members account for a joint annual turnover of £2.6 billion in wood products above. A total of 6.6 million m³ of wood is traded by the Group per annum representing 14% of the total wood trade in the UK. Approximately 1,000 product lines in the UK carry the FSC logo and are available at DIY/retail outlets. By joining the environmental movement to protect the world's forests, companies are able to project a 'green image' which they think is good for their business. For instance, one large supermarket chain has distributed a customer leaflet to alert shoppers to the FSC trademark and that the company is committed to source all timber and timber based products from well managed sources by the year 2000.

"Forest Forever"


/ . . .

The UK Timber Trade Federation (TTF) has launched an information programme under the heading “Forest Forever” in 1990 to counter the misinformation and misperceptions which have resulted in public authorities, builders, architects and consumers shying away from particularly tropical timber and switching to alternative non-timber materials such as PVC, aluminium and steel. The Forests Forever programme has also introduced the Environmental Purchasing Policy which has been adopted by over 100 timber companies in the UK.

Timber Industry Alliance In 1996, the Timber Industry Alliance (TIA) was set up comprising companies in forestry, wood processing, the timber trade and others having interests in the timber industry. The TIA works towards developing market awareness of timber products services and environmental factors in order to increase timber consumption in the construction and building industries. It would also seek the understanding and co-operation of the government and leading building industry groupings to increase the use of timber.

Model Policy Statement The national government has formulated the Model Policy Statement in May 1998 to help Government Departments develop their own strategies for 'greening' their operations, in a uniform and co-ordinated fashion, taking account of government policies and best practice and formalised what many of them have been doing since 1992. However, local authorities are under no obligation to adopt the Model Policy Statement. The Model Policy Statement is consistent with the UK’s commitment to sustainable development and sets out the Government's position on wood procurement as follows :

to purchase sustainably produced timber and timber products which, as far as possible, come from forests and plantations that have been independently verified as well managed with the trees grown and harvested in a way which maintains biodiversity, productivity and vitality and prevents harm to other eco-systems and any indigenous people or forest dependent people; and

to consider buying reclaimed timber or products made from reclaimed timber where it is cost effective and practicable to do so.

The Model Policy Statement as it relates to wood procurement is currently subject to internal Government review. The review is believed in part to have been sparked off by a recent FOE criticism that the mahogany purchased by the Royal Navy was obtained from 'illegal logging.' The review is considering the possible inclusion in the Model Policy Statement a reference that the timber must be from a 'legal source'. As the UK is signatory to the ITTA, it is not expected that the review will discriminate against or in favour of timber from any particular part of the world.

Certification In January 1998, the FSC organised for the first time the FSC Trade Fair in London. Apart from displaying FSC certified timber and timber products by mostly companies in the UK with a few from Africa and America, the Fair was also used to promote the FSC as the only globally acceptable certification body in the world. It claimed that 1,000 items of FSC-certified products are now available at retail chains and outlets in the UK and the range of timber products will further increase. According to TTF, demand for certified timber is driven by NGOs rather than by consumers. The TTF is against the idea of exclusivity which FSC is seeking for its certification scheme. It considers the WWF '95 Plus Group to use exclusively FSC certified timber as contravening the UK’s Restrictive Trade Practices Act 1976 and also infringes Article 85(1) of the EC Treaty. The UK government encourages voluntary certification. To this end the UK Forestry Standard should form a firm basis for forest certification. The Forest Commission (FC), which owns 850,000 hc. out of 2.5 million hc. of UK forests, will not be developing its own certification scheme. The private sector will be encouraged to do so with the FC facilitating the process. The FC hopes that the standards will match the FSC principles. The decision of adopting any particular system will be left to the consumer. The FC will consider the certification of FC woodlands if it is proven that it makes good business sense to do so.


/ . . .

GERMANY Forests amount to 10.8 million hectares or some 30% of the land area of Germany. As a result of the reforestation of farmland, the forest area has increased by around half a million hectares since 1950.

Market Developments Among EU countries, Germany ranked as the sixth largest importer of tropical timber. In 1996, Germany's import of tropical timber (logs, sawnwood, veneer and plywood) amounted to US$271.2 million, equivalent to 10% of total EU import. Of this, plywood made up 38%, veneer 24%, sawnwood 23% and logs 15%. Germany is itself an important timber producer, with an annual production of 30 - 40 million m³, meeting approximately half its total consumption of timber. Of this, tropical timber import has over the years been of the order of around 2 million m³ a year. TABLE 1

Germany : Import of Tropical Timber 1989 – 1996

(with 1989 = 100%)


x 1000m³ % x 1000m³ % x 1000m³ % x 1000m³ %

1989 365 100 495 100 76 100 143 100

1990 356 98 410 83 91 120 161 113

1991 317 87 416 84 85 112 202 141

1992 281 77 353 71 80 105 230 161

1993 213 58 248 50 77 101 193 135

1994 193 53 256 52 72 95 195 136

1995 174 48 254 51 83 109 271 190

1996 116 32 157 32 60 79 196 137

Source : ITTO Publications From the table above, it can be seen that tropical logs and sawnwood were the two categories, which experienced severe market declines. German import of tropical logs fell by two-thirds during the period 1989 to 1996 and the same goes with import of sawnwood. On the other hand, import of plywood was up by 90% in 1995 compared to 1989, before falling back to a lower increase in 1996. In the case of logs, there was the growing uncertainty of supply as tropical producers were increasingly processing their own logs as a matter of policy. Ghana was a case in point. In earlier years, it was the main source of log supply for Germany. But with the log export ban on several species in 1995 and extended to all species in 1996, German log import from Ghana, which was at a high of 131,000m³ in 1991, plummeted in 1994 before going down to zero in 1996. A notable development was that Germany has been moving from importing tropical logs and sawnwood to more processed products. In 1960, up to 90% of German import of tropical timber consisted of roundwood. By the end of the 1970's, sawnwood has become the major import. From the mid-eighties, the proportion of finished products and plywood has significantly increased and since 1992, these have been the most important categories. Import of secondary processed wood products from ITTO producers rose from US$106.3 million in 1990 to US$364.8 million in 1995 representing an average increase of 69% a year. TABLE 2

Germany : Import by value of Secondary Wood Products from ITTO Producers, 1990 - 1995

Year 1990 1991 1992 1993 1994 1995 1995/1990

US$ million 106.3 170.2 243.7 323.8 365.1 364.8 343%


Product Substitution


/ . . .

Windows and doors are the main areas of sawnwood usage. With a production of 22 million to 26 million units of window frames a year, Germany has been the largest European market for windows. By 1991 more windows were made from non-tropical than from tropical timbers. The market share of tropical timber window frames as a proportion of the total window market slumped from 25% in 1988 to 10.9% in 1994. According to the German timber trade, the environment campaign against the use of tropical timber contributed significantly to the decline in popularity of tropical timber windows since the beginning of the nineties. As in Table 3, a survey carried out in March 1996 of 145 members of the Association of Window and Facade Manufacturers in Germany shows that the use of tropical timber in wooden window production has dropped from 47.8% in 1990 to 35% in 1995. In the early eighties, wooden window frames made of tropical timber was at an even higher figure of 70%. TABLE 3

Proportion Of Tropical and Non-Tropical Wood in Window Production

1990 1995

Total wood consumption of 145 companies 162,432m³ 169,153m³

Tropical wood 47.8% 35.0%

Non-tropical wood 52.2% 65.0%

While non-tropical timber benefited to a certain extent, it was predominantly PVC that saw its market share in window production rising from 36% in 1988 to 49% in 1996. It was not only because of environmental pressure against tropical timber that PVC has benefited, but the fact that PVC windows were generally 10% to 20% cheaper than wooden windows played an important part. There was also active promotion by PVC manufacturers that PVC windows did not need painting and maintenance. As for aluminium windows, its market share has remained at around 20% during 1993 and to 1996. However, as Germany is moving towards implementing stricter rules an building insulation, the use of aluminium could be adversely affected. TABLE 4

German Window Production According To Types of Material (million units)

Year 1993 1994 1995 1996

Wood windows 7.9 34.3% 7.6 30.2% 7.4 28.9% 6.9 28.2%

Plastic 9.9 43.0% 11.8 46.8% 12.3 48.0% 12.0 49.0%

Aluminium 4.7 20.4% 5.2 20.6% 5.2 20.3% 4.9 20.0%

Aluminium + wood 0.5 2.0% 0.6 2.4% 0.7 2.7% 0.7 2.8%

All types of windows 23.0 100.0% 25.2 100.0% 25.5 100.0% 24.5 100.0%

Source : German Window Manufacturers Association Since the fire at the Dusseldorf Airport in April 1996, which highlighted the emission of toxic fumes from PVC material, PVC has had its share of environmental criticism. In recent year, Greenpeace mounted a campaign against the use of PVC as a building material in Germany and the UK It advised that from an environmental standpoint, timber would be a preferable material if it were obtained from sustainable production. In meeting the need of environmental concern, PVC manufacturers have in promotion claimed that their product can be recycled.

I. Subnational Authorities The German Federal Government holds the view that subnational authorities in deciding not to use tropical timber for their own constructions or in public building projects are acting in their individual fiscal capacity as a consumer and this consumer behaviour should not be regarded as representing ‘a ban on tropical timber’ in any official sense.


/ . . .

Having regard to the above, was the decree by the German Federal Ministry of Transport on 30 April 1997 withdrawing the restriction imposed on the use of tropical timber contained in two previous decrees issued in January and February 1989. This meant that tropical timber could henceforth be used without any restriction for building works in the sphere of responsibility of the authority in charge of German waterways as well as for other building and repair works on waterways and trunk roads. The new decree stated that "the German Federal Government has arrived at a conclusion that boycotts and restrictions on the use of tropical timber are not appropriate for stopping the depletion of the tropical forests. According to the International Tropical Timber Agreement which entered into force on 1 January 1997, the Federal Government is, among others, not entitled to take any measures restricting the use of tropical timber. Thus, it is again allowed to use tropical timber without any restriction for building works". Subsequently it was confirmed that the timber used should come ‘preferably from sustainably managed sources.

II. WWF Buyers' Group In April 1997, the German chapter of WWF set up Group '98. Members joining Group '98 must commit themselves to selling and promoting timber bearing the FSC quality label of certification. Currently, there are 31 members comprising DIY chains, timber traders, furniture and window frame manufacturers, printing companies and mail order houses and two associations.

III. Certification

Forest owners in Germany have started the Forest Initiative. The Forest Initiative is not expressly against FSC certification but is looking into developing its own criteria and indicators for the German forestry instead of having to follow a management system prescribed by environmental organisations. Recently the Germany Forestry Council (DFWR) decided, in close co-operation with forest owners and the timber industry of 13 other European countries, to take part in the development of a pan-European forest certification system (PEFC) based on the Helsinki criteria as an alternative to FSC. They stressed that it is neither practicable nor necessary to certify 12 million individual forest owners, and prefer therefore a regional approach. This was supported by the German Sawmill Industry (VDS) which rejected the FSC scheme as being impractical from the point of view of cost, detail and procedure. There are some in the German trade who do not think there is much demand for certified timber as yet although they expect a growing interest in such timber. If certification is to be undertaken, the majority in the timber trade and industry are in favour of a European solution rather than the FSC. Given the significant losses suffered by tropical timber especially in the windows market due in no small part to environmental concerns about the rainforest, it is generally believed that a certification scheme would be one way of providing users and consumers with credible proof as to the ecological quality of tropical timber in addition to its technical attributes.


/ . . .

USA

Market developments In 1996, the USA consumed almost 40% of all the lumber, veneer and plywood made from tropical and temperate hardwoods as well as softwoods which were consumed by ITTO consumer countries. Enormous domestic production dominated by coniferous species in all products but veneer supplied export and most of the domestic requirements, supplemented by imports representing 40% of lumber production, but only 8.5% of plywood production.

Table 1: US CONSUMPTION OF ALL TIMBER (000m3)

Logs Lumber Veneer Plywood

1993 224,033 134,103 302 17,161

1994 232,485 141,151 246 17,581

1995 230,392 140,430 116 17,514

1996 237,828 145,517 112 18,615

1997 250,046 150,654 98 17,650

Source: ITTO Annual Review 1997 Although, by comparison, US consumption of tropical timber is modest, the trend (see Table 2) is slightly firming for plywood from around 5% to 7.5%, while veneer has become significant in recent years. Tropical lumber consumption in the US, however is a negligible proportion of the total consumed.

Table 2: US CONSUMPTION OF TROPICAL TIMBER (000m3)

Lumber % Veneer % Plywood % Total (a) (b) (a) (b) (a) (b)

1993 135 0.10 1.3 79 26.1 4.8 839 4.9 5.2 1,053

1994 185 0.13 2.1 69 28.0 5.0 1,029 5.9 6.3 1,283

1995 203 0.14 2.5 79 68.1 5.6 1,275 7.3 7.7 1,557

1996 213 0.15 3.2 68 60.7 4.9 1,275 6.8 7.9 1,556

1997 193 0.13 2.9 58 59.2 4.3 1,320 7.5 8.1 1,572

Source: ITTO Annual Review 1997 NB: US Imports of tropical hardwood logs are negligible % (a): US consumption of tropical timber as a percentage of total US timber consumption % (b): US consumption percentage of all ITTO consumers consumption US 1997 consumption of tropical lumber, veneer and plywood accounted for 2.9/4.3/8,1% respectively of the consumption by ITTO consumers. In 1996, US imports of tropical timber products (lumber, veneer and plywood amounted to US$791 million, or 7.1% of ITTO producer countries export of US $11 billion. In volume terms, sawn timber represented 2.9%; veneer 5.7%; and plywood 10.4% of tropical origin, while values represented 6.3%; 3.3% and 11.2% respectively. The tropical proportion of total US imports in 1996 amounted to: logs and lumber (0.6%); veneer (24.8%); plywood (85.4%.) The value of Secondary Processed Wood Products (SPWP) imports by ITTO consumers from ITTO producer countries reached US$4 billion in 1995, one third of the value of their primary tropical timber imports in the year, up from 28% in 1994. This proportion continues to increase (up 15% over 1991 levels) as imports of primary product are replaced (down 15% since 1991) by SPWP, alternative wood products or substitutes. The United States is by far the largest single importer of SPWP from ITTO producer countries. These countries accounted for 22% of its huge US$6.4 billion imports of SPWP in 1995, having grown from US$4 billion in 1991. (Tables 3 & 4.)


/ . . .

Table 3: US IMPORTS OF SECONDARY PROCESSED

WOOD PRODUCTS (US$000)

From: DMEC* % ITTO

Producers

% OTHERS % WORLD

1991 987,418 25 585,744 15 2,431,118 60 4,004,280

1992 1,142,146 26 725,630 17 2,477,721 57 4,345,497

1993 1,484,696 30 1,036,573 21 2,446,342 49 4,967,611

1994 1,771,804 30 1,279,888 22 2,773,133 48 5,824,825

1995 1,916,398 30 1,392,813 22 3,090,231 48 6,399,442

Source: ITTO Annual Review 1997 *DMEC: developing market economies plus China

Table 4: US IMPORTS OF SPWP: 1995 (US$000)

From DMEC % ITTO

Producers

% OTHERS % WORLD

Wood Furniture & Parts

1,208,256 28 840,279 20 2,555,249 52 4,303,784

Builders Woodwork

133,081 24

88,820 16 337,931 60 559,832

Other SPWP

443,261 36 335,747 27 444,777 37 1,223,785

Cane & Bamboo Furniture & Parts.

131,799 42 127,967 41 52,275 17 312,041

Totals 1,916,397 30 1,392,813 22 3,090,232 48 6,399,442

Source: ITTO Annual Review 1997, based on ITC: PC-TAS NB: these US$ values are subject to exchange rate conversion caveats By 2000 the US furniture industry is forecast to reach $100 billion retail value, with imports expected to exceed 40% at retail. US furniture imports for 1996 exceeded $6 billion. This was a 71% increase on 1990. About 75% ($4.5 billion) was wooden furniture, components and parts. China, Taiwan, Malaysia, Indonesia, Philippines and Thailand are major suppliers. The strength of the housing market has bought increased demand for fine quality hardwoods for furnishing and fixtures moulding, flooring and millwork. Total US consumption reached 28 million cubic metres, of which 6% came from imports. Imports have doubled over the last five yeas to $695 million in 1996, six percent of consumption with doors accounting for 29%, windows and other minor millwork items at about 7% each, leaving mouldings at over 5% of the builders woodwork sector. Asian supply represents 10%, while Brazil and Mexico ship 4% each. The door market is predominantly serviced by domestic manufacturers, with the wood door market sector valued at $2.5 billion ex factory. Imports wee only $170 million (7%) of which hardwood flush and panel doors amounted to one third. Brazil was the major supplier, followed by Asian products (20%.) The wood window market has been estimated to be worth around $3 billion, of which imports are less than 1%. Moulding deliveries reached US$1.9 billion in 1996, predominantly from domestic softwoods and temperate hardwoods. Hardwood components valued at $2.8 billion, were sourced from both domestic and import sources (particularly from Asia.)


/ . . .

Wood parquet flooring represents 4% of the US floor covering market, and is expected to rise to 6% by 2000. US production increased by 36% from 1992 to 1995 and is now worth over $1 billion. Hardwoods represent 82% of the volume. In addition to parquet, hardwood strip flooring reached almost 1 million cubic metres. Wood parquet imports represent 2% ($25 million) particularly in rubberwood from Malaysia and Thailand.

Substitute and alternative products Non-wood furniture, components and parts (steel, plastic, glass, upholstered etc.) represent 25% of US

imports of household furniture. Only 25% of the office furniture market is classified as wood product, although this is changing as companies down-size and outsource, changing the purchasing pattern toward a home-office environment where wood is preferred.

Kitchen and bathroom cabinets are increasingly panel based (usually of melamine surfaced particle board) although solid wood worktops, door and drawer fronts still have the largest share. Laminated, and vinyl or foil wrapping of reinstituted wood components are eroding that sector.

Because of security requirements, steel and composite steel reinforced external doors surfaced with laminates or wood veneer... or painted, take 55% of the market. Hollow core flush internal doors are faced with plywood (usually of tropical hardwood) pressed/moulded woodfibre doorskins, or steel.

Wood windows regained market share in 1995 and accounted for 5% of new construction and 41% in remodelling, for an average 47.6% of the market. Vinyl and vinyl clad wood was 32.9% and aluminium hollow framed and aluminium clad wood totalled 19.5%. 60% of wood windows is currently softwood, but there is a trend toward composite materials using finger jointing, chip cores of softwoods overlaid with quality hardwoods. Environmental demands for greater energy efficiency form the window and frame is now considered as important as frame cost.

Solid or finger-jointed wood mouldings are now available using medium density fibreboard, which can be veneered, or painted or stained. Although the wood parquet flooring market has only 4% market share of the total US flooring covering market (72% of which is in carpets and rugs) and is forecast to grow to 6% by 2000, a major new sector is emerging... possibly to the detriment of the wood parquet sector. Production of laminate flooring, made from laminate overlaid high density fibreboard was only 2.5 million sq. metres in 1995, is forecast to reach 60 million sq. metres by 2000, 40% of which will be imported.

MARKET IMPEDIMENTS

Import Tariffs The United States, since the time of the Uruguay Round negotiations, has sought the elimination of tariffs on wood, paper and paperboard products. In 1997, APEC economies, including the US, agreed to include forest products among the nine sectors which would be liberalised as part of an Early Voluntary Sectoral Liberalisation (EVSL) initiative. APEC leaders, at their November 1998 summit, agreed to move these sectoral discussions on tariff reductions to the WTO for finalisation and implementation, on the basis of the framework agreed to by Ministers at their June 1998 meeting in Kuching on product coverage, end rates, and end dates. As part of the EVSL in forest products, APEC economies also agreed to undertake a survey to review the non-tariff measures affecting trade in forest products, and to explore economic and technical projects designed to improve trade conditions and to work towards harmonisation of standards related to wood products use in construction.


/ . . .

Table 5: US TARIFFS

H.S. Code Pre-Uruguay

Post-Uruguay

MFN GSP -

4403 - -

4407 - -

4409 - -

4412 20 (c) 4 (NC)

- 8.0

4418 6.3 - 2.4

4801 - -

9403 4.6 - -

Source: ITTO Annual Review 1997 (Hick’s revision) NB: Pre-Uruguay tariff rates are actual; Post-Uruguay are ‘bound’ rates, or maximum upper limit. C = Coniferous NC = Non-Coniferous Some tropical timber producers have enjoyed reduction or elimination of duties under a Generalised System of Preferences (GSP) scheme allowing eligible products from many developing countries to enter the US duty-free as an incentive for investors or importers to develop trade. When a country, or a specific product becomes sufficiently competitive, it is “graduated” off GSP, and joins the “most favoured nation” (MFN) group of non-preferentially treated countries. This happened to Malaysia at the beginning of 1997.

Other Restrictions

Countervailing Duties & Quantitative Restrictions In the mid-1980’s and again in the early 1990’s, because of the US industry’s contention that certain Canadian timber exports to the US were being subsidised by low stumpage rates, the United States initiated investigations of Canadian softwood lumber. Following protracted negotiations, a countervailing duty was replaced by a 5 year quota system in April 1996 which permits some 35 million m

3 to enter the

US duty free. Canada imposes an export tax on volumes exceeding the quota ceiling.

Sub-National In recent years, there have been a number of state and local municipal actions which would place non-tariff restrictions on the use of tropical wood products in projects funded by these public authorities. These are detailed in Appendix 1. Some have been enacted, while industry efforts have seen some defeated and some remain pending. Although most are driven by environmental concerns, some widen their focus beyond tropical timber to rainforest species or endangered species in general. Several, however, permit the purchase of tropical wood if from independently certified sustainably managed forest. Moreover, two particular measures are more related to human rights issues than to environmental issues. The International Wood Products Association (IHPA) has intensively lobbied these public authorities on behalf of their international producer members from Malaysia, Indonesia, Brazil and elsewhere and their US importer members with some success. In one such action in 1992, the Governor of California vetoed a bill banning the use of tropical hardwood products for State funded projects with a statement that state governments did not belong in the international forestry and trade policy arena.. With consumption of tropical hardwood products not declining (table 2) it is not possible to deduce to what extent it is impeded by such sub-national actions, as distinct from other elements such as competition from alternative wood and non-wood products. Although it is clear that initially many sub-national actions were narrowly and discriminatory focused on tropical hardwood, one NGO group (Global Forest Policy Project) believes this is fast disappearing in the US, and recent actions are more even-handed. The key strategy - they state - is to encourage a shift from poor forest management to good forest management.

Imposition of certified Sustainable Forest Management (SFM)


/ . . .

The benefits of managing forests on a sustainable basis are clear. It ensures that future generations will have timber products as well as forestlands and wildlife to enjoy. Less clear is what it means, as disagreements about its definition do exist. There is some support emerging for the concept to look for “improved” forest management, which can be benchmarked and evaluated rather than “sustainable.” “Improved” denotes positive change. SFM, by itself, is a worthy objective... not a trade barrier... and the concept is being adopted within the USA through the Sustainable Forest Initiative SM Program (SFI) developed by the American Forest & Paper Association (AF&PA), all of whose members are committed to it. Adopted in 1994, the SFI is reportedly a comprehensive system of principles, guidelines and performance measures that integrates the perpetual growing and harvesting of trees with the protection of wildlife, plants, soil are and water quality. Annual progress to SFM is reported by each member to summarise industry activity which permits the public to measure the industry’s progress toward the goal. Their performance is validated by an Independent Expert Review Panel which includes representatives from conservation groups, universities, professional forestry societies and federal and state agencies.

Certification A number of systems have been put forward to monitor, verify and certify that forests are being sustainably managed. The official US position is that no one system has been universally endorsed, and should be private, and voluntary. In an international context, certification and labelling are at an early stage of development, with mutual understanding or agreement concerning criteria quite elusive. Within the US, the Global Forest Policy Project supports the Forest Stewardship Council (FSC) program, and supports trade “carrots and sticks” to encourage producers to embrace the system. A North American Buyers Group reportedly also stipulates that only FSC certified timber will be purchased. Some of the sub-national measures mentioned previously specify FSC certified tropical timbers qualifying for purchase. Such attempts by subnational authorities and commercial organisations - in their desire to

accelerate certified universal SFM practices - to impose requirements for labelling compliant to one or other system to qualify to trade, can be considered a trade impediment. Results of independent surveys and research repeatedly conclude that few in the US market have a strong desire for the use of certified wood products. A 1997 study by a communications firm examined responses to marketing messages used to describe and sell certified wood products to consumers. Among the conclusions (reported in the NGO ‘Journal of the Good Wood Alliance’ of New York) were that consumers:

are sceptical of the information they receive about environmentally responsible choices;

are becoming increasingly cynical about alarmist extremist advocacy that plays on their guilt and warns of dire consequences;

want to be assured that the product they are purchasing was grown and harvested according to standards that protect forests and forest ecosystems;

do not want to be told (nor will they believe) that purchasing a certified wood product will halt the destruction or degradation of the forest;

need more detailed information from a variety of sources to lend credibility to the FSC, which is still essentially ‘invisible’ in the market place;

want benefits, not politics. A recent independent study commissioned by the IHPA looked at various levels of the distribution chain within US (processors, manufacturers, distributors, retailers and specifiers (architects, designers etc.,) which found that:

certification of tropical woods has little impact on purchasing decisions by buyers and specifiers throughout the distribution chain;

there is a clear unwillingness by the market place to pay additional costs for certification;


/ . . .

a great majority of the US distribution chain for wood products prefers to receive information on the wood products they use through industry channels such as suppliers, and industry associations;

a portion of the distribution chain has some perception (which varies widely at different levels of distribution) that the use of tropical woods contribute to some tropical forest degradation or endangerment of particular species;

tropical wood producers are considered by some to be less concerned about the environment then domestic wood producers;

there is a perception by some that tropical woods are considered to be less responsible environmental choices than domestic woods, as well as wood composites, laminates, steels and only slightly above plastics.

Overseas - particularly in Europe - US producers and exporters encounter requests for proof of SFM. They have no evidence of losing sales, but recognise some Buyers Groups use the issue as a marketing tool, particularly among consumers in the do-it-yourself sector. Architects are less sensitive, they find, but Local Authorities are most insistent. Demand for SFM is gradually increasing.

Phytosanitary Requirements Concern about possible insect or pest infestation resulted in an injunction (issued by a US district Court in Northern California) that prevented the USDA Animal and Plant Health Inspection Service (APHIS) from issuing new permits for the importation of certain types of unmanufactured wood products (logs, lumber, chips) from New Zealand, Chile, Siberia or any other of the worlds temperate forests. Exceptions to the injunction included Canadian and Mexican wood... and all tropical wood. Until the injunction was lifted early in 1999, importers encountered difficulties in obtaining amendments to old permits, or new permits. Other problems stemmed from the inclusion of kiln dried timber, and a lack of definition of “unmanufactured.” The lawsuit that prompted the injunction was initiated by two US environmental groups.

JAPAN

Market Developments In 1996, Japan consumed almost 13% of all the lumber, veneer and plywood made from tropical and temperate hardwoods as well as from softwoods which were consumed by ITTO consumer countries (and almost 11% of all ITTO members as a whole.) Over the period covered by Table 1, log and plywood consumption increased, while veneer consumption eased. Lumber consumption - steady for most of the period - dipped in 1997.

TABLE 1: JAPAN CONSUMPTION OF ALL TIMBER (000m3)


1993 40,544 36,877 555 9,672

1994 40,071 36,614 476 8,935

1995 44,837 36,290 448 8,327

1996 43,796 36,085 431 9,283

1997 45,169 33,772 412 10,463

Source: ITTO Annual review 1997 In 1993, tropical hardwoods accounted for over 20% of Japan’s log consumption, and (Table 2) 7.7/82.3/87.3% of consumption of lumber, veneer and plywood respectively. Over the period, market share of tropical hardwoods has steadily declined to a level in 1997 where logs, lumber and veneer accounted for 13.8/5.5/62.4% of Japan’s consumption... a reduction of between one quarter and one third. Only plywood reflected a modest downturn. Japan’s tropical timber consumption among all ITTO consumers is significant. Over the period - despite the volume reductions mentioned in the previous paragraph - it accounted for around half of the logs; more than a quarter of the lumber; less than a quarter of the veneer and more than half of the plywood


/ . . .

consumed in total by all ITTO consuming countries. This suggests that despite a reduction in Japanese consumption, parallel reductions among the other ITTO consumers has supported (with the exception of veneer) Japan’s steady market share.

TABLE 2: JAPAN CONSUMPTION OF TROPICAL TIMBER (000m3)

Logs % Lumber % Venee

r

% Plywoo

d

%

(a) (b) (a) (b) (a) (b) (a) (b)

1993 8,324 20.5 48.7 2,855 7.7 27.9 457 82.3 28.0 8,440 87.3 52.1

1994 7,494 18.7 47.4 2,224 6.1 25.4 341 71.6 24.6 7,741 86.6 47.7

1995 6,536 14.6 46.6 2,178 6.0 26.7 297 66.3 21.1 7,443 89.4 45.1

1996 6,172 14.1 50.0 1,875 5.2 28.0 259 60.0 18.6 7,993 86.1 49.8

1997 6,216 13.8 50.4 1,851 5.5 27.5 257 62.4 18.6 8,792 84.0 53.7

Source: ITTO Annual Review 1997 % (a): Japan consumption of tropical timber as a percentage of total Japanese timber consumption % (b): Japan consumption percentage of all ITTO consumers consumption All of the tropical logs consumed are imported. They are converted into lumber, veneer, plywood and other products. These domestically manufactured tropical hardwood products are supplemented with imports. Table 3 shows that plywood imports have dramatically increased in volume over the period and increased market share from around 46% to almost 64% in 1997, with 5.6 million cubic metres. Lumber imports, although reducing from 1.8 million to 1.2 million cubic metres over the period, has seen its market share edge up by over 3% above its average. In 1996, Japan imports of tropical timber products (logs, lumber, veneer and plywood) amounted to US$4.63 billion, or 42% of the total ITTO producing countries exports of US$11 billion.

TABLE 3: JAPAN IMPORTS OF TROPICAL TIMBER (000m3)

Logs Lumber % Veneer % Plywood %

1993 8,324 1,805 63.2 239 52.3 3,864 45.8

1994 7,494 1,283 57.7 160 46.9 3,777 48.8

1995 6,536 1,342 61.6 131 44.1 4,068 54.6

1996 6,172 1,202 64.1 109 42.1 4,860 60.8

1997 6,216 1,227 66.3 107 41.6 5,608 63.8

Source: ITTO Annual Review 1997 %: is the proportion of tropical timber consumption that is imported Japan’s plywood manufacturing industry has been undergoing considerable restructuring in recent years. Market share has reduced from 54% (1993) to 36% (1997) of tropical plywood consumption. Plymills have experienced increasing difficulty in making any profit from manufacturing tropical hardwood plywood. Several factors have contributed:

because of competition from imports, the market price level is low;

log prices have firmed as availability has shrunk;

using lower priced mixed specie logs in an endeavour to compete on price;

difficulties in tropical log availability. Consequently, since the Sabah log export ban, Japanese plymillers have embarked in a deliberate strategy to find alternative - and less expensive - raw material, including Russian Larch and Radiata Pine mainly from New Zealand and Chile. As a result, led by Japan’s leading plywood manufacturing group Seihoku, the industry’s production has already reached 30% softwood, according to JLIA.


/ . . .

(At Seihoku with eight plymills accounting for around 25% of total Japanese production, two thirds of current production is 100% from Larch, one third from a combination of tropical hardwood faces and softwood cores, equivalent - on a round log basis - to 60% softwood, 40% hardwood. Seihoku targets an 80% softwood utilisation by year 2000, with an eventual goal of 100%.) For Japan’s plywood and sawn timber industries this evolution has been driven by the availability and cost of tropical hardwoods. The swing to softwoods has been particularly influenced by cheaper prices, but it has also necessitated some re-tooling to accommodate small diameter logs. Once the investments are made, it is difficult for plymills to revert to large diameter logs, as attempts by Indonesia and Sabah to renew log exports have discovered.

Secondary Processed Wood Products Japan imports of Secondary Processed Wood Products (SPWP) reached US$2.6 billion in 1995 of which just under US$1 billion was purchased from ITTO producers. This represents 36% of the total, up from 30% in 1991, and 19% of all ITTO SPWP producer exports.

TABLE 4: JAPAN IMPORTS OF SECONDARY PROCESSED

WOOD PRODUCTS (US$000)

From DMEC* % ITTO

Producers

% OTHERS % WORLD

1991 459,481 34 402,357 30 498,464 36 1,360,302

1992 529,754 38 479,487 34 392,127 28 1,401,368

1993 630,288 41 583,258 38 330,593 21 1,544,139

1994 859,505 41 799,293 38 434,999 21 2,093,797

1995 1,032,909 39 964,369 36 648,529 25 2,645,807

Source: ITTO Annual Review 1997 *DMEC: developing market economies plus China

Japan’s furniture market, which has traditionally been dominated by domestic producers has seen a steady increase in imports, which are now estimated to account for about 10% of Japan’s apparent consumption of ¥2,700 billion (1995.) Wooden furniture accounts for about 72% of the market.

Overall, the market has a wide range of traditional to contemporary Japanese to Western styles, but it is undergoing significant change. There is an increasing trend to build-in closets and other storage space, and a reduction in large cabinets, wardrobes and chests. Only half of Japanese homes have beds, which are not traditionally used. Lifestyles - particularly among the younger generation - are tending more toward the Western style. System kitchens, with their built in cabinets, are displacing traditional cupboards. There are also changes with living-room and dining room furniture. Although luxury furniture has long been imported from Europe, in recent years imports of medium priced and economy priced furniture have commenced. This trend is likely to accelerate in future.

Consumption of Builders Woodwork is also dominated by domestic production, with imports estimated to account for only about 1.5% of the ¥751 billion (1995) market. (This was 36% more than the previous

year as a result of the high level of housing starts in 1994.) Home construction trends are also changing, with the majority of the new homes built with only one Japanese-style room, but the other rooms are Western style. This has assisted the volume production of wooden fittings such as exterior doors (including sliding doors) and interior doors, both hinged and sliding, and door and window frames.

Japan’s import of wooden doors have risen sharply in recent years, and in 1995 represented 51% of total imports in this category. The US supply (almost 37%) is mainly double and single exterior doors. Interior doors are mainly from Malaysia and Indonesia (16% of the total.)

Only 5% (or less) of Japan’s window consumption of around two million units are made from wood. Imports also jumped sharply by almost 53% in recent years, represented over 34% of total builders woodwork imports. In 1995, the US shipped almost 50% of these, while Indonesia and Taiwan Province shipped 14% each.


/ . . .

Japan is probably the largest consumer of wooden flooring in the world, using about 80 million square metres the bulk of which is manufactured domestically. There are two types” ‘single layered’ which is made from solid lumber strips and is mainly imported, premium product used in higher grade homes, and ‘composite’ made from plywood overlaid on particle board or MDF used in ordinary homes. Demand for the superior but more expensive solid wood flooring remains steady, but has been growing consistently for composite flooring. Less expensive than solid flooring imported from China, Indonesia and Malaysia is more competitive and gaining in popularity. In the categories of ‘moulded wood products’ and ‘other wooden items’ reliable data concerning consumption is scarce. Import statistics indicate that tableware & kitchenware, some from Thailand and Malaysia rubberwood together with chopsticks amounts to ¥20 billion in 1996. Chopsticks are

predominantly from softwoods, but some imports use fast growing tropical plantation species. Between 1992 and 1996 Japan’s imports of SPWP have increased from $1.25 billion to $2.75 billion, an increase of 220%. This trend is likely to continue, as Japanese manufacturers continue to establish joint ventures overseas (e.g. in Thailand, Malaysia and most recently in China) for the production of products designed in Japan. However, with Japan housing construction declining - perhaps permanently due to significant demographic changes - overall consumption is being affected, and this will have some impact on imports.

Substitute & Alternative Products Of all new homes built in 1997, only 44% were classified as wooden homes. This represents a steady decline from 1992 when almost 48% were made from wood. While this has some impact in overall wood consumption because of the reduction in use of structural timbers, there is much less impact on the consumption of secondary processed wood products as all homes still require doors, windows, floors, fittings and trim... and furniture. The market share of wood construction and builders woodwork is restricted for a number of reasons:

strict fire regulations in towns and cities, affecting the structure, cladding, underlayment and access doors and windows of buildings;

lower weather resistance and higher maintenance costs in Japan’s frequently humid climate and, particularly in the north, temperature extremes;

the better insulation sealing of non-wood windows. The requirement for wood fire resistant external doors, and wood insulated doors (such as imported from Sweden) has been for teak, pine or painted material.

80% of Japan’s 1996 window consumption was supplied in aluminium, and 15% in unplastified polyvinyl chloride (UPVC) or steel. However, some of the so-called aluminium windows comprise extruded aluminium over wood.

The vast majority of moulded wood products are produced in Japan from domestic and imported timbers and it has not been possible to calculate the volume used in construction. Nor has it been possible, in consequence, to identify substitute or alternate products in this category. Not all are produced form solid wood, as some wall linings and ceilings use plywood, and some mouldings are made from MDF. The growing demand for composite flooring made from overlaid particle board or MDF on plywood has affected the market for solid lumber flooring.

Consumption Tax Japan raised its consumption tax April, 1998 with immediate apparent impact and is expected to eventually affect wood product consumption.

MARKET IMPEDIMENTS


/ . . .

Import Tariffs Japan uses tariffs based on the Uruguay Round during which pulp and logs are duty free. Most sawnwood species (other than a few coniferous species) incur duties. Plywood of coniferous and tropical hardwood also incur duties. During the UR gradual annual reductions have been negotiated to reduce such duties to moderate level... and several tropical and coniferous categories additionally benefit from GSP with zero or 50% reduced duties within ceilings. LLDC enjoy zero duties.

With one exception (Kiri) all tropical, temperate and softwood logs (H.S.4403) have a zero tariff;

sawnwood (H.S. 4407) from the tropical Diptherocarp/Lauan/Meranti group of species is subject to duty reducing to 6% in 1999. Some coniferous sawnwood has a zero tariff; (exceptions are Pine, Abies and Picea spp less than 160mm thick which will incur 4.8% duty in 1999, and Larix, less than 160mm thick 6% in 1999.)

Veneer (H.S. 4408) of coniferous and non coniferous species mainly incurs 5% duty, (with Kuarin, Tsuge

and Boxwood 5.6%.) Coniferous and non coniferous mouldings (H.S. 4409) will attract 3.6% by 1999 and wood continuously shaped by Pinus, Abies, Picea, Larix (less than 160mm thick) and Dipterocarp will draw 5.0% in 1999.

The tariffs for plywood (H.S. 4412) are quite complicated and have been subject to intense international scrutiny which resulted in 1996 in a reclassification of tariffs into so-called “high tariff” and “low tariff” categories. Before 1996, high tariffs of 10-15% were imposed on 13 of the most popular tropical species, depending on their thickness, (the thinner the panel, the higher the duty.) By 1999, these will be reduced on these species plus one additional, to 10% or 8.5%. All other species used for plywood or laminated lumber, coniferous and non-coniferous will, by 1999, incur a uniform 6% tariff. Plywood imports are not eligible for GSP, although laminated lumber is, with a zero rating. Although the trend overall has been toward tariff moderation, and in many categories even eliminated, international pressure (e.g. USTR through APEC) continues for total elimination.

Suppliers log trading policies Since the early 1980’s Japan’s major tropical hardwood log supplying areas (Philippines, Indonesia, Sabah, Sarawak) embarked on curtailment and/or banning of log exports, and - as their major log buying customer - this had several consequences for Japan and particularly for the plywood manufacturing sector to which 80-85% of the logs were destined:

the plymills were immediately disadvantaged compared with plywood imported from those countries in that their raw material cost was higher, and the availability of preferred quality and species was more limited;

the higher production cost also rendered the plymills more vulnerable to substitution by less expensive OSB and MDF panels, as well as to imported plywoods;

the progressive restraints in tropical log availability raised Japanese awareness concerning future supply problems and initiated a search beyond their traditional SE Asian supply region;

the log export ban by Sabah triggered a switch to the usage of softwood in combination with hardwood “Combiply”, although aggressive softwood log marketing and competitive prices from New Zealand and Chile facilitated the change;

between 1990-1996 the number of raw plymills reduced from 134 to 101, with total production dropping from 6.7 million cubic metres (1990) to 4.2 million cubic metres (1997) and this trend will continue.

Environmental Issues Some years ago a “Green Movement” of NGOs became apparent at a local, rather than a national level, and - with media coverage of the depletion of tropical resources in e.g., Sarawak, and growing general awareness concerning global warming - some activity occurred.


/ . . .

Prompted by television coverage of forest fires, and massive land clearance the public have become increasingly environmentally sensitive. UNCED in Rio, and later the Kyoto Convention for Climate Change, late 1997 in Japan were closely followed, and the media now understands SFM. Public consciousness focused on two key aspects concerning timber, scarcity and waste.

Lobbying of local officials focused on suggestions:

to reduce the use of wooden chopsticks in restaurants, especially municipal, not only for the reason of conserving timber resources (both softwood and hardwood) but also for the reason of the daily volumes of waste the disposable chopsticks became, and the landfill space they required;

to reduce paper waste and promote the use of recycled paper;

to reduce consumption of timber products - and particularly tropical plywood - in public works and public housing, especially in urban areas.

The consultants were informed that Japan recognises the link between trade and the environment and that the ITTO 2000 Objective is incorporated within the new ITTA. It is, however, a political target rather than a mandating duty, with no objective standard. The criteria and indicators are unclear. Japan considers the Objective can be achieved by:

self efforts of producer countries;

international support from consumer countries through training in SFM, research and development etc.,

creating a more positive understanding through publicising the realities of member countries efforts as well as channelling the NGO activities toward deforestation in a more helpful way;

Certification of Sustainable Forest Management (SMF) The Japanese government understands that certification and labelling should be implemented voluntarily, securing transparency in procedure and independent assessment based on strict measurement of forest management performance. The Japan Lumber Importers Association reports that their members have not experienced environmental pressures of late. They are aware that FSC has made some progress in Europe, and are observing closely... but are not really interested. The NGOs in Japan - although strong at the local level - are not as active nationally as in Europe, and the Japanese consumer is fundamentally market driven.

Sub National Actions

Japan has 12 ordinance-designated cities, and 48 prefectures. Of these, the Tokyo, Kanagawa Prefecture, Kawasaki and Kobe city authorities have responded to the public consciousness concerning the scarcity and waste of timber in their municipalities.

The response has taken the form of “Guidelines” which has been issued recommending a reduction in the

use of tropical hardwood plywood for concrete shuttering (conpanel) principally in municipal civil works. (Conpanel is an end-use market which represents approximately 20% of Japan’s domestically manufactured and imported tropical hardwood plywood.)

However, Tokyo City tropical plywood consumption amounted to only 0.2% of total Japanese consumption, before implementing reduction plans. The other authorities with Guidelines use proportionately less. The resulting impact on overall consumption of tropical hardwood plywood is, in consequence negligible.

The Japan Government states that in an open market like Japan’s the “Guidelines” should not be regarded as market impediments. As with similar measures in other countries, the expression of consumer choice must be considered.

In response to such sub-national actions, in January, 1997 the Japan Forestry Agency circulated to every

prefectural authority in Japan a translated copy of the ITTO Decision 2 (XXI) of November, 1996


/ . . .

“Promotion of Market Access Opportunities for International Trade in Tropical Timber.” In this notice, the Forest Agency highlighted the positive relationship that can exist between trade in tropical timber and efforts being made by producing countries toward SFM.

In February, 1998 at the national convention of prefectural forest offices, attended by officers from throughout the country, the Forestry Agency emphasised that the main causes of tropical deforestation are agricultural development and rural poverty, that that SFM is possible if careful management practice is applied. The Agency high-lighted the fact that through economic activity, the increased value of the forests would lead the effort toward SFM. Delegates were told that ITTO producer members are working for the Objective 2000, and need financial support, technology and human resources to help achieve this.

MALAYSIA

Export Developments

In 1997, export of timber and timber products amounted to approximately US$5.2 billion or roughly 6.6% of total export earnings of US$78.8 billion. Plywood made up 29.4% of the export of timber and timber products followed by sawnwood at 18.6% wooden furniture 17.2%, logs 16% moulding and builders joinery 9.9% and veneer 4.9%. (See table below).

TABLE 1:

Malaysia : Export of Timber Products 1997

US$ million %

Logs 839.5 16.0

Sawnwood 976.9 18.6

Plywood 1,540.9 29.4

Veneer 257.7 4.9

Moulding and Builders Joinery 519.2 9.9

Wooden Furniture 900.7 17.2

Others 203.9 3.9

Total 5,238.8 100.0

Note : Exchange Rate : RM2.81 = US$1 (average) Log production was at a high of 40.5 million m³ in 1992 but fell thereafter and in 1997 log production was at 30.2 million m³. As the policy of the government at federal and state levels has been to encourage downstream processing from resource-based industrialisation, export of logs declined from 20.3 million m³ in 1990 to 6.5 million m³ in 1997. On the other hand, export of plywood increased from just over 1 million m³ to 3.6 million m³ during this period. (See table below). TABLE 2:

Malaysia : Export of Timber, 1990 - 1997 (1,000 m³)

1990 1991 1992 1993 1994 1995 1996 1997

Logs 20,336 19,320 19,797 9,382 8,561 7,864 6,987 6,500

Sawn 4,908 4,,932 5,417 5,371 4,560 4,151 3,660 3,200

Veneer 330 477 765 720 613 586 649 750

Plywood 1,017 1,186 1,670 2,421 3,004 3,339 3,403 3,600

The progress in downstream processing also saw the rapid growth in the export of moulding and joinery products and more so in furniture. During the five years 1991-1995 Malaysia’s SPWP exports virtually tripled (table 3) to almost $1 billion. In the following two years, they exploded. By 1997, as detailed in table 1 they had reached $1.6 billion and represented 31% of Malaysia’s earnings from the timber sector. TABLE 3:

Malaysia: Export of Secondary Wood Products 1991 - 1995 (US$million)


/ . . .

Year: 1991 1992 1993 1994 1995

ITTO consumers: 251.6 354.9 508.3 687.1 781.5

World: 336.8 459.7 641.4 863.1 993.1

Source: ITTO Annual Review 1997

Policy Decisions to further forest conservation and downstream processing In the quest towards the development of timber based industries, the following were among policy decisions taken:

A ban on log export from Peninsular Malaysia since the late seventies;

A ban on log export from Sabah in January 1994 which was partially lifted in November 1996 to allow for up to 2 million m³ of logs per year (roughly one-third of annual production) to be exported;

Reduction of log production from the 4.5 million hc. of Permanent Forest Estate (PFE) in Sarawak from 12.5 million m³ in 1992 to 9.2 million m³ in 1996 to be in line with the recommendation of the ITTO Mission (headed by Lord Cranbrook) aimed at sustainable production;

Reduction of the annual coup (i.e. cutting cycle) in Peninsular Malaysia in line with sustainable production;

Stricter control on logging practices and the imposition of punitive measures against illegal logging;

Imposition of levy on sawntimber export from Peninsular Malaysia to improve supply availability to wood moulding and furniture industries; with the exception of sawntimber of chengal, damar minyak, nyatoh, kembang semangkok, red balau and rubberwood and strips of jelutong and dark and light red meranti, the levy on the other species of sawntimber and strips was suspended effective 7 May 1998;

Announcement in late 1995 that the export of sawntimber from Peninsular Malaysia may be stopped by year 2000. (This is not likely to happen now, given the Asian economic turmoil and the contraction of domestic demand for sawntimber from the slowdown in the construction and housing sector).

Countering Environmental Impediments to Trade Malaysia has expressed concern that the trade in tropical timber has been seriously affected in certain markets especially in Europe due to environmental pressure. Malaysia is also concerned by attempts to use CITES to propose trade restrictions on tropical timber species without proper scientific evaluation and information and without consulting the range states so affected. Action taken by Malaysia to counter restrictive trade practices arising therefrom include:

Pursuing with like-minded countries to follow up implementation of the UNCED Statement on Forestry Principles and Agenda 21 through CSD and the IFF;

Supporting international efforts for a global instrument to operationalise the UNCED Forestry Principles to cover all types of forests in a holistic approach;

Pursuing on a bilateral and multi-lateral basis to get countries to do away with unilateral action and regulations by their sub-national authorities which unfairly discriminate or prohibit the use of tropical timber, negating rather than promoting tropical forest management on a sustainable basis;

Ensuring that CITES is not unfairly used to put trade restrictions on particular species of tropical timber on false premises that they are “threatened” or “endangered”;

Strengthening SFM at Federal and State levels in terms of policy and implementation;

Embarking on a communication programme to correct misinformation and misperception about the state of tropical forest management and the causes for the massive losses of tropical forests;

Undertaking a pilot project on timber certification in co-operation with the Dutch timber trade and the Keurhout Foundation.


/ . . .

Timber Certification Malaysia is aware of impediments arising from environmental concerns which have adversely affected market access for tropical timber. For the time being, these impediments are limited to a few important markets in Europe, i.e. the UK, Netherlands, Germany and Belgium, countries which have been in the front-line of the environmental movement. The demands for certified timber have been set in motion and there are signs that these demands may become more pervasive among European consumers as well as becoming more extensive in coverage of product lines. Given that Malaysia put in place from an early stage policies to manage its forest resources on a sustainable basis, there should be no problem for Malaysia to provide testimony on sustainability to satisfy niche market requirements. As a producing member country of the International Tropical Timber Organisation (ITTO), Malaysia has made serious efforts in meeting ITTO’s objective for sustainability by year 2000. To implement certification, the National Timber Certification Council was set up in October 1998. The governing board comprises representatives from research and development, NGOs, the timber industry and relevant Government agencies. WWF Malaysia is one of two NGOs on the board. NTCC will be responsible for the following activities:

Development and implementation of a timber certification scheme in Malaysia to ensure sustainable forest management as well as to facilitate the trade in timber from Malaysia;

Development and implementation of standards related to timber certification;

Establishment and implementation of system to oversee and monitor the implementation of the certification scheme, including appeal mechanisms;

Establishment of networks and co-operation with national and international bodies related to timber certification to facilitate co-operation and mutual recognition arrangements;

Development and implementation of training programmes in all aspects related to the timber certification scheme;

Collection, processing and dissemination of data and information related to timber certification and sustainable forest management.

Prior to the setting up of NTCC, Malaysia has together with the Netherlands jointly implemented a pilot study on timber certification by which the ‘certified timber products’ would be sold in the Netherlands under the Keurhout Hallmark. Certification on sustainability is based on Malaysian Criteria and Indicators (MC&I) which in turn are based are based on ITTO Guidelines for the Sustainable Management of Natural Forests and Criteria for the Measurement of Sustainable Tropical Forest Management. The timber is certified after going through a chain-of-custody evaluation by an independent third party. The Netherlands Timber Trade Association (NTTA) has no difficulty to get the initial shipments of sawn timber coming under the pilot study to be used in building projects of several municipalities and local authorities which have restrictions on the use of tropical timber. A total of more than 17,000 m³ of sawntimber have come through successfully under the pilot study, thus paving the way for certification to be implemented on a growing scale.

International Co-operation Malaysia feels that international co-operation to promote SFM in tropical countries should include efforts to:

Level the playing field through the elimination of discriminatory tariff and other unfair trade practices against tropical timber vis-à-vis competing substitutes;


/ . . .

Enhance rather than diminish the value of tropical forests to ward off competing claims for land use within the context of national development;

Provide equitable opportunities for export earnings for tropical timber products, the proceeds of which are important in financing R&D, training and SFM.

BRAZIL Brazil is the largest producer of tropical hardwood logs in the world today. In 1997, it produced 48 million cubic meters, compared with Malaysia and Indonesia, which produced 30 million cubic meters each. Similarly, Brazil’s sawn timber production (almost 20 million cubic meters) is more than double Malaysia and Indonesia (about 7 million cubic meters each.) In contrast, however, Brazil’s veneer production is considerably less than Malaysia’s. Indonesia’s plywood production (around 9 million cubic meters) overshadows Malaysia (3.8 million cubic meters) with Brazil currently only 2 million cubic meters.


/ . . .

Table 1: BRAZIL PRODUCTION OF TROPICAL TIMBER*(000m3)


1993 44,779 18,628 300 1,575

1994 46,779 18,691 310 1,870

1995 47,779 19,091 300 1,900

1996 48,000 19,600 275 2,000

1997 48,000 19,900 275 2,000

Source: ITTO Annual Review 1997 * all Brazilian timber, coniferous and non-coniferous, is tropical according to this source However, unlike its two main competitors, most of Brazil’s production is consumed domestically, with less than 2% of Brazil’s logs and, less than 7% of its lumber being exported. Veneer exports have increased from 28% to 45% of production, while plywood exports have declined from almost 42% to under 27% of production over the period. Plywood production in the south of Brazil is increasingly a combination of tropical hardwood faces trucked 2,500 kms from the Amazon with local pine softwood cores, or 100% softwood plywood, and used in production of both structural and speciality plywoods which characterise the southern industry. It is interesting to note that in the Brazilian domestic market, concrete formply must have a guaranteed number of re-uses. If resin or oil-coated, 8-12 uses, if film faced a minimum of 18 re-uses must be guaranteed. In 1997. Brazil’s exports of tropical logs, lumber, veneer and plywood accounted for 6.2/17.7/9.4/4.1% respectively of the total exports by ITTO producers.

Table 3: BRAZIL TROPICAL EXPORTS (US$000)

1995 1996

Logs 58,847 25,746

Lumber 379,816 344,746

Veneer 293,735 238,383

Plywood 259,993 247,670

TOTAL 992,391 856,545

Source: ITTO Annual Review 1997 Valuewise (Table 3) Brazil’s exports declined from almost $1 billion in 1995 (8.7% of the total value of ITTO producer exports) to $856 million (7.7% of the total) in 1996.

Table 4: BRAZIL EXPORTS OF SECONDARY

PROCESSED WOOD PRODUCTS (US$000)

To ITTO Consumers % WORLD

1991 105,544 87.3 120,895

1992 162,583 80.7 201,461

1993 279,975 79.2 353,651

1994 344,131 80.1 429,821

1995 395,631 83.8 472,248

Source: ITTO Annual Review 1997.


/ . . .

Table 5: BRAZIL EXPORTS OF SPWP: 1995 (US$000)

To ITTO Consumers % World %

Wood Furniture & Parts 233,336 82.9 281,535 59.7

Builders Woodwork 107,951 91.3 118,288 25.1

Other SPWP 53,552 76.2 70,250 14.9

Cane & Bamboo Furniture & Parts

792 36.4 2,176 0.3

TOTALS 395,631 83.6 472,249

Source: ITTO Annual Review 1997 Brazil exports of SPWP have increased from US $121 million in 1991 to over $472 million five years later, almost a fourfold increase (Table 4.) It is significant that by 1995, SPWP represented 33% of Brazil’s total wood product exports. Over 80% of these exports are destined for ITTO consumer countries, and over 85% are builders woodwork and wood furniture and parts (Table 5.) Brazil is also one of the largest producers and exporters of high quality Hardboard, after the USA and Russia, with 10-15% of the world market. In August, the Brazilian Government announced an export initiative to double exports by year 2002 with a co-operative program with the private sector to manage and develop specific industries, including sawn timber and plywood. (ABIMCI will represent the private sector.) An immediate target is Brazil’s bureaucracy, whose activities impede exports which (ABIMCI calculate) adds US$1 to 6 per cubic metre to the cost of sawn timber and plywood. The repetitious paperwork, the poor condition of the roads, the restrictive practices and low efficiency of the ports, poor labour training, high energy costs and a tax structure which urgently needs review are all areas where improvements will help achieve the initiative. NEW ENVIRONMENTAL LAWS Tough legislation enacted earlier this year by the Brazilian Congress will help eliminate illegal logging in the Amazon. The laws will punish all members of violating companies from owners down to chainsaw operators who are found to be involved with fines, confiscation and even gaol. This legislation is just one of several measures underlining a new commitment by the Brazilian Government to environmental protection. Others include:

the opening of seven “national forests” in the Amazon covering 2.6 million hectares where sustainable forestry will be promoted;

legislation for 25 year tenure of concessions within these national forests for logging companies that use

environmentally sound logging practices is under preparation;

plans to protect 25 million hectares of primary Amazon forest by the year 2000 have commenced. Already, four protected areas totalling 600,000 hectares have been established under funding from the World Bank, the Global Environment Facility, the Brazilian Government and the Rainforest Trust Fund.

Even before the new legislation, Brazil had reportedly already allocated 100 million hectares as Indigenous Reserves, 13 million hectares as National Forests and almost 10 million hectares as Extractive Reserves. TRADE RESTRAINTS UNCED/92 in Rio de Janeiro temporarily raised ecological consciousness, but poverty is the main cause of environmental damage. Many of Brazil’s interior regions are very poor because of the inequality of revenue distribution, and forest activity reflects that. Over exploitation is due to a variety of factors including central government fiscal, tax and land policies as well as due to low prices, which increases exploitation, with inevitable negative consequences for the forests. In fighting poverty, one is contributing to forest sustainability. Better prices would materially help. Although the Government of Brazil is engaged with sustainable Forest Management, and is legislating toward it as an objective, problems of pricing and market access limit their capacity to achieve it. At the


/ . . .

recent Intergovernmental Forum of Forests in Geneva, a meeting between Brazil, European Union and the USA was arranged with UNCTAD to be held early next year in Brazil which will define and comprehensively analyse the many North/South trade and environment issues now apparent. Brazilian officials voiced concerns about a number of issues affecting their international trade in wood products:

they recognise an internal impediment exists because a very high percentage of consumption is domestic, is unconstrained by technical regulations, and has been considerably influenced by the volatility in Brazil’s currency. This has encouraged more consumption and made less product available for export.

Japanese technical standards;

the mid-year imposition of an anti-dumping duty and penalty by the European Union against Brazilian hardboard producers;

unilateral restrictions by sub-national authorities in several countries which appear to be in contravention of the International Tropical Timber Agreement. This raises the question of whether or not the ITTA is respected;

a perception that tariff escalation with manufactured wood products in some markets - especially Europe - is an indirect trade barrier and is damaging trade. This works against further added value in tropical countries and undermines Sustainable Forest Management, the costs of which are supported by such added value income;

Brazil has found that compared with Europe, the GSP system operating in the USA (for which Brazil was accepted as eligible only in 1996) is very antiquated, with inappropriate specie listings in the Customs Tariff or omissions of the many lesser known species now being introduced;

Other tariff and non-tariff issues include:

Surinam, although not part of the geographic Caribbean, is included in the CARICOM treaty and receives MFN duty treatment. This gives an unfair competitive advantage over Brazil, and is particularly disappointing as Surinam’s forests - unlike Brazil’s - are owned by the government, and thus not in need of the incentive;

concerns that some countries are using incentives or subsidies to help trade. In South America for example, Uruguay, Chile and Paraguay offer incentives for the establishment of pine and eucalyptus plantations whereas Brazil does not;

Brazil’s own export quotas for certain species (e.g. Virola and Mahogany) is to conserve the resource of these popular species within WTO Article 20.

It is felt that some consuming countries should - before implementing unilateral measures restricting tropical timber consumption - seriously study whether the consequences will actually be positive and assist - or deter - the promotion of Sustainable Forest Management (SFM.) There are many issues to be considered including:

the difficulty in persuading buyers to accept a diversification of species from the forests. Unless lesser known species can be sold, it is more difficult to manage the forests profitably, and this can - in turn - affect their sustainability;


/ . . .

because Brazilian commercial production forests are obtained only after the preparation of an acceptable forest management plan which permits maximum 20% of the forests to be exploited, costs - if managed on a sustainable basis - become so high that small producers cannot support them unless their forest contains high value Mahogany;

within Brazil there is considerable pressure for alternative uses for forest land, while internationally no provision - it appears - has been made for trading in timber from such conservation forests by markets insistent on Certificated SFM products;

although the Brazilian Government supports measures to promote SFM, it considers Certification and

Labelling as trade issues, and will not legislate enforcement. They have noted, however, that NGOs who criticised Brazil’s forest management during the Mahogany Working Group in Brasilia last June, would not accept Brazilian certification. Instead only one system (the Forest Stewardship Council system) is being promoted, and it wont accept any other independent certifiers. This is not acceptable to the Brazilian Government;

there is a perception that the cost of FSC certification puts it beyond the reach of many Brazilian companies, so only rich companies can subscribe. This would create an unacceptable - unfair -

differentiation;

another concern about Certification relates to recognition by importers of particular issuing agencies. This could be used as an instrument to cause problems. Harmonisation or reciprocal recognition of various systems will be necessary. In Brazil, for example, the non-government ABNT (National Standards Association) are the official representatives of the International Standards Organisation. Following several years of preparation, a new national certification scheme (along the lines of IS0 14,000) named CEFLOR has been launched, with criteria for Plantations which is currently being ratified by members. ABNT is now preparing criteria for Natural Forests.

what market premium - if any - will be paid for timber products from sustainably managed forests? ABIMCI say they have not been asked for certified plywood from Europe, nor offered higher prices for such a product.


/ . . .

CONCLUSIONS While the EU as a single market is the largest importer of tropical and non-tropical timber, competition for market opportunities, and therefor market access, will continue to intensify due to :

greater self-sufficiency in wood resources following the inclusion of Austria, Finland and Sweden in EU-15 and the use of Euro as the common currency;

greater inflow of lower cost timber products from Eastern and Central Europe as more Western European companies seek to relocate their wood-based manufacturing operations in countries there;

redirection of export shipments from Asian markets (with the notable exception of China) mainly to EU and the US following the Asian economic crisis;

rapidly expanding EU production of engineered wood materials particularly MDF, which is making strong gains in flooring and wall panelling and in moulding, joinery and furniture applications.

1. Given the growing intensity of competition, it has become even more compelling for impediments to

market access for tropical timber to be overcome. 2. While EU tariffs are at zero level for tropical logs and rough sawnwood, tariffs are an impediment for

several other categories of tropical timber products especially as their rates of tariff are significantly higher than those for comparable non-tropical timber categories.

3. While the EU has offered an environmental incentive for tariff remission of 15% to 35% upon

application and proof of compliance with the forest management standards of the ITTO, producer countries do not appear to be too forthcoming in taking advantage of this incentive.

4. Tariff escalation is not pronounced in the EU tariff structure and the rapid growth in exports of SPWP

by ITTO producer countries to the EU speaks for itself. 5. Impediments of a non-tariff nature are not evident for tropical timber in EU while temperate softwood

is only somewhat affected by phytosanitary requirements. 6. Trade impediments connected with environmental issues are a serious problem for tropical timber as

environmental concerns centring round tropical deforestation have influenced market choices to use less tropical timber particularly in UK, Germany, the Netherlands and Belgium, i.e. the front-line countries in the EU where the environmental movement has been most active.

7. Environmentally related impediments against tropical timber have adversely affected tropical sawnwood more than other categories of tropical timber, given that sawnwood has largely been used in windows and doors where substitution by PVC and temperate softwood has been most evident. On the other hand, the drop in EU intake of tropical logs could be due in part to uncertainty in supply as tropical producer countries increasingly opt to restrain log export in favour of further processing.

8. Gain in market share by PVC windows has not been due only to environmental pressure against

tropical timber, but by virtue of its technical advantage, price competitiveness and active market promotion by PVC manufacturers; similarly, active market promotion has also helped to boost the usage of MDF to replace plywood and sold wood.

9. While many tropical timber producer counters think that unilateral actions on the part of subnational

governmental authorities to prohibit the use of tropical timber in their building and construction projects are contrary to commitment and obligations under ITTA to which European governments are signatories, the European Commission and the German Federal Government have expressed the view that these local authorities are merely acting in their individual fiscal capacity as consumers and exercising consumer choices in not using tropical timber which should not be construed as a ban or prohibition by the government against tropical timber.

10. The environmental campaign against tropical timber in the EU is driven by NGOs rather than by

consumers and aided by a highly supportive media as well as growing political interests aligning to the "green movement".

11. NGOs influence on market choices have been reinforced through :


/ . . .

the large number of municipalities that have adopted policies against the use of tropical timber;

the formation of the Climate Alliance or Alianza del Clima and the establishment of the European Co-ordination Office to sustain action against tropical timber use;

the formation of WWF Buyers Groups, committing themselves to increasingly and preferentially trade timber products from sustainable sources and certified under the FSC logo;

the determination of sustainability on the basis of FSC's Ten Principles, which tend to give more stress on ecological and social elements while giving importance to economic benefits;

the operationalising of sustainability through FSC certification;

the promotion of exclusivity for FSC certification in the European market on the basis that it is the only scheme applicable on a global basis;

the strategic alliance entered into between the WWF and the World Bank targeting at the certification of 200 million hectares of forests by the year 2005;

1. While environmental concerns have extended to temperate and boreal forest management, market

perceptions are still heavily biased against tropical timber on account of one-sided and misinformation from NGOs such as :

tropical forests are wantonly destroyed for short-term gains without regard for ecological and social consequences;

come year 2040, the last rainforest will be destroyed;

trade is the cause of tropical forest destruction;

controlling trade is the solution while liberalising trade will aggravate the situation;

certification ala FSC is the answer to ensuring sustainability and the protection of the rainforests. 2. It is important for more factual and balanced information to be disseminated to counter misinformation

on matters such as the causes of tropical deforestation and the role of trade, the progress towards SFM and the role of ITTO and the problem of illegal trade.

3. Concern about the FSC scheme as being impractical from the point of view of cost, detail and

procedure, especially for smaller individual forest owners has led the German Forestry Council (DFWR) in co-operation with forest owners and the timber industry of 13 other European countries to work towards a pan-European forest certification system (PEFC) based on the Helsinki criteria as an alternative to FSC and to ensure that certification would not be a burden to forest owners and the industry.

4. In meeting the demands for proof of sustainability, the trade in EU is supportive of certification for

tropical timber to improve market access. 5. Some analysts have warned that a proliferation of diverse schemes could back fire on tropical timber in

terms of credibility and market acceptance. In this connection, the IFF has also voiced concern that the proliferation and lack of co-ordination among certification and labelling schemes are currently hampering the development of an internationally agreed and voluntary timber certification process given the need to achieve international harmonisation and mutual recognition of standards for certification and labelling. It may therefore be in the interest of producer countries to have a more co-ordinated approach to certification on the basis of ITTO guidelines on sustainability as is being done in the case of the pan-European forest certification.


/ . . .

RECOMMENDATIONS 1. Changes in tariffs affecting market access for tropical timber should be monitored on a regular basis

and as a follow-up on commitments under the Uruguay Round. 2. Import tariffs should be reviewed to eliminate discrimination against tropical timber as compared to

non-tropical timber. 3. Policies and fiscal measures to encourage downstream wood processing in a producer countries

should avoid :

incurring high cost production structure and excessive capacity; and

creating undue market uncertainty over supply of particular species and products in the short, medium or long term

4. Changes in non-tariff measures pertaining to import and export quotas or bans, health, safety and

technical standards, and plant protection requirements affecting both tropical and non-tropical timbers should be monitored for follow-up action to minimise impediments to market access.

5. Trade impediments connected with environmental issues affecting market access for tropical timber

should be addressed through an information and communication programme aimed at changing negative perceptions on the purchase, sale and use of tropical timber to :

dispel concerns that tropical forests are irresponsibly managed;

provide assurance regarding efforts and progress made towards SFM and ITTO objective year 2000;

correct the misunderstanding that trade i.e. the cause of tropical deforestation;

provide factual and balanced information on the real causes of tropical deforestation (e.g. shifting cultivation, recourse to using timber for fuel, and conversation of forests to permanent agriculture) due to in-situ problems of poverty, underdevelopment and population pressure, and that so long as these problems are not given due attention by the international community and helped resolved, tropical deforestation will continue with little or no abatement;

stress that controlling trade will do little to promote SFM, while liberalising trade would enhance the value of the forest resources, thereby reducing the possible diversion of forest land to other competing uses;

clarify that the ecological and social functions of forests, aside from economic, should realistically be measured not just against 'operating production units' but the totality of the forests in the producer country concerned, including forests designated for protection, amenity, recreation and even biospheres set aside for forest dwellers;

provide information on on-going action in producer countries to curb illegal logging and illegal timber trade.

6. Certification schemes should be simple in terms of procedural requirements and cost-competitive with

certification schemes for temperate timber to maintain a level playing field. 7. In implementing certification schemes, attention should be given to ensure that improved market

access for 'certified timber' will not be counterbalanced by an opposite effect on 'uncertified timber'. 8. Producer countries should adhere to using as the basis the ITTO Guidelines for the Sustainable

Management of Natural Forests and Criteria for the Measurement of Sustainable Tropical Forest Management to achieve harmonisation and avoid confusion in the market place; and preferably, to work towards a co-ordinated approach in timber certification.

9. ITTO should undertake to obtain unequivocal international support and recognition as well as

acceptance for its Criteria and Indicators for sustainable management of tropical forests by holding meetings, seminars and workshops in environmentally-sensitive countries.


/ . . .

10. Given that the present study has been constrained by the limited budgetary allocation, consideration should be given to extend the coverage to a larger number of importing and exporting countries as intended in Council Decision 2 (XXIII) and the accompanying Terms of Reference.

11. As the study has identified several important factors affecting competition and substitution involving

tropical timber, such as changes in consumer tastes and preferences, shipping arrangement and freight costs, interest and exchange rate movements, supply changes from producer policies towards downstream processing as well as from emerging low-cost producing regions and growing domestic production of engineered wood materials in major consuming markets, the repercussions from the Asian economic crisis and its impending recovery, consideration should be given to address these and other relevant issues in future studies by ITTO.


/ . . .

APPENDIX 1

SUB-NATIONAL ACTIVITY AFFECTING

TRADE IN TROPICAL TIMBER

1.1 EUROPEAN UNION In Europe, there have been instances where the authority of subnational governments was used to influence private developers in the choice of building materials to the detriment of tropical timber. This happened with certain municipalities in the Netherlands where land was allowed for long-term use only if owners did not use tropical timber and sale of building lots carried a penalty clause if tropical timber was used. In 1990, the Climate Alliance or Alianza del Clima was set up. It comprised 357 municipalities, mainly from Germany, Holland and Belgium. Within the framework of the Alliance, the municipalities agreed not to use timber of tropical origin for their own construction works and not to award contracts in public tenders to contractors who use tropical timber. They would maintain this commitment as long as sustained yield management in the rainforests and its reliable monitoring are not guaranteed. The long-term goals of the Alliance are to secure an import restriction for timber that cannot be shown to have come from sustained yield management, and a labelling of sustainably harvested timber. Flyers and brochures are distributed by the European Co-ordination Office of the Alliance to influence private owners to use domestic timber rather than timber of tropical origin. Two cities of the Climate Alliance in Germany have initiated a manual on the implementation of a tropical timber-free municipal procurement in the five most important areas vis:

general procurement;

gardening and landscaping;

building works;

civil engineering works;

port and hydraulic engineering. One of the main problems to tropical timber-free procurement is said to lie in the “hidden applications” in furniture, plywood, etc. To overcome this, only a labelling system is said to give certainty as to which type of wood has been used.

1.2 GERMANY Municipalities began taking action against the use of tropical timber as early as 1988. Thus on 15 April 1988, the town council of Gottingen decided that it would make sure that no products made either partly or entirely out of tropical timber would be used in construction work on town buildings. It would also see to it that tropical timber products would not be purchased for town buildings. The town council would use its influence to get companies with town involvement to stop using tropical timber where possible. Similar decisions were also taken by the State authorities. Thus on 15 December 1989, the Bundeslander of Hesse issued a decree that in the interests of preserving the rainforests, tropical timber should not be used until such time as it could be definitely proved that it originated from ecologically friendly plantations or sustainably managed forests. Currently some 10 out of the 16 Bundeslander have decided restricting the use of tropical timber in public construction and buildings. A total of 340 German town and cities have joined the Climate Alliance since it was founded in 1990. The Alliance is dedicated to banning the use of tropical timber in public building projects as "a measure aimed at conserving the tropical rainforest in order to secure the land rights of the indigenous peoples and the sustainable utilisation of the forest areas". The Alliance stated that it will continue with the ban until "certification has developed to an extent that it can guarantee transparent, credible and sustainable forest utilisation". Although it is aware that trade is not the only cause of deforestation, the Alliance feels the ban is the only way communes can impact on the forest situation from a distance.

1.3 NETHERLANDS


/ . . .

A number of sub-national actions were initiated to reduce tropical timber logging, and unsustainably produced tropical timber. In 1989, the Tytsjerksteradiel Municipality sent letters to IMF, the World Bank, ITTO, EC, the Dutch ministries and timber trade to reduce tropical timber logging. It undertook an information campaign directed at Dutch consumers on timber alternatives. Currently some 252 Municipalities out of a total of 633 have joined the "Heart for Wood" campaign to refrain or reduce the use of unsustainably produced tropical timber over a period of time to nil. Examples of decisions taken by the Municipalities are the following :

builders who construct on community grounds are not allowed to use tropical timber (e.g. Schiedam);

agreement with housing corporations/residents' committees not to use tropical timber inside new houses; for outside policy is to avoid use (e.g. Amsterdam);

let land on long-term use only if owners do not use tropical timber (e.g. Leiden);

ban use of tropical timber via sale of building lots with timber penalty clause (e.g. Deventer);

reduce the price of building lots if environmental measures are implemented (e.g. Eindhoven);

tropical timber to be only used for waterworks as agreed with housing corporations (e.g. Utrecht). It can be seen that decisions by Municipalities are not only confined to their own public funded projects but extend in some cases to discouraging and even restricting the use of tropical timber to private developers where they are able to exercise their authority or influence. Global and national environmental concerns no doubt are dominant in shaping policies of Municipalities. "Think global, act local" has been their guiding motto with a view to contribute to a better, more environmentally friendly world. It appears that the majority of Municipalities may be willing to review their current policies if they have sufficient evidence that they can acquire tropical timber from sustainable sources. A number of municipalities are following the guidelines on sustainable building practice of the Foundation Experiments and Public Housing (Stichting Experimenten Volkshuivesting - SEV). For windows and frames, the guidelines by SEV since June 1995 on the choice of materials are as follows :

1st

choice

2nd

choice 3rd

choice 4th

choice

Timber from sustainably

managed forests

softwood treated with boric acid

softwood made durable; PVC with

a recycle-guarantee; aluminium

timber from non-sustainably

managed forests

It should be noted that until the issuance of the new guidelines in June 1995, the SEV did not recommend municipalities to use tropical timber. In June, the SEV changed the 'sanction on tropical' into a 'premium on sustainability.' According to the SEV, the use of tropical timber does not necessarily have harmful effects on the environment for two reasons:

when sustainably produced timber is used, i.e. when the cutting down of trees takes place in a responsible way, the environment will be damaged to a small degree;

when non-tropical timber is used, the environment can be damaged and exhausted as well.


/ . . .

'Heart for Wood' Campaign Environmental NGO's have been very active at the municipal level, especially Milieudefensie (Friends of the Earth). Together with the main Dutch NGO for development co-operation Novib, they carry out the "Heart for Wood" campaign against the use of tropical timber. Other NGOs, such as WWF and IUCN are in support of Miliendefensie activities. Already 252 municipalities and 10 state departments are listed as members of the "Heart for Wood" Buyers Group. About 75% of DIY chain stores in the Netherlands along with 139 housing corporations and 72 project developers are also members, committing themselves not to sell or use products made from tropical timber unless certified by the FSC. The agreement with "Heart for Wood" does not seem to exclude the possibility of accepting certified timber under other schemes which are deemed to be compatible with that of FSC.

1.4 UNITED KINGDOM The following provides a summary of the decisions taken by local authorities in the context of their timber purchasing policies:

Do not use tropical timber. Will not contribute to rainforest destruction (e.g. Ashford Borough Council);

Do not use tropical timber because destruction of tropical rainforests has a detrimental impact on the environment and native people (e.g. Colchester Borough Council);

Do not purchase tropical timber. Abide by Friend of the Earth policy (e.g. Harrogate Borough Council);

Will only use wood included in Friends of the Earth "Good Wood Guide." (e.g. Congleton Borough Council);

Do not purchase tropical timber unless from proven sustainable source (e.g. East Lothian District Council);

Do not purchase tropical timber because no independent validated evidence that the tropical forests are being managed sustainably (e.g. Blaby District Council);

Preference given to Northern hardwoods until satisfactory certification system becomes available (e.g. Middlesborough Council);

Use only sustainably produced tropical hardwoods (e.g. Mole Valley District Council);

Tropical hardwoods only used when no substitute can be found and generally from forests which are managed to allow natural replacement (e.g. Bearsdon & Milgrave District Council);

Will only purchase timber from sustainable sources. Will review policy if a recognised and trusted certification process is established (e.g. Lewes District Council);

Do not purchase tropical timber. Await FSC scheme to review policy (e.g. Leicester City Council).

1.5 USA The following are state, local and municipal actions which - if or where enacted - would place non-tariff restrictions on the use of tropical wood products.

Arizona: (HB2294): this legislation passed in 1990. It called for state and local governments to prohibit the use of endangered tropical woods (including teak and lauan) in government projects. This restrictive tropical timber purchasing bill was amended in April, 1997 (HB2123.) It took six years to successfully change the legislation from being restrictive to a positive approach in the purchase of tropical wood products.

California: (Senate Bill SB 1727) proposes legislation requiring all raw lumber products sold in the state to include a consumer disclosure label indicating the origin and species of the wood. If passed,


/ . . .

this labelling bill would constitute a non-tariff barrier. Efforts are being made to have the bill re-referred to the International Trade Commission.

Los Angeles: the City Council has postponed (indefinitely) a final hearing on an ordinance that - when originally passed in 1995 - was to restrict purchases of old growth and tropical hardwood products to only those which have been certified as sustainably produced by an FSC accredited certification organisation. The proposal may re-surface in a slightly altered form.

California League of Cities: a proposed resolution that would require lumber to be labelled certifying its production met FSC international standards advanced to a vote, but has now been delayed indefinitely over concerns about violation of anti-trust and US/international trade measures.

Santa Monica: the use of tropical hardwoods has been banned in city projects.

New Jersey: (S-2058) originally aimed to prohibit state purchase or use of tropical wood products unless verified as sustainably produced by an approved independent tropical hardwood certification programme. An alternative bill, recognizing progress toward sustainability and eliminating requirements for certification was subsequently introduced but not passed. In 1998 a new bill (A-1796) was introduced which would ban the purchase of tropical hardwoods unless they come from certified sustainably managed sources.

New York City: IN206 (July, 1997) would include restrictive measures that would bar the city from purchasing tropical woods or wood products in future city contracts unless purchased from a sustainably managed forest and independently certified by any group accredited by FSC. Although approved in committee, considerable international pressure from tropical hardwood supplying countries, as well as questions from the office of the US Trade Representative, has seen the legislation put on hold.

Attempts to ban or restrict the state or municipal purchase or use of tropical timber have been unsuccessful in Pennsylvania (1997); Rhode Island (1993); Maryland (1992); Minneapolis, Minnesota (1992); Honolulu, Hawaii (1993) and the US Conference of Mayors (1991) (which would - if successful - have banned the use of all tropical wood products in municipal projects nation-wide. However, a number of US municipalities have enacted Bills or Ordinances that ban - or restrict - the municipal purchase of tropical timber, including: Baltimore, Maryland (1990) Bellingham, Washington (1990) Berkeley, California (1990) San Francisco, California (1990) Harrisburg, Pennsylvania (1991) Santa Clarita, California (1991)

1.6 JAPAN Japan has 12 ordinance-designated cities. Of these, the Tokyo, Kanagawa Prefecture, Kawasaki and Kobe City authorities have issued “Guidelines” recommending a reduction in the use of tropical hardwood

plywood for concrete shuttering in municipal civil works. Two examples of these “Guidelines” are detailed herewith: Tokyo Municipal Government (TMG) Japan’s largest prefecture of 2,186 square kilometres contains almost 12 million people. TMG recognised a growing concern about the global environment, but also recognises there are many programmes to preserve the tropical forests conducted by international organisations, especially ITTO, with their programme ITTO 2000. Acting upon popular demand, in October 1991 the Tokyo Building Bureau initiated experimental guidelines to reduce the consumption of shuttering boards - which are discarded after a few uses - made from tropical timber in buildings financed by the Tokyo City. Following reports on the tests in 13 construction projects the TMG then announced measures to reduce tropical plywood shuttering with effect from July 1, 1993 in constructions financed by the Tokyo City, with the following goals:


/ . . .

1. Shuttering made from any plywood should not - in future - exceed the present consumed amount; 2. Shuttering made from tropical hardwood plywood should be reduced to approximately 50% of the

current use within 3 years, and to 30% of the current use with the next 5 years. (See below for 1990 consumption.)

To achieve these goals, TMG recommended alternative methods and materials including;

steel frame and steel frame reinforced systems instead of plywood;

prefabricated systems using factory produced precast concrete;

the use of steel deck plates, obviating the need for plywood shuttering;

the use of metal shutters made from steel or aluminium;

research to assess the technical and economic feasibility of shuttering boards made from alternative materials like synthetic resins or ceramics;

the use of high durability resin coated shuttering plywoods which produce a better finish and increase the number of reuses;

more uniform planning of heights, spans, beam and pillar sizes to reduce the number of different panel specifications that have to be cut;

better maintenance of boards through after-use cleaning, and the use of peeling agents to prevent damage to the plywood shutters;

the use of combination or softwood plywood shuttering provided they are JAS certified, and care is exercised to prevent poor concrete setting through the deformation of the shutter, and transfer of the natural characteristics to the concrete;

ensure the transfer of reusable shuttering plywood to the next building site. In addition to shuttering plywood, the TMG also addresses the use of plywood for underlayment for floors and ceilings, and for interior finishes, and recommends that tropical solid wood should be avoided as much as possible. Instead, the TMG recommends the use of combination or softwood plywood, gypsum or particle boards. These extremely comprehensive guidelines cover every aspect of plywood used for shuttering. The baseline for the experimental guidelines issued in 1991 was the actual TMG consumption in 1990, which was as follows: Total area using metal and other shuttering: 1.7 million square metres Total area requiring plywood shuttering: 3.7 million square metres Total area plywood shuttering used: 1.6 million square metres (the difference between required/used reflects the amount of plywood re-use) Calculating the volume of the plywood used (based 12mm thickness) reveals that the base line total was 19,330 cubic metres. As a proportion of the total 8-9 million cubic metres of plywood consumed nationally in 1990, the volume affected is 0.2%, and the targeted reduction to 30% will have minuscule impact on tropical hardwood plywood consumption.


/ . . .

Kanagawa Prefecture (KP) Kanagawa (encompassing the city of Yokohama) is the third largest municipality in Japan after Tokyo and Osaka, with 240,000 hectares and 8.3 million people. Its own forests have a stock of ten million cubic metres, gradually increasing. Heightened public awareness concerning the inefficient and wasteful use of tropical hardwoods for some applications such as shuttering, and media coverage of the Earth Summit meeting in Rio de Janeiro resulted in discussion at the Prefectural Conference. This resulted in a 1992 guideline, effective from 1993, that the use of tropical plywood for concrete shuttering in construction financed by KP should be reduced to 70% by 1995, and that steel should be used instead. (For many projects such as roads, bridges and dams, steel has always been preferred, and its cost differential with plywood apparently very small.) KP recommended that the target could be achieved by:

the use of steel;

the increased use of combination softwood and hardwood plywood;

changes in construction methods;

increase the reuses of shuttering panels. (It is noteworthy that Kanagawa Prefecture has established a project in Sarawak researching and developing forest rehabilitation.)


/ . . .

APPENDIX 2

TARIFF ISSUES Twenty producer countries provided their assessment of the significance - if any - of high and/or discriminatory tariffs, and other market factors, affecting market access:

(a) LOGS Significance

High Tariff

Discriminatory Tariff

Other Market Factors

very 15% 20% 10% a lot 5% 10% 20% some 5% 5% 10% a little 15% 5% 5% none 15% 15% 5% N/A 45% 45% 50%

Overall, respondents rated between 60 - 70% of ‘little or no significance’. (No answers are considered ‘none’.) Factors other than tariffs (40%) are considered more significant than either high (25%) or discriminatory (35%) tariffs.

(b) SAWNTIMBER Significance

High Tariff



very 10% 15% 15% a lot 10% 15% 10% some 10% - 25% a little 15% 15% - none 20% 15% 10% N/A 35% 40% 40%

Factors other than tariffs (50%) were considered of more significance than high (30%) or discriminatory (30%) tariffs.

(c) VENEER Significance

High Tariff



very 15% 10% 15% a lot 5% - 15% some 15% 20% 5% a little 5% 5% 20% none 20% 15% 5% N/A 40% 50% 50%

High tariffs (35%) and other factors (35%) are considered marginally more significant than discriminatory tariffs.

(d) PLYWOOD Significance

High Tariff



very 15% 10% 15% a lot 5% 5% 10% some 15% 20% 5% a little 15% 5% 15% none 10% 10% 5% N/A 40% 50% 50%

High tariffs (35%) and discriminatory tariffs (35%) are considered marginally more significant than other market factors (30%.)


/ . . .

(e) MOULDING Significance

High Tariff



very 10% 5% 5% a lot - - 5% some - 15% 5% a little 30% 10% 15% none 10% 10% 10% N/A 50% 60% 60%

This result indicates moulding tariff issues are not significant.

(f) BUILDERS

WOODWORK Significance

High Tariff

Discriminatory

Tariff

Other Market

Factors

very 5% 5% 5% a lot 5% - 10% some 5% 20% 5% a little 20% 5% 5% none 10% 10% 10% N/A 55% 60% 65%

This result indicates builders woodwork tariff issues are not significant

(g) FURNITURE Significance

High Tariff



very 15% 5% 10% a lot 5% - - some 15% 10% 5% a little 15% 15% 10% none 10% 15% 15% N/A 40% 55% 60%

High tariffs (35%) have a clear significance compared with the other categories. Indonesia, Bolivia, Congo and Australia all expressed concern.


/ . . .

APPENDIX 3

REGULATORY ISSUES Twenty producer countries provided their assessment of the significance - if any - of regulatory arrangements on tropical timber markets.

(a) LOGS Significance

Quantity Restrictions

Safety Standards

Health & Sanitary Standards

Market

very 10% - 5% 15% a lot 10% 5% 10% 15% some 5% - 5% 15%

a little 5% 20% 15% - none 30% 20% 15% 5% N/A 40% 55% 50% 50%

Market regulatory arrangements (45%) are quite significant, with quantity restrictions (25%) and health standards (20%) of some significance. Safety standards are unimportant.

(b) SAWNTIMBER Significance


Safety Standards


Market

very 15% - 10% 10% a lot 10% 15% - 15% some 5% - 25% 15%

a little 10% 20% 15% 10% none 30% 20% 5% 5% N/A 30% 45% 45% 45%

Market regulatory arrangements (40%) are of slightly more significance than the other categories.

(c) VENEER Significance


Safety Standards


Market

very 10% - 10% 15% a lot 5% 10% 5% 10% some 15% 5% 5% 10%

a little 5% 20% 10% 10% none 20% 10% 10% - N/A 45% 55% 60% 55%

The importance of these factors is modest, with safety (15%) being the least significant.

(d) PLYWOOD Significance


Safety Standards


Market

very 15% - 10% 15% a lot 10% 10% 5% 10% some 15% 10% 15% 10%

a little - 15% 10% 10% none 20% 10% 5% - N/A 40% 55% 55% 55%

Quantity restrictions (40%) feature ahead of markets (35%) or H&S (30%.)


/ . . .

(e) MOULDING Significance


Safety Standards


Market

very -% - 10% - a lot 5% 5% - 15% some 5% 5% 10% 5%

a little 10% 20% 10% 10% none 20% 5% 5% 5% N/A 60% 65% 65% 65%

There are no concerns of significance in this product in any regulatory category.

(f) BUILDERS

WOODWORK Significance


Safety Standards


Market

very -% 10 20% - a lot 5% 20% - 5% some 5% - 5% 10%

a little 5% - 10% 10% none 25% 5% - 10% N/A 60% 65% 65% 65%

Safety concerns (30%) edge out H&S (25%.) Overall, the significance is marginal.

(g) FURNITURE Significance


Safety Standards


Market

very - 10% 20% - a lot - 10% 5% 5% some 5% 5% - 10%

a little 10% 10% 5% 10% none 35% 5% 10% 10% N/A 50% 60% 65% 65%

Safety, and H&S standards both reflect minor concerns about the glues and finishes used in the product’s manufacture.


/ . . .

APPENDIX 4

Other Relevant Organisations The consultants were directed to take into consideration the work of the Intergovernmental Panel on Forests (IPF) and other relevant international organisations concerning discussions of trade and environment.

Intergovernmental Panel on Forests Owing to the incompletion of the Geneva deliberations of the IFF last August, 1998 no communiqué was

finalised which would have enabled us to incorporate relevant information in this study.

World Trade Organisation (WTO)

The Trade & Environment Division has looked at the benefits of trade vis-à-vis the environment in six sectors, one of which is timber. The Tokyo Round of tariff negotiations contained nothing about the environment, but today the world is more conscious of this issue than 25 years ago. The Uruguay Round contains no contract, but there is, during its Reform Period, a commitment emerging despite - or perhaps because of - the lack of follow through of agreements made in Rio at UNCED. CITES and Kyoto all influence. The new Round will either contain something on the environment... although what has yet to be negotiated... or it is unlikely to go ahead. It is generally felt that - if accompanied by acceptable environmental measures - the new Round will be regarded as positive. New proposals will not, however, be protectionist... trade measures do not permit that.

Everyone agrees development is an integral component of environment, and money is the key, but agreement has not been possible on who pays. However, progress can be made once all are aware of the gravity of the situation, and becomes conscious of the need. There has already been some unilateral action at national level, but no international consensus. WTO has organised NGO symposiums in the belief that without dialogue, NGOs will attack. The Third Symposium recently concluded focused on “Sustainable Development and Protection of the Environment” but forestry was not specifically addressed. The vigorous debate of contra-views underlined the need for logic, fact and professional presentation... not emotion.

The Agriculture & Commodities Division is - among other duties - for managing and resolving disputes of member countries are unable to resolve their disagreements over perceived breaches in the Articles of GATT. Under GATT, the dispute settlement process was rarely used, but under the Uruguay round, it is being increasing used, especially by developing countries. In fifty years of existence, only two timber disputes went right through the complete dispute process to a final ruling, (Canada vs. Japan, 1987 - 88; and Canada vs. USA, 1st: 1987; 2nd: 1993.) Both cases involved softwoods. The Division urges countries to not hesitate in bringing cases to WTO. Developing countries are not disadvantaged, and have access to WTO lawyers for help. The concern about costs, the Division says, is needless. Market access issues are the responsibility of this Division.

Asia Pacific Economic Co-operation (APEC) Initiated in 1989, APEC initially comprised the then six ASEAN members, i.e. Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand and their six “official Pacific dialogue partners” namely Australia, Canada, Korea, Japan, New Zealand and the US. Subsequently, the membership was enlarged to include China, Hong Kong, China-Taipei, Papua New Guinea, Mexico and Chile. Under the Bogor Declaration signed in 1994, APEC agreed on a time-table for trade liberalisation. According to the time-table, negotiations to achieve free trade will commence in year 2000 and be completed within 10 years for the developed nations, 15 years for the newly-industrialised countries and 20 years for the developing nations. As APEC is committed to the principle of “open regionalism”, trade concessions would then be extended to non-members on a reciprocal basis to promote global trade liberalisation.


/ . . .

In 1997, APEC economies agreed to include forest products among the nine sectors which would be liberalised as part of an Early Voluntary Liberalisation (EVSL) initiative. In November 1998, APEC agreed to move these sectoral discussions on tariff reductions to the WTO for finalisation and implementation on the basis of an agreed framework on product coverage, end rates and end dates. As part of the EVSL on forest products, it was also agreed for a survey to be conducted to review the non-tariff measures affecting trade in forest products with a view towards improving trade conditions, including the harmonisation of standards pertaining to wood products use in construction.

Association of South East Asian Nations (ASEAN)

Malaysia, a founder member, is currently one of eight member countries of ASEAN. The others are Indonesia, Philippines, Singapore, Thailand, Brunei, Vietnam and Myanmar. Until the Asian economic crisis that is now slowly being resolved, the countries of ASEAN were among the fastest growing economies in the world with Indonesia, Malaysia, Singapore and Thailand all having growth rates over a prolonged period of more than 6% a year. To underpin this growing economic dynamism and as a means to step up intra-ASEAN trade, a Common Effective Preferential Tariff (CEPT) scheme was initiated in 1992. The objective was to arrive at an ASEAN Free-Trade Area (AFTA) in year 2008. In the years leading to AFTA, tariffs on manufactured and processed agricultural goods would be reduced first to a maximum of 20% and subsequently to a maximum of 5%. In 1995, it was decided to accelerate the implementation of tariff cuts to realise AFTA in year 2003. Obviously, the implementation of AFTA will significantly improve market access to boost intra-ASEAN trade in forestry products as well as intensify competition in semi processed and secondary processed wood products (SPWP) to the extent that inefficient and high cost producers are likely be weeded out.


/ . . .

REFERENCES AF&PA Progress Report, May 1998. “The Sustainable Forestry Initiative Program.” Baharuddin Haji Ghazali and Simula Markku. “Timber Certification: Progress and Issues.” Report prepared for ITTO, 1998. Barbier E, Burgess J, Bishop J, Aylward B and Bann C. London environmental Economics Centre. “The Economic Linkages Between the International Trade in Tropical Timber and the Sustainable Management of Tropical Forests.” Report prepared for ITTO, 1993. Bourke I.J., FAO. “Prospects and Challenges in the Supply and Demand of Timber in the Global Market.” Paper presented at the International Timber Conference ‘98 in Kuala Lumpur, Malaysia. Bourke I.J. and Leitch Jeanette. “Trade Restrictions and Their Impact on International Trade in Forest Products.” FAO, 1998. Brown Chris, FAO. “The Implications of the GATT Uruguay Round and other Trade Arrangements for the Asia-Pacific Forest Products Trade.” April 1997. Chew Lye Teng, Malaysian Timber Industry Board. “Overview of the Malaysian-Netherlands Pilot Study on Timber Certification.” Paper presented at the Seminar on Pilot Study on Timber Certification, August 1998 in Kuala Lumpur, Malaysia. de Boer Andre, Netherlands Timber Trade Federation. “Market Developments Relation to timber Certification and the Pilot Study.” Paper presented at Seminar on Pilot Study on Timber Certification, August 1998 in Kuala Lumpur, Malaysia. de Boer Rudy. “The Tropical Timber Market in 11 European Countries in 1993.” Report prepared for ITTO, 1995. Douglas Jim and Blaser Jurgen, World Bank. “Global Economic Trends and Implications to the International Timber Market.” Paper presented the International Timber Conference ‘98 in Kuala Lumpur, Malaysia. FAO. “State of the World’s Forests 1997.” Freezailah B.C.Y, ITTO. “Ensuring Future Global Supply of Tropical Timber.” Paper presented at the International Timber conference ‘98 in Kuala Lumpur, Malaysia. Herbert Karl Heinz. “The European Window Market.” ITTO. “Annual Review and Assessment of the World Tropical Timber Situation 1990-1991.” ITTO. “Annual Review and Assessment of the World Tropical Timber Situation 1992.” ITTO. “Annual Review and Assessment of the World Tropical Timber Situation 1993-1994.” ITTO. “Annual Review and Assessment of the World Tropical Timber Situation 1996.” ITTO. “Annual Review and Assessment of the World Tropical Timber Situation 1997.” ITTO. “Background on Trade and Environment.” Paper prepared for the Second Session of the Intergovernmental Forum on Forests, 1998. ITTO. “Criteria & Indicators for Sustainable Management of National Tropical Forests.” Policy Development Series No. 7. ITTO. “Libreville Action Plan 1998-2001.” Policy Development Series No. 8.


Japan Forestry Agency (MAFF). “Annual Report on Trends of Forestry 1997.” Japan Wood-Products Information & Research Center. “Forest & Forestry in Japan - Toward Sustainable Forest Management.” 1997. Kanagawa Prefectural Government, Agricultural Department Forestry Division. “Kanagawa Forest Plan.” 1994. Kiekens Jean Pierre. “Certification: International Trends and Forestry and Trade Implications.” 1997. Maini J.S. “Trade and Environment in Relation to Forest Products and Services: An Overview of the Intergovernmental Panel on Forests (IPF) and the Intergovernmental Forum on Forests (IFF) Deliberations.” Malaysian Timber Council. Occasional Papers and Reports. Tham S.K, Malaysian Timber Council. “Market Challenges and Opportunities for Timber Products in Europe.” Paper presented at the International Timber conference ‘98 in Kuala Lumpur, Malaysia. U.N. Publications. “Forest Products Annual Market Review, 1997-1998.” USDA. Occasional Papers and Reports. World Trade Organisation, Committee on Trade & Environment. “Tariff Escalation” Note W/25. “Environmental Benefits of Removing Trade Restrictions & Distortions” Note W/67. World Trade Organisation. “Dispute Settlement Procedures.” 1995.

World Wildlife Foundation International. “Expert Panel on Trade & Sustainable Development Reports: lst (10

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