FLEGT s Influence on Markets, Trade
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1 FLEGT s Influence on Markets, Trade and Economic Development Shaping forest policy: Global Initiatives and the European Arena Dr. Ed Pepke, Senior Timber Trade & Policy Analyst Dr. Alex Hinrichs, Senior Advisor Asia EU FLEGT Facility, European Forest Institute Ensuring legal timber trade & strengthening forest governance
2 Contents I. EU FLEGT Action Plan II. Demand-side policies and instruments EU Timber Regulation Other countries similar policies III. Supply-side policies and instruments Voluntary Partnership Agreements (More by Jussi Viitanen) IV. Trade developments and monitoring V. Economic impacts VI. Illegal timber trade VII. Conclusion & questions
3 I. EU FLEGT Action Plan
4 FLEGT Linking development with trade EU enacted the Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan in 2003 to reduce illegal logging by Addressing illegal logging g and related trade Strengthening governance of forest resources Promoting trade in legally produced & traded timber Package of measures to simultaneously influence Supply of legal and sustainably produced timber Demand for legal and sustainably produced timber The T strengthened FLEG.
5 EU FLEGT Action Plan evolution 2001 East tai Asia Bali BliFLEG Declaration was a catalyst tl t FLEGT Action Plan 2003 Towards SFM, good governance & transparency: 1) New Legislation (EU Timber Regulation) 2) Bilateral Partnership Agreements (VPA) 3) Encouraging public procurement policies for legal and sustainable timber 4) Encouraging private sector initiatives Aim to eliminate trade in illegal timber in the EU
6 EU Timber Regulation evolution (con d) December 2010 Regulation entered into force Due diligence Prohibition Traceability June 2012 EU Implementing Regulation: more detailed rules on the "due diligence system" rules for recognition of monitoring organisations March 2013 EUTR applicable / operational 5
7 FLEGT Action Plan measures 1. Support to timber-producing countries, primarily delivered through Voluntary Partnership Agreements (VPAs) 2. Supporting the Action Plan with legislative instruments 3. More responsible trade in timber 4. Public procurement of timber 5. Private sector initiatives to eliminate illegal timber from supply chains 6. Better financial accountability for forestry investments 7. Improved understanding of the role of forests and timber in conflicts and measures to reduce such conflicts
8 Two measures of the EU FLEGT Action Plan EU Timber Regulation Voluntary Partnership Agreements Prohibits sale of illegal timber in the EU (2013+) Ensures exporting only legal timber to EU from VPA Demand-side measure countries Binding EU legislation l Supply-side measure EU wood and imported wood Bilateral treaties with Applies to timber and wide timber exporting countries range of timber products Voluntary to enter, legally including furniture, pulp binding once agreed and paper Agreed by stakeholders Legal timber in compliance with the laws of the countries where it is harvested.
9 II. Demand-side policies and instruments
10 EU Timber Regulation (EUTR) Systematic ti approach to avoid placing illegal timber on market EU trade must implement due diligence system EU Timber Regulation Illegal timber is harvested in contravention with laws of country of harvest
11 Due diligence systems components (EUTR) EU timber trade must have measures and procedures in place that Information Risk analysis & evaluation Risk mitigation provide access to information on the timber supply (species, origin, quantities, traders and legal compliance with legal requirements of harvest country.) allow for analysis & evaluation of risk based on assurance with compliance with applicable legislation, information provided on timber supply, and other listed aspects Mitigate risks adequately and proportionately where risk are beyond negligible (acceptable) EU timber trade must be able to demonstrate how information was gathered, checked against criteria and decisions made
12 Enforcement and penalties (EUTR) Enforcement Competent Authority in EU Member States responsible for verifying operator s compliance with EUTR due diligence requirements Verification systematically, based on risk Penalties EU Members States enact and enforce penalties EUTR requires record keeping of checks, results and recommendations
13 Illegal timber seizure under EUTR 57 wenge logs seized in Germany by German Competent Authority (CA): Federal Office for Agriculture and Food (BLE) Belgium CA (FOD Environment) informed German CA Cargo tracked by Greenpeace Imported by 3 German companies from a consignment from Antwerp, Belgium Exporter: Swiss supplier, Bois d Afrique Mondiale 32 additional logs went to Czech and Italian importers German Timber Trade Federation (GD Holz) says: Demonstrates EUTR strength EUTR + German legislation = instrument for proving legality DDS allows GD Holz members ensure imports satisfy EUTR requirements
14 Other similar demand-side policies United States Lacey Act Amendment 2008 Entire chain from importers to retailers Penalties according to severity of offence Australia Illegal Logging Prohibition Act 2012 Blocks imports of illegal l timber Importers and wood processors must prove due dilligence in annual statement to Dept. of Agriculture New Zealand 2010: Voluntary code of practice Japan 2006: Green purchasing policy More countries need similar policies
15 III. Supply-side policies and instruments
16 Voluntary Partnership Agreements (VPAs) Bilateral agreements between EU and timber-exporting countries VPA phases: pre-negotiation, negotiation, implementation, system development Partner country develops legality definition, legality assurance and licensing system in participatory process with stakeholders EU Member States establish mechanisms to exclude unlicensed timber from VPA partner countries. Timber-producing country agrees to control and license its timber exports as legall Once a VPA is in fully implemented, the partner country s timber exports to the EU can only enter with a FLEGT-license which confirms legality
17 IV. Trade developments and monitoring
18 $ Bill lion Tropical and temperate % of global imports -- based on value -- Based on value, tropical timber s market share greater than on volume, because tropical timber s greater unit value. 34% tropical In % tropical In Temperate Tropical Note: 4 primary products. Source: ITTO, 2013.
19 Tropical and temperate % of EU imports $ Billion % tropical 5 In 2003 Market share decreasing 15% tropical In Note: 4 primary products. Temperate Tropical Source: ITTO, 2013.
20 EU tropical timber imports,1000m m Industrial roundwood Sawnwood Veneer Plywood Source: ITTO, 2012.
21 EU-27 imports of FLEGT timber products from 15 VPA countries Bill lion euros Notes: FLEGT timber products = roundwood, sawnwood, veneer and plywood. 14 VPA countries = Cameroon, Congo, Democratic Republic of Congo, Gabon, Ghana, Guyana, Honduras, Indonesia, Ivory Coast, Laos, Liberia, Malaysia, Thailand, Vietnam. Source: Comext via Eurostat, May 2013.
22 3000 EU imports of FLEGT timber products from VPA and non-vpa tropical countries Mill lion euros % tropical from 15 VPAs Non-VPA tropical countries 14 VPA countries Notes: FLEGT timber products = roundwood, sawnwood, veneer and plywood. 15 VPA countries = Cameroon, Congo, Democratic Republic of Congo, Gabon, Ghana, Guyana, Honduras, Indonesia, Ivory Coast, Laos, Liberia, Malaysia, Thailand, Vietnam. Source: Comext via Eurostat, May 2013.
23 Billion euros EU imports of primary- versus secondaryprocessed products, from all destinations Secondary Primary Notes: Primary includes roundwood, sawnwood, panels and veneer, and excludes pulp and paper. Secondary includes furniture, cabinets, flooring, etc. Includes trade within EU. Source: Comext via Eurostat, May 2013.
24 Independent Market Monitoring (IMM): documenting FLEGT market impacts Driver: VPAs (some) include requirement for IMM. To enable measuring impact of FLEGT Action Plan in terms of tropical timber, especially FLEGT-licensed timber, trade DG DEVCO contracting with signing, initiation September 2013 (EFI not a candidate) 5-year project, 4 million 2018? Intended to continue, but funding not assured
25 Independent Market Monitoring (IMM): objectives, scope, outputs Objective: Information from timber market monitoring reinforces incentives for effective VPA implementation and improved forest governance and law enforcement Scope: To be defined Outputs Annual reports, ad hoc reports Database, website Inputs Trade statistics from normal channels FLEGT-licensed timber info from VPA countries, Competent Authorities Descriptive info on markets and policies from many sources Contributes to monitoring the impacts of the FLEGT Action Plan and to inform its implementation
26 Independent Market Monitoring (IMM): anticipated impacts VPA countries and EU provide reliable, timely statistics and information on markets Provides informed discussions and decision-making in VPA Joint Implementation committees EU and partner countries better able to assess effectiveness of current policies, and adjust efforts for the promotion of FLEGT-licensed timber VPA countries maintain confidence in the VPA and in the FLEGT action plan Information collected and disseminated i d reinforces private sector engagement and support of the VPA.
27 V. Economic impacts
28 Economic impacts EU s economic importance EU second only to China in imports of primary-processed p wood products (includes intra-eu trade) EU greatest importer of primary + secondary products Trade of legal timber increases revenues for importers, processors, retailers and governments VPA countries economic improvement Development of laws, enforcement, governance Trade of legal timber increases revenues for harvesters, exporters, processors and governments and local communities Development of legal forest sector How can we measure these economic impacts? Important for policy analysis and direction Important for donors to EFI FLEGT Facility Important for FLEGT Facility
29 VI. Illegal timber trade
30 EU Timber Regulation What is legal? Legality is defined on the basis of the applicable legislation of the country of harvest, covering: Rights to harvest within legal boundaries Payments for harvest rights and timber, including duties related to timber harvesting Timber harvesting, including environmental and forest tlegislation l Third parties legal rights concerning use and tenure affected by timber harvesting Forest sector related trade and customs legislation.
31 Illegal timber Illegal timber trade Harvested or traded in contravention of laws of country of harvest or export From illegal logging Illegal transport or processing Illegal export and import Illegal timber trade (exporting and importing) $10 billion / year economic loss (source: World Bank, 2009) + $5 billion / year tax losses (source: World Bank) International efforts against illegal trade FLEGT CITES US Lacey Act Amendment Others e.g. Australia, New Zealand, Japan But not enough!
32 Illegal l logging Illegal l logging can initiate chain of criminal activities Annual loss: $ billion (World Bank, 2009) = huge spread in estimation Equates to annual deforestation size of Austria
33 Illegal timber trade FLEGT-REDD Source: UNEP, Session 2012
34 VII. Conclusion & questions
35 EU FLEGT Action Plan s EUTR and VPAs: Game Changers Illegal logging and related illegal trade widespread economic and social problems. However, awareness raised EU FLEGT Action Plan acknowledges Europe s responsibility and roles Action Plan implantation supports SFM, enforceable legislation, good governance EFI FLEGT Facility implements Action Plan with collaborators
36 EU FLEGT Action Plan s EUTR and VPAs: Game Changers EUTR promotes and facilitates legal trade Provides preferential treatment for FLEGT-licensed timber Promotes due diligence, including certification and chain-of-custody EU Member States expect EUTR to be strictly enforced Legality of timber products now minimum i trade requirement EU trade associations, monitoring organizations and companies establishing due diligence systems
37 VPAs and EUTR level l playing field in timber trade EUTR promotes and facilitates legal trade Provides preferential treatment for FLEGT-licensed timber Promotes due diligence, including certification and chain-of-custody EU Member States expect EUTR to be strictly enforced Legality of timber products now minimum trade requirement EU trade associations, i monitoring i organizations i and companies establishing due diligence systems
38 Questions for discussion i & research What are the current and future market effects of the EUTR? In the EU In VPA partner countries In other timber-trading countries, e.g. China, India In conjunction with other countries similar policies? What are the economic impacts of VPA implementation in partner countries? Is the EU FLEGT Action Plan achieving its goals? How should it be modified d to either address changing situations or new countries? Is it possible to analyze developments in illegal logging and the trade of illegal timber?
39 Discussion int For more information contact: European Commission website on EUTR for EU operators EU FLEGT Facility website on VPAs and FLEGT-licensed timber Ensuring legal timber trade & strengthening forest governance
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