Action against illegal logging: interaction with international trade agreements Duncan Brack Associate Fellow, Energy, Environment & Development Programme, Chatham House Forest Governance and Trade: Exploring Options Chatham House, 24 January 2007

2 Questions How do these agreements affect measures taken to exclude illegal timber products? (mainly FLEGT); and Do they provide opportunities to promote these measures? WTO US Free Trade Agreements EU Economic Partnership Agreements International Tropical Timber Agreement Issues around potential development and extension of the FLEGT licensing system

3 World Trade Organisation Doha Round started 2001 Suspended July 2006 US trade promotion authority ends summer 2007 Some progress over aid for trade – but not really WTO issue

4 Liberalisation of trade in forest products Roundwood production +0.5%, trade +2%; South– South trade increases more (higher barriers) Trade in value-added products increases; logs falls, except where log export bans removed Most export-oriented developing countries benefit most Environmental impact negative; increased pressures Some increased incentives for SFM; also for expansion of plantations Many negative social impacts

5 WTO: Conclusion Liberalisation of trade in forest products will exacerbate problems of illegal logging where they exist Measures taken to exclude illegal products can be seen as WTO-supportive

6 US Free Trade Agreements More focus now on bilateral FTAs, as multilateral talks (WTO, FTAA), in trouble FTAs/TIFAs with Cambodia, Honduras, Indonesia, Malaysia, Peru Some FTAs have environmental side agreements – e.g. US–Singapore MoI, US–Indonesia MoU FTAs have increased trade in forest products; side agreements ineffective against illegal logging 2006 election will reduce trend to FTAs, increase pressure for side agreements FTAs could offer opportunity to include controls

7 EU Economic Partnership Agreements Bilateral trade agreements with ACP countries, currently under negotiation Should enter into force 2008, but currently in trouble Trade liberalisation impacts limited, as tariffs already low FLEGT VPAs will be preferred route to tackling illegal products Need for coherence of development assistance, EPAs, VPAs

8 International Tropical Timber Agreement ITTA 2006 due to replace ITTA 1994 in 2008 Illegal logging controversial issues during negotiations, though includes some references ITTO’s activities limited to project funding and data analysis No likelihood of extending role to control trade

9 Developing FLEGT In basic form, three major flaws: Product coverage limited: raw timber, sawnwood, plywood, veneer Really designed to deal with simple case of single country exporting directly to the EU, and VPA partners under no obligation to control imports– so potential problems: Circumvention Laundering Covers only EU amongst consuming nations

10 Extending product coverage Product coverage should be extended to all products Impact assessments for all VPA partners

11 Covering multiple cross-border movements System should evolve so that license travels with the timber through every stage of chain of custody Need to segregate licensed and unlicensed products (as in certification schemes) Need for independent monitoring / verification VPAs need to cover imports into partner countries Regional VPAs would make sense Licensing system should cover all exports from participating countries Pressures will encourage these moves anyway

12 Extending licensing to consumer countries Imports of high-risk products (2005): EU 23%, China 19%, Japan 12%, US 11% Japan: possibilities of G8 initiative; procurement policy; imports from VPA countries China: sensitive as re-exporter US: generally hostile to trade controls; sensitive as exporter; political changes

13 A FLEGT MEA? Balance of responsibilities between countries; what requirements for evidence of legality? Financing mechanism Compliance system – against non-complying parties, and against non-parties?