1. Market Developments for Value Added Wood Products Jukka Tissari Market Development Officer - Wood Products

2. Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 2 Global trade in Value Added Wood Products (VAWPs) Competitive environment Conclusions Contents

3. Products covered (SITC) 248.3/5Profiled wood 635.3Builder’s joinery and carpentry Ex-821Wooden furniture Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 3

4. OECD Imports of three VAWPs Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 4

5. OECD Imports of Wooden Furniture by Type Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 5

6. OECD Imports of BJC by Type Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 6

7. OECD Imports of Wooden Furniture by Major Markets Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 7

8. OECD Imports of BJC by Major Markets Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 8

9. Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 9 OECD Imports of Profiled Wood by Major Markets

10. Imports of Wooden Furniture by Origin: USA & Japan Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 10

11. Imports of Wooden Furniture by Origin: Germany & UK Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 11

12. Imports of BJC by Origin: USA & Japan Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 12

13. Imports of BJC by Origin: Germany & UK Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 13

14. Imports of Profiled Wood by Origin: USA & Japan Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 14

15. Imports of Profiled Wood by Origin: Germany & UK Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 15

16. ITTO Consumer Imports of Tropical Wood Products Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 16

17. Major Tropical VAWP Exporters (1999) Exporter Wooden furniture and partsBJC Other VAWP Cane and bamboo furniture and parts $ million Indonesia 637,652 542,726 243,561 269,021 Malaysia 1,026,330 188,323 77,692 19,368 Thailand 571,843 40,058 223,039 10,826 Brazil 315,858 171,345 96,036 909 Philippines 118,937 75,786 52,805 130,601 Bolivia 10,733 20,213 355 1 Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 17

18. Changes in ITTO Export Structure Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 18 Asia-Pacific Latin America-Caribbean Africa

19. Competitive environment: drivers 1. Government policies to add value, taxes on primary products, investment incentives 2. Technological developments in the processing of plantation species and lesser-used species 3. Foreign direct investment 4. Wage and cost advantages 5. Falling tariffs under GATT/WTO agreements 6. Rapidly growing domestic/regional markets 7. Improved shipping services 8. Specific export & import promotion programs Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 19

20. Competitive environment: challenges 1. Growing out-sourcing of semi-finished products 2. Tightening certification and labelling requirements on furniture (e.g. the USA in the next 2-3 years) 3. Substitution pressure from new materials (natural fibres and synthetics) 4. Higher potential supply for more diversified plantation wood products 5. Product standards and design 6. Consolidation of distribution 7. Mounting of non-tariff barriers on trade Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 20

21. On competition 50+ US-furniture plants closed by mid-2001 high-end producers with customisation and rapid delivery will survive manufacturers transform into assembly, finishing lines or distributors/marketers out-sourcing of semi-finished products and components from China, Asia-Pacific, Latin America still capture most of the value-adding potential in design, distribution and marketing functions Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 21

22. On competitiveness from comparative advantage to competitive advantage In Europe: flexible but efficient production with the highest technological quality, superior design, innovative market promotion, and swift distribution with minimal stock-keeping In the tropics: moving from original equipment manufacturing (OEM) towards original design manufacturing (ODM) and ultimately to original brand manufacturing (OBM) Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 22

23. Market access trade liberalization has reduced tariff escalation (= higher tariffs for value added products) EU, Japan and USA apply no import tariffs on FPWP from GSP countries, for most other countries 2-6% eliminate tariffs on wooden furniture completely by 2005 generally tropical producers retain higher tariffs to protect their industries regional agreements reduce tariffs Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 23

24. On End-use markets for VAWPs: 1.Consumer market (DIY products, household furniture and BJC products) 2.Commercial and industrial enterprises (building and construction materials, intermediate and finished joinery products, contract furniture) 3.Institutional buyers (building and construction materials, office & public premises furniture) Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 24

25. On Certification In 1 st and 2 nd segment, the role of intermediaries (sourcing agents, brokers, importers, wholesalers, retailers, etc.) is essential complex consumer market involves large corporations, who manage supply chains (IKEA, Home Depot, B&Q) and a lot of medium and small-scale operators on institutional side, many governments in Europe are developing their procurement policies (WTO rules breach?): largest volumes, less certified yet Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 25

26. Conclusions 1 International trade of VAWPs has liberalized, increasing export opportunities for DMECs. Around 40% of all OECD imports originate from developing market economies and China. Competition will force industrialized countries to transform their manufacturing industries and participate in the supply chains from cost- competitive regions like Asia-Pacific and Latin America. Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 26

27. Conclusions 2 The contribution of VAWP to the forest sectors of tropical countries will continue to grow. Tropical value-added processing (furniture in particular) tends to develop in phases: >>> standardized products >>> originally designed products >>> branded products. Tightening tropical wood resources call for: 1.Processing of more plantation woods 2.Expanded (unconventional) trade flows of primary processed products Geneva, September 2002 UN-ECE TIMBER COMMITTEE: 2002 MARKET DISCUSSION 27