Ambiguity in the tropical timber trade

By Alexandru Giurca, MSc European Forestry, EFINord

Will EU regulations actually protect rainforest, or will the timber only find new markets? Bwindi mountains, Uganda. Photo Mats Hannerz.

The European Union is one of the biggest importers of tropical timber in the world. Raised public concern in the EU about the legality of its timber imports has pushed the European Commission to sharpen its legality demands for wood imports. These policy actions have great potential to tackle the problem of illegally sourced timber, but there are some signs of unwanted side effects that could originate from the stricter regulations for tropical imports.

The majority, if not all, of the tropical timber comes from forest-rich, developing countries that generally face similar problems: unclear legal and regulatory frameworks, weak information systems, corruption, and weak law enforcement. The implications of such a “disharmonious” trade are already well known, and examples of the effects of illegal logging (one of the major contributors to deforestation) can be seen around the world in developing countries in the tropics. Just to name a few of the major environmental challenges that appeared as a direct or indirect side effect from illegal logging: biodiversity loss, desertification, climate change, but also threatening livelihoods of forest-dependent communities.

Hence, an imminent risk exists that timber coming from illegal sources ends up on the international and European market. So, one could deduct that by buying illegal timber, importers exert a significant influence on illegal activities in these developing countries. The EU and its major importers acknowledged these risks already back in 2003 with the EU FLEGT (Forest Law Enforcement Governance and Trade) action plan.

Nowadays the FLEGT system builds on two main components: the VPAs (which are basically bilateral voluntary trade agreements between the EU and partner- exporting countries) and the EUTR (which is a new controversial legislation requiring importers to demonstrate due diligence and makes them accountable for the timber goods they bring into the EU).

Apart from the fiery discussions that these regulations have been generating, the impact on the international trade is expected to be significant. “Expected” because the first FLEGT licenses are yet to be issued and the EUTR just came into force this year. There is no commonly agreed method on how to track the impacts of these regulations on timber trade, mainly because the time series are too short, international data is not always reliable and illegal logging is obviously not recorded in the trade data bases. So one could only speculate on what the future of timber trade might hold, and this can be ambiguous.

One assumption is that these regulations (together with other international mechanisms such as certification for example) are playing their part in the fight against illegal logging. Trade statistics show that the quantities of tropical timber (especially tropical hardwoods) imported to Europe have been steadily decreasing over the past decade. Hence, around 33% of the World’s tropical sawn-wood imports were destined to the EU in 1998 and by 2011 they sank to 18% (see figure below). But is this really a sign of reduction in imports of illegally sourced timber, or are there other reasons behind this decline in tropical imports?

EU imports of tropical non-coniferous industrial roundwood, sawnwood, plywood and veneer. Source: ITTO (2013)

One possible explanation for this decline is that there is an increased ambiguity on the market that could originate as a side effect from these stricter regulations. The lack of general consensus in the interpretation of FLEGT (and especially EUTR) both within Europe and its trade partners, coupled with concerns around the documentations and licenses seem to be just some of the reasons fueling this ambiguity.

What is even more interesting is that this ambiguity in the international trade seems to be the reason behind observed trends such as: trade diversion (What if illegal logging activities didn’t just stop and the exporters simply chose to send their illegally sourced timber to other countries with less stringent regulatory frameworks than the EU?) and substitution (we are witnessing a “reinvigoration” in temperate hardwoods trade, which generally come from more “reliable” and “safe” sources in the Northern hemisphere).

Hence, my last thoughts on the issue: transparency and consistency in the interpretation and implementation of these instruments may help us prevent such unintentional detrimental effects on trade in the near future. But for now, one can only speculate and time will eventually tell what the effects of such regulations are.

For more information, see the author's article in Forests.