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Forest Governance and Trade Programme
Forests, governance and trade: Creating market incentives to tackle illegal logging and improve governance in timber producing countries
Image courtesy of Environmental Investigation Agency
DFID is leading international efforts to promote reforms to deal with illegal logging and trade in illegally logged timber by addressing underlying failures of governance, policies and markets.
Forests are important for the livelihoods of about 1.6 billion people in developing countries. They provide food, fuel, building materials and employment and protect environmental services such as water sources and hillside soil stability. They are important for the global environment as reserves of biodiversity and sinks for greenhouse gases.
But over the last four decades tropical forests have been lost or seriously depleted at an alarming rate. This is often caused by land clearing or illegal logging, driven by the international demand for timber products, with much of the harvested timber ending up in developed countries’ markets. This can have serious impacts on local livelihoods.
Impacts on timber producing countries’ economies and timber markets can also be serious. The World Bank estimates that more than US$15 billion a year is lost to governments through failure to collect correct royalties, and a report prepared for a US forest trade association calculates that trade in illegally produced timber depresses world wood product prices by up to 16%, making it difficult for legal producers to compete.
The causes of the problem are complex but can be attributed broadly to failure of international markets, which continue to accept illegal timber products, and failures of governance allowing commercial and political elites to benefit from forest exploitation by evading national forest laws. DFID’s Forest Governance and Trade Programme is confronting this problem by harnessing market leverage in timber consuming countries to encourage governance reform in producing countries.
Partnership Agreements: Encouraging legal trade and promoting good governance
Image courtesy of Environmental Investigation Agency
Timber markets in the EU and other developed timber producing countries are changing. As a result of increased awareness of the importance of forests and civil society pressure, many national governments as well as private sector buyers have adopted purchasing policies that specify legal timber and prefer products certified as sustainable. Whilst most northern temperate forest sources can meet these requirements, only a small proportion of tropical timber is certified - or can even be shown to have been legally logged. Trading tropical timber therefore carries growing reputational risks for companies.
At the same time, it is difficult for legal operators in many tropical countries to compete with widespread illegal logging. This discourages them from improving management and achieving certification. And because of perceptions of corruption in these countries, official documents claiming legality are often considered valueless by buyers in increasingly demanding markets.
Bilateral partnership agreements, now being negotiated between the European Union and timber producing countries, offer a solution. These voluntary partnership agreements, or VPAs, form part of the EU’s Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan. They will establish export licensing systems in partner countries and, when these are in place, their timber exports must be licensed as legal to be allowed into the EU. This means that all timber products from partner countries will carry a guarantee of legality, significantly reducing risks to EU buyers and improving market access for these countries’ producers.
EU member states will help partner countries establish credible legality assurance systems, including improved control mechanisms and independent monitoring. Where needed, the agreements will also support addition governance reforms. These include enhanced transparency in the forest sector, strengthened capacity of enforcement authorities, and ensuring that small-scale producers and communities benefit from the agreements. DFID is currently working closely with the governments and civil society organisations in Indonesia and Ghana - amongst the first countries to start negotiating FLEGT agreements - helping them to develop the systems needed for implementation.
Governments and other stakeholders in developing timber-producing countries see the value of VPAs, apart from their likely market benefits and the potential for improved revenue collection. The agreements will help regularise domestic markets – which often rely predominantly on illegally produced timber. They will promote improved transparency in a sector which has historically been plagued by corruption and they will assist in identifying where reform of forest-related legislation is needed.
Buyer-supplier dialogue: Engaging the private sector
Developing effective partnership agreements will require more than government
to government negotiations; involvement of those engaged in the trade is equally
important.
In co-operation with DFID, the Timber Trade Federation (TTF), the UK's main timber industry trade association, has taken a lead in promoting responsible purchasing by its members. It is also encouraging involvement of trade associations from other European countries to take similar action. This has led to the Timber Trade Action Plan, a European Commission-supported initiative that encourages timber product suppliers in producing countries, and also intermediate processing countries like China, to only accept legal timber in their supply chains.
Organisation of trade “road-shows” has also been an effective means of buyer-supplier communication. These allow representatives of EU-based timber companies to meet suppliers in prospective partner countries and explain how legal and sustainable timber will more readily find buyers in European markets. DFID is also supporting the Global Forest Trade Network, a programme run by the Worldwide Fund for Nature (WWF), to work with timber companies in Ghana and China to implement systems to deliver legal, and ultimately sustainable, timber.
Sharing lessons: Encouraging other timber-consuming markets to take action
Although the EU is a major importer of timber products from developing
countries, it doesn’t dominate the trade. Other countries are equally important
and can play an essential role in eliminating illegal timber from international
trade. Foremost amongst these are the United States, Japan and China. So if
FLEGT partnership agreements and other EU-based actions are to be fully
effective, similar steps in other importing countries are also needed. The
Forest Governance and Trade Programme encourages dialogue with other major
timber trading countries. This is through bilateral engagement between
governments and through forums such as the G8.
China, which imports increasing amounts of unprocessed timber from developing countries and exports finished products to the west, is particularly important in this regard. DFID has supported comprehensive analytical work to understand the magnitude of timber deficits in China and predict the impacts of these on stimulating illegal logging and trade. This provided background information for a high-level conference seeking solutions to illegal logging involving China, EU Member States and several developing timber producing countries in September 2007.
Telling the story: Communications and advocacy
DFID has provided support for the operation of an
independent
web site. Managed by Chatham House (the Royal Institute of
International Affairs), this provides a central point for information on illegal
logging and trade in illegal timber. It contains summaries and commentaries on
the issues and latest developments, up-to-date news, downloadable documents
about current research topics, and links to other relevant web sites.
Further DFID support to Chatham House allows regular multi-stakeholder consultations to inform and exchange ideas between interested organisations about developments in general and specific topics of interest. These typically involve up to 200 representatives of governments, companies and non-governmental organisations from many countries.
Forest Governance and Trade Budget (2006 -2011)
Last updated: 27 February 2008
