¦ The EUTR must work in step with producer countries’ national processes to improve forest governance.
¦ It should increase market access without significant additional costs.
¦ Quantitative data on the risk of illegal timber entering Europe needs to be improved.
¦ Focusing on sustainable timber would risk a challenge under WTO rules.
¦ European governments should be lobbied to develop procurement policies for all materials.

When introducing the topic of the EU Timber Regulation (EUTR), it’s traditional to talk about a percentage of wood imports or global production being derived from illegal sources at a cost of so many billions of dollars. I’m not going to repeat the numbers. Frankly, I don’t have much confidence in their accuracy or think they have much relevance to the discussion. The rhetoric has moved the agenda forward. But now the law is in place, it is time to put it in its true context. What is the real contribution it can make? How can we make it work in practice?

Much of the dialogue to date has given the impression that we have a clear idea of the scale of the illegal logging problem, where it is occurring and why. I’m not sure we do. The numbers on illegal logging levels are often poorly researched. In some instances they are still heavily dependent on how the term is defined. The level of illegal wood exported from Papua New Guinea, for example, has been variously estimated at 0% or 100%. Which number you accept depends on your interpretation of the legal framework and bias regarding the legitimacy of industrial logging in tropical forests.

That’s not to say that illegal logging is not a significant problem. There’s plenty of evidence indicating it is widespread and very damaging in parts of the humid tropics, eastern Europe and the CIS. However, it is also symptomatic of other deeper problems, the importance of which varies from one place to another. These include:

? weak land tenure – acting as a disincentive for long-term forest management and an incentive for timber mining for short-term profit;
? pressure to convert forest land for more profitable uses, especially commercial agriculture;
? lack of technical and administrative resources for forest law enforcement;
? corruption in government and forest and other agencies;
? a democratic deficit leading to national governments imposing forest laws without proper consultation or consent, little understanding of the technical or economic realities of forestry practice, or without considering the needs of local communities.

Legal and sustainable practices

What is often overlooked in this debate is that there are many areas where the combination of secure land tenure, strong civil society, a wealthy and educated population, a free press and a lightly regulated timber trade has delivered not only legal, but also sustainable forestry practices.

There are several conclusions that may be drawn from this with respect to the EUTR. First, it’s clear the law must work in lock step with national processes in producer countries to improve forest governance. It should act to maximise the leverage offered by western markets to encourage wider participation in these processes, which many countries are already engaged in.

Second, the law should not be seen as a mechanism to increase the level of state control over the European wood trade, but to create a level playing field. It should positively benefit producers within and outside the EU that demonstrate minimal risk of illegal supply. They should be given increased market access without significant additional costs.

Third, it is essential to improve quantitative data on the risk of illegal wood entering European supply chains in order best to target resources and avoid imposing unnecessary controls on wood from areas where risks of illegal supply are low.

We also need to view the new law as an opportunity to develop an efficient risk-based model for environmental procurement. This could then be extended to other timber-consuming countries and other material sectors with a larger environmental footprint.

The central component of the EUTR is a prohibition on trading products derived from illegally harvested timber within the EU. Rather than compelling operators to demonstrate legality, the obligation is on European authorities to prove that a timber product derives from an illegal source in order to pursue a prosecution. However, it does oblige importers to exercise due care to minimise the risk of any illegal wood entering their supply chains.

So why this law? Why focus on legality when the real prize is sustainability? And why introduce due diligence obligations for traders rather than simply demand government-endorsed legality certificates at point of delivery into the market?

The answer to these questions has much to do with national sovereignty and World Trade Organisation (WTO) compliance. Consumer country laws demanding production standards different from those enshrined in the laws of producer countries are seen by producers as an infringement of national sovereignty. Unless conformance to rules for “sustainable timber” can be demonstrated through internationally recognised standards and certification systems, all such measures risk a challenge under WTO rules.

Certification scheme merit

Systems like FSC and PEFC have considerable merit. But neither can claim to be built on a national consensus forestry standard within all the member states of the WTO. And less than 2% of forest in Asia, Latin America and Africa is FSC or PEFC certified. Even within North America and Europe, most non-industrial private forest owners are not yet engaged in forest certification. So it is more acceptable and constructive for consuming countries to assist producer governments to enforce their own forest laws than to dictate sustainability standards.

And why not an international legality licensing system? This would require development of a global framework to regulate the entire wood production chain from extraction through to entry into the EU market. This would be disproportionate. My own analysis of EU trade and production data suggests that perhaps 8% of wood consumed in the EU risks being derived from an illegal source. Demanding legality licences for all imports would add unnecessary costs in supply of wood from regions where there is little risk. There would also be potential for discrimination against smaller non-industrial owners, given the difficulties of tracking wood where they predominate. With limited resources to police such a system, it could also lead to an explosion in bogus legality licences.

The EU authorities have taken the only practical option – to reinforce existing procurement policies developed by the private sector to reduce the risk of illegal wood entering supply chains; not chain of custody systems for labelling specific product lines, but company procurement policies and management systems that require scrutiny of 100% of wood purchases to assess the illegality risk.

Some European timber trade associations have been developing such systems for nearly two decades. The UK Timber Trade Federation introduced an environmental timber procurement policy in 1991. This evolved into a comprehensive due diligence tool requiring: risk assessment of all products and suppliers; targets and action plans to eliminate high risk ones; and annual reporting and independent audits of the whole system. Similar due diligence systems have been evolved by Le Commerce du Bois in France and the Netherlands Timber Trade Association. There are others operating at international level. Systems managed by the WWF’s Global Forest & Trade Network and The Forest Trust, for instance, have played an important role in supporting retailers’ procurement efforts.

Simplest option

Under the EUTR, where shippers are confident of good forest governance, the simplest and cheapest option may be for them to commission independent research compiling quantitative evidence to demonstrate this. This is the approach adopted by The American Hardwood Export Council to satisfy European customer demands. Shippers could link such independent risk assessments with their own due diligence systems to make legitimate claims that all their purchases are low risk.

An option for some shippers sourcing from areas with forest governance problems is to work through national forest law enforcement processes, for example, the EU-sponsored FLEGT VPA (Forest Law Enforcement, Governance and Trade Voluntary Partnership Agreements) processes being adopted in tropical countries. In high risk countries where such systems are absent, shippers will have to work through private sector third-party legality verification and certification systems.

Finally I want to refer to communication issues. There has already been negative media coverage of the new EUTR. European media have focused heavily on the complaints of green party officials about alleged short-comings in the legislative text. In March, for example, The Times ran a report on the EUTR in its “Greenwash” column which stated that “there are worrying signs suppliers and retailers will find loopholes, enabling them to carry on profiting from the destruction of natural tropical forests… the licensing systems in many rainforest countries are weak and corrupt, so hardwood hacked from natural forests will be defined as legal and end up on DIY store shelves”.

The best response to this kind of coverage is to make the legislation work and then to shout about it. An effective response could put to bed once and for all lingering doubts about the legality of wood products. The wood industry will be the first major materials sector able to claim that 100% of raw material is demonstrably of low risk of being derived from an illegal source. European governments should be lobbied hard to develop their “timber procurement policies” into “material procurement policies” requiring equivalent standards for due diligence across all material sectors. Once again the forest sector is leading the way, demonstrating how to develop responsible procurement practices without adding excess costs or creating unnecessary trade barriers.

? This is an abridged version of a presentation made to the UNECE Timber Committee Workshop in Brussels on April 13.