www.fern.org

9 April 2001

FERN’S COMMENTS ON DG TRADE’S INFORMAL DISCUSSION PAPER REV. 1 ‘THE NON-TRADE IMPACTS OF TRADE POLICY ­ ASKING QUESTIONS, SEEKING SUSTAINABLE DEVELOPMENT’.

Introduction

Fern welcomes the fact that DG Trade is addressing the issues related to the interface between trade and sustainable development by producing the above-mentioned paper. However, we feel this paper falls short of its objectives.  Its aims -as set out in the list of questions in the beginning of the paper- are  too ambitious. Few its  questions are answered by the body of the text. Furthermore, the paper’s objective is unclear[1]. It therefore lacks clarity. Last, the paper lacks credibility as many dubious and non-referenced statements are made[2].  Therefore, the paper is a disappointing mixture of a historical review of Commission activities, and generalised statements that are not backed up by any form of analysis. To become a useful document the text needs to be reformulated so as to present the current situation, analyse the problems and propose actions to address them.

Although Fern appreciates the consultation process organised by the Commission, the status of this process and the real opportunity afforded to NGOs for comments to be integrated into the final Communication are unclear. In the light of these uncertainties and in the light of comments presented by other NGOs such as the RSPB and WWF, Fern has restricted its comments to the forest sector. Nonetheless Fern supports the analysis presented by WWF and the RSPB to DG Trade in their comments[3]; for instance that the economic theory underlying the paper’s analysis[4] needs to be reviewed. DG trade is basing its analysis on 19^th century economic theory of comparative advantage, which does not integrate environmental and social externalities.

Therefore Fern believes that the theory, descriptive analysis and solutions to problems highlighted must first be rectified before the issues relating to natural resources and forests in particular can be addressed. However, if the authors are willing to review their discussion paper in light of NGO comments received then an additional chapter on forests could enhance the understanding of the interaction between trade and sustainable development.

Forests and the non-trade impact of trade policy

The paper misses as well as misrepresents some forest related issues. These are complex issues and the over-simplification undermines the papers contribution to environmental and social integration.  Our main concerns are as follows:

·        Despite the fact forests are treated by the WTO as industrial goods, they also provide multiple functions and benefits to society. The agricultural sector is no more or less multifunctional than the forest sector. The EU should therefore clearly state that natural resources, such as forests, cannot be dealt with in trade fora as purely industrial goods.

·        To ensure that the environmental and social aspects of forests are being taken fully into account in discussing the impact of trade liberalisation in the forest product sector, we would suggest[5] that DG Environment and DG Development are more closely involved in any further drafts of the paper.

·        Finally, Fern would like to take the opportunity to accept DG Trade’s proposal to hold a specific ad hoc meeting on the trade impacts on Forests. Fern will get in touch with DG trade to discuss this idea further.   

·        We suggest that DG trade consults civil society on its new negotiation position on the forest product sector. DG trade should prepare a communication (such as the one it has prepared on TRIPs and the CBD), which should be circulated widely for comments.

As the paper misses some forest related issues and misrepresent others, we would like to highlight briefly some of the most relevant issues:

1.      The ecological and social relevance of forests has large economic implications

Forests provide timber, non-timber forest products, as well as a range of other environmental services, estimated by the World Bank at 4.7 Trillion US Dollars per year[6].  Ninety percent of the world’s 1.2 billion extreme poor—those living on $1 or less a day—depend on forests for their income, or are significantly dependent on forest resources, including agro-forestry and tree crops[7]. It is conservatively estimated that governments are losing at least $5 billion a year through failure to collect full revenues from forests, and it is probable that governments are losing another $10 billion more per year to illegal logging. These losses have a large impact on the budgets of governments, and on overall economic growth.

This data highlights that forests are consistently and seriously undervalued in economic and social terms. By restricting the debate to trade in forest products and limiting forest products to industrial goods the Commission does not pay attention to the ecological and social roles forests play.

2. Consumption reduction is relevant

As a consumer, the EU’s impact on forests is felt globally: it is one of the largest consumers of timber, and specifically pulp and paper products. In 1998, the EU’s consumption of paper products amounted to 196kg per person per year or a total of 73,3 Mio tones, compared to 334 kg per person per year in the US or 3,8 kg per person per year in India[8]. It is undeniable that consumption patterns of the EU and its Member States will leave a heavy ecological footprint on the globe; the question is how deep, how indelible a footprint this will be. The issue of consumption reduction needs to be addressed in any trade related Commission paper addressing sustainable development.

3. Increased trade in timber from badly managed forests leads to more forest loss

Trade is, in itself, neither good nor bad for forests and forest peoples. However, given the lack of effective regulatory structures, continued growth in the export of forest products[9] is resulting in unsustainable pressures on forest ecosystems. Worldwide, the quantity of forest products exported has doubled since 1970[10], and the value of forest products' exports has tripled between 1970 and 1995 to reach $152 billion a year. International trade now accounts for 25% of global production of wood based panels and paper, 20% of sawn-wood and wood-pulp, and 6% of industrial roundwood. Ten countries are responsible for 70% of timber exports[11].

Commercial logging is by far the greatest threat to the world's old growth forests, affecting 70% of these forests.[12] Large-scale mining, exploration for oil, road building and land clearing for agriculture -all commonly export orientated activities- are other important causes of forest loss[13]. As most of these forests are not well managed, there is a direct link between trade, trade liberalisation and forest loss. For more information see report  ‘Trade liberalisation and its impact on forests’ enclosed.

4. Tariff reduction will lead to forest loss

Although tariffs are already low in the forest product sector, further tariff liberalisation will increase the pressure on remaining forests. This is recognised by DG Trade in its sustainability impact assessment [14]: “The overall environmental impact is also uncertain; and will vary between sectors. It is likely to be negative in resource based industries, if increased trade liberalisation encourages increased rates of depletion of natural resources, such as fish stock and forests.” Therefore, it is crucial that DG Trade in cooperation with other services such as DG Environment ensures appropriate sequencing of environment and trade policies. Measures to conserve and manage forests properly must be implemented before further reductions of tariffs are negotiated.

5. Non-tariff measures (NTMs) to protect forests should stay in place

Environmentally supportive activities potentially subject to reduction or prohibition under WTO rules include eco-labelling and forest certification schemes, import and export quotas, log export bans, requirements for recycling, and subsidies. These so-called non-tariff measures are often in place to protect forests. To date there is no agreed definition of NTMs. Furthermore, because little research has been conducted into this issue, the subject is poorly understood. A report commissioned by APEC[15] represents the first serious attempt to categorize the myriad of NTMs in use. However, it also reveals a lack of understanding of environmental protection and fails to recognise the role of trade in causing deforestation.

Fern believes that it is imperative for DG Trade and DG Environment to carry out further research on non-tariff measures. The study will have to balance equally the environmental, social and economic aspects of the measures. The aim of the study should be provide a clear understanding of non-tariff measures. It should ensure that a clear distinction is made between environmental and beneficial measures and negative measures. The analysis must include the objectives underpinning the measures and the reasons why they may have positive or negative environmental consequences. Finally, options should be presented to ensure environmental and social measures are safeguarded and the ‘deep freeze’ effect of the WTO on Multilateral Environment Agreements is halted.

Forest certification is a useful tool if the certification scheme is credible

As forest certification is explicitly referred to in the DG Trade’s paper Fern would like to point out a few fundamentals on this issue.

Forest Certification is a tool to improve forest management and if combined with labelling, provides a useful instrument for consumers to make a distinction when purchasing a product, between a product from a well-managed forests and one from an unsustainably managed forest. However, it is a fact that only a small proportion of the world's forests is currently well managed.

On page 6 of the Discussion Paper, DG trade states….”Further liberalisation should be accompanied by developing and enforcing better international certification…” The only credible certification scheme in place is the Forest Stewardship Council. The FSC is an international scheme. Other schemes that have emerged recently do not fulfil minimum criteria for credible certification.[16]

To suggest as the DG Trade paper does, that what is needed to reconcile trade liberalisation with sustainable development in the forest sector, is a regulatory framework for forest certification will not be possible unless existing certification schemes are indeed comparable, which they are not. Fern is at present carrying out a comparative study of the main forest certification schemes in operation: the Forest Stewardship Council, the Pan European Forest Certification Scheme, the Sustainable Forestry Initiative and the Canadian Standards Organisation. The first draft will be finalised at the end of April.

In the paper the USTR study on the Accelerated Tariff Liberalisation[17] is used to justify the fact that 'stronger rules for certificating sustainable timber production may be more important than tariff reductions for promoting consumption'. Apart from the fact that there is no evidence supporting this statement, it shows DG Trade’s interest in promoting consumption. The USTR study clearly shows that trade liberalisation will lead to an increase of logging in environmentally and socially vulnerable regions such as Indonesia, Malaysia, Chile and Finland.

END