TRADE ISSUES EXPECTED TO FEATURE AT UPCOMING UN FOREST FORUM

The third session of the UN Forum on Forests (UNFF-3), meeting from 26 May to 6 June in Geneva, Switzerland, will focus on three priority areas that include the economic aspects of forests; forest health and productivity; and maintaining forest cover to meet present and future needs. A number of trade-related issues are expected to feature in the context of the first of these areas (economic aspects of forests), including certification, subsidies and market access, as outlined in a supporting document prepared by the World Bank. The paper stresses the significant impact that macro-economic policies, such as trade liberalisation and the removal of export controls, can have on forest management, emphasising the need for forest concerns to be mainstreamed into overall economic development and poverty reduction strategies.

Certification and labelling for sustainable forest management

The World Bank paper notes the "considerable progress" made in the use of market-based tools to promote trade in forest products from sustainably managed forests, such as certification of forest management and labelling of forest products. These tools could also play an important role in combating illegal trade in forest products, which according to World Bank estimates has led to losses of more than USD 10 billion, eight times the total ODA flows into sustainable forest management. While the importance of voluntary certification schemes in achieving the objective of sustainable forest management was also stressed at UNFF-2, several delegates, in particular from developing countries, cautioned that such schemes should not be used as a barrier to trade for tropical timber (see BRIDGES Trade BioRes, 4 April 2002).

At the WTO, eco-labelling has been discussed more generally at the WTO Committee for Trade and Environment (CTE) based on the mandate by the Doha Work Programme to give particular attention to labelling requirements for environmental purposes in its work. Members remain far from agreement on how to address this issue at the CTE. The body is struggling with how it can add value to an issue area that most Members prefer to deal with at the Committee on Technical Barriers to Trade (TBT). Canada has put forward a framework for informal, structured discussions on labelling in the TBT Committee in an effort to develop a better understanding of the practical steps that need to be followed in developing labelling measures (G/TBT/W/174/Rev.1). While broadly welcoming Canada's efforts, many developing -- and some developed -- countries remain wary of engaging in extensive discussions on this issue due to concerns that stronger eco-labelling regimes could prove a barrier to their market access.

Eliminating perverse subsidies

According to the World Bank paper, perverse subsidies that may result in deforestation and forest degradation are estimated to amount to about USD 14 billion per year. This includes implicit (or concealed) subsidies, such as low stumpage prices arising from inefficient rent collection and artificially depressed log prices due to trade restrictions. The removal of perverse subsidies, while likely to improve the climate for sustainable forest management, has proven difficult in the past due to "vested group interests", the paper asserts, adding that due to the potentially adverse impacts, this issue "should be an important area for future scrutiny, analytical clarification and action". In this context, the paper notes the opportunity offered by the Doha trade round for reducing agricultural subsidies, which can have an adverse impact on the forest sector by encouraging unwarranted land conversion.

In contrast to fisheries subsidies, forest-related subsidies have not been singled out as a distinct sector in the ongoing discussions in the WTO Negotiating Group on Rules (see related story, this issue). Rather, they are addressed within the broader debate on clarifying and strengthening the disciplines under the WTO subsidies agreement as part of the Doha mandate. Specific subsidy-related concerns have been raised in the US-Canadian softwood lumber dispute over Canadian stumpage fees -- a tax on each harvested tree -- which the US alleges are below market value and therefore constitute a subsidy to Canadian lumber producers (see related story, this issue; BRIDGES Trade BioRes, 16 May 2002). The US' view was supported by the Canadian First Nations group Interior Alliance, which goes even further, alleging that the non-recognition of Aboriginal land rights constitutes a subsidy under international trade law.

Improved market access for forest products

While acknowledging the recent improvements in market access for forest products that have resulted from the Uruguay Round of trade negotiations, the World Bank paper stresses that more needs to be done to improve market access, especially with regard to non-tariff barriers and unilateral measures. This applies in particular to local communities who should be supported in the processing and marketing of forest products. In this context, the paper cites the ongoing negotiations on reducing tariff and non-tariff barriers for environmental goods and services as part of the Doha trade round, and suggests that UNFF-3 could assess ways of working collaboratively with the WTO on this issue, including ongoing efforts at the WTO to agree on a definition of environmental goods.

At UNFF-2, developing countries had proposed language calling for the elimination of tariff and non-tariff barriers on forest products in the context of the WTO Doha agenda. Following opposition from several developed countries, however, the final decision simply urged countries to promote sustainable forest management "through trade policies and practices, including in the WTO" and "to negotiate in the context of the Doha Work Programme".

Similar to forest-related subsidies, forest products have been discussed more generally in the context of market access negotiations, rather than as a specific sector. At the Negotiating Group on Market Access, Canada has expressed its support for negotiations of new "zero-for-zero"(duty-free) sectoral agreements, which could also cover forest products (TN/MA/W/9). This suggestion, however, was rejected by Japan, which argued that it could seriously impede the promotion of sustainable forest management (TN/MA/W/15/Add.1). Japan, which maintains relatively high levels of protection for its forest industry, stressed the importance of retaining flexibility when determining appropriate tariff levels to allow domestic and international factors to be taken into account.

In the context of environmental services, the EC submitted a communication in 1999 on classification issues in the environmental sector, which includes protection of forests and promoting sustainable forestry in the list of environmental services (S/CSC/W/25). However, the proposal has so far not received major backing from other countries and discussions at the WTO on how to define environmental goods and services continue (see related CTE story, this issue). In the context of the International Tropical Timber Organisation (ITTO), emerging markets for forest services include: watershed protection; ecotourism; carbon sequestration; and biodiversity protection (see BRIDGES Trade BioRes, 21 November 2002).

BRIDGES Trade BioRes will report on the outcomes of UNFF-3 in the forthcoming issues.

Additional Resources

WTO documents are available at the WTO's Document Search Facility.

Daily coverage of UNFF-3 will be provided by IISD Linkages.

ICTSD reporting.