Assessing the New York Declaration on Forests from a trade perspective

8 May 2015

Stemming forest loss is slated as a part of tackling global climate change. What role for green public procurement and private certification schemes in addressing deforestation? 

Concerned by continued high rates of deforestation and forest degradation, a group of governments, companies, indigenous groups, and non-governmental organisations adopted the New York Declaration on Forests at a high-level UN summit on climate change last September. The document is a political declaration endorsing a target to cut natural forest loss in half by 2020, and striving to end it by 2030. It also calls for restoring 150 million hectares of degraded forests and croplands by 2020 and at least an additional 200 million hectares by 2030. Signatories to the declaration claim that meeting these goals could save between 4.5 and 8.8 billion tonnes of carbon dioxide (CO2) emissions per year by 2030, in other words, the equivalent of the current annual emissions of the United States.

A voluntary “Action Agenda” attached to the declaration recommends a number of steps governments, companies, and organisations can take to help achieve these goals, including trade-related measures. But all this activity raises important questions. Can the proposed trade-related measures really be effective in limiting forest loss and forest degradation? And how might these measures interact with trade rules?

Forest loss and trade trends

The value of global forest product exports more than tripled from 1980 to 2013, weighing in at US$246 billion by the latter, according to data gathered by the UN Food and Agriculture Organization (FAO). Meanwhile, the FAO’s latest Global Forest Resources Assessment suggests that around 13 million hectares of forests were lost each year in the 2000s, compared to 16 million hectares per year in the 1990s.

South America, Africa, and many countries in South and Southeast Asia continue to have the largest forest net loss. FAO estimates suggest that industrial roundwood mainly accounted for wood removals valued at just over US$100 billion annually between 2003 to 2007. This commodity, however, is just one part of the deforestation problem. A major driver of deforestation is the legal and illegal conversion of tropical forests to agricultural land. The precise causes nevertheless vary by region. In South America soybean cultivation in the Amazon and land clearing for the cattle industry are leading factors, while timber, paper, and palm oil production is more prevalent in Southeast Asia.

Tropical deforestation used to be attributed primarily to subsistence farming and local consumption but the economic forces of globalisation are now recognised as important. Global trade in timber, paper, soy, palm oil, beef, and other commodities associated with deforestation continues to destroy entire swaths of forest around the world. Although the majority of crops and livestock products associated with deforestation in the countries of origin are still consumed at local or regional levels, 33 percent of crops and eight percent of livestock products associated with deforestation are traded internationally, according to EU data. International capital investments are increasingly flowing into commercial agriculture, timber enterprises, and large-scale production facilities in a number of developing countries to supply industries facing growing demand in developed countries, as well as from the new middle classes in China, India, Brazil, and other emerging economies.

Changes within global commodity chains are also piling pressure on tropical forests in the global South. Over the past few decades, the timber industry has been gradually shifting from the forests of North America and Europe, to tropical forests and plantations in Asia, Africa, and Latin America as well as boreal forests in Russia. China continues to increase in importance as an importer, consumer, and exporter of forest products. The Asian giant is now the world’s largest importer of industrial roundwood and by far the largest producer and consumer of paper and wood-based panels. China is also at the centre of the vast traffic in illegally logged timber from the Asia Pacific, Russia, and Africa. Factoring in illegal timber trade, China is estimated to buy at least one-third of all the timber sold, according to some environmental crime monitoring groups.

Developments in global commodity chains and markets show, however, that responsible production and consumption can make a difference. Over the past two decades, many governments have adopted public procurement policies with strong links to private sector certification schemes, to promote the use of legal and sustainable timber. Similarly, a number of non-governmental sustainability certification and labelling schemes have emerged, designed to encourage responsible forest management and discourage the sourcing of commodities associated with forest degradation and deforestation. Examples include forest, soy, and palm oil responsible sourcing schemes. Some of the world’s largest retailers have demanded supplier certification, and have also adopted tools such as chain-of-custody tracking, ecological footprint and life cycle analysis, green procurement, and sustainability reporting.

Public procurement policies

A handful of European countries – namely the UK, Germany and Norway, with the possible addition of France and the Netherlands – made a joint statement on public procurement under the New York Declaration indicating their intention “to work on new procurement policies to limit the consumption of commodities associated with deforestation.” Such policies would expand public procurement policies from timber to a wider range of agricultural products associated with forest loss and forest degradation.

Experiences with timber procurement policies can shed light on the prospect and limits of this type of trade tool. While some governments have developed legality and sustainability criteria for their timber procurement policies, others have decided that timber certified under a credible certification scheme can be accepted. In practice all governments with timber procurement policies accept certification under the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification (PEFC) – the two major existing forest certification schemes – as evidence of legality and sustainability. FSC and PEFC – both non-governmental, international, and multi-stakeholder outfits – are advanced schemes that require compliance with environmental, social, and economic forest management criteria, including compliance with national laws, third-party auditing of forestry practices, and product tracing through the supply chain. A major difference between the two schemes is that, whereas the FSC has developed a global set of prescriptive principles and criteria that apply to all certified operations, PEFC is an umbrella scheme for a number of national certification programs with wide variation in criteria and requirements. Several governments also accept a number of simpler legality verification schemes that have emerged as a result of public and private sector demand for legal timber.

As there are no official statistics on public sector timber consumption it is difficult to estimate how much of the total timber demand is covered by procurement policies. According to one estimate by the International Tropical Timber Organization (ITTO), public procurement policies could range between 3-20 percent of total timber consumption, depending on the importing country and market segment. Although such estimates are uncertain, there is little doubt among stakeholders that public procurement initiatives have facilitated the uptake of certified forest products, particularly in the European market.

The links established by governments between non-governmental certification schemes and their public procurement rules and policies are, however, not unproblematic from the perspective of international trade law. The 43 WTO members that are parties to the revised plurilateral Agreement on Government Procurement (GPA) – including all the countries that have signed the New York Declaration – are subject to rules limiting their policy options for procurement entities as listed in each member’s schedule annexed to the GPA. Article IV regarding non-discrimination implies that benefits extended to some products, producers, or companies must be equally available to comparable products, producers, or companies regardless of their origin. Whether a product, producer, or company is certified is probably not in itself a justifiable basis for differential treatment.

GPA Article X limits the range of technical product specifications that can be set out in tendering documents. The product specifications shall not be prepared, adopted, or applied in a manner that creates unnecessary obstacles to international trade. It could be argued that procurement policies based on labelling schemes as well as on the origin of products or their production processes might represent a trade obstacle. Article X also states that, where appropriate, technical specifications shall be set out in terms of performance and functional requirements of the products rather than design or descriptive characteristics. This rule suggests a preference against technical specifications that are based on production processes, for example, whether the timber originates from virgin or old growth forests.

The extent to which these rules would prevent countries from using government procurement policies to promote forestry and agricultural practices in accordance with the declaration also depends on the interpretation and application of Article X:6, namely, procuring entities “may, in accordance with this Article, prepare, adopt or apply technical specifications to promote the conservation of natural resources or protect the environment.” This new provision clearly indicates that procurement entities will enjoy some flexibility when setting out technical specifications in tendering documents.

GPA Articles VIII and IX limit the possibilities of public authorities to restrict the range of potential suppliers. Conditions for participation shall be limited to those that are essential to ensure that a supplier has the legal and financial capacities and the commercial and technical abilities to undertake the relevant procurement. In addition, qualification procedures shall not be adopted with the purpose or the effect of creating unnecessary obstacles to the participation of suppliers of other members. While these rules may open for exclusion of suppliers that have previously submitted false declarations, perhaps regarding the origin of timber products, they would probably not allow countries to restrict participation to suppliers that only trade in certified products.  

Countries may possibly enjoy some flexibility under GPA Article III if technical specifications or qualification requirements are necessary to protect human, animal, or plant life or health. A Work Programme on Sustainable Procurement has also been initiated by the GPA Committee. Among the topics to be explored are the ways in which sustainable procurement can be practiced in a manner consistent with the principle of "best value for money," and the ways in which sustainable procurement can be practiced in a manner consistent with members’ international trade obligations. However, while the programme may signal a willingness to enhance sustainable government procurement, it does not currently indicate any aim of facilitating sustainable procurement beyond what is allowed under the existing rules of the GPA.

Private sector initiatives

The New York Declaration recommends a range of measures and announces dozens of initiatives to phase out products associated with deforestation and forest degradation from global supply chains. More specifically, many private sector signatories have committed to a goal of eliminating deforestation linked to the production of agricultural products such as palm oil, soy, paper, and beef no later than by the end of the decade. Certification and timber legality verification schemes could help companies achieve these targets. Indeed, a number of private actors are already using forest certification to demonstrate partial compliance with obligations to exercise “due diligence,” as required by the 2010 EU Timber Regulation geared towards minimising the risk of placing illegal timber on the EU market.

Data on the supply of certified timber shows that in 2014 about 30 percent or 524 million m3 of global roundwood production  ­– 1.7 billion m3 – originated from certified forests. The proportion of global forest area certified under either FSC or PEFC was 10.7 percent or around 433 million hectares.  The distribution of certified forestland between the northern and southern hemispheres is, however, extremely uneven. In 2013-2014 North America and Europe combined produced more than 95 percent of certified roundwood supply. Meanwhile, the share of certified tropical forests is only around two percent, raising questions about the need for certification frameworks and tools that are more effective in southern countries.

Voluntary initiatives by private parties are not restricted in international trade law. In order for the WTO disciplines to apply, the activities of private parties must be attributable to governments. Rules regarding members’ responsibility in this regard are set out in the WTO Agreement on Technical Barriers to Trade (TBT). Article 4 requires countries to “take such reasonable measures as may be available to them” to ensure that non-governmental standardising bodies do not adopt or apply standards that are discriminatory or constitute unnecessary obstacles to international trade.

Exactly what constitutes a non-governmental standardising body remains unclear. However, given the market power of business and industry associations or consumer associations, it is not unlikely that Article 4 applies to certification and verification set up by such groups to be implemented by their members. Countries shall also refrain from taking measures that, directly or indirectly, encourage such standardising bodies to act inconsistently with the requirements of the TBT Agreement. In accordance with Article 8, the same rules apply to procedures for conformity assessments geared towards checking compliance with technical regulations, carried out by non-governmental bodies.

To the extent that market actors qualify as de facto or de jure monopolies, their activities may be subject to Article XVII of General Agreement on Tariffs and Trade (GATT 1994). This may, for example, be the case for state-owned enterprises that hold a dominant position in the forest products market. Countries have an obligation to ensure that such actors follow rules on non-discrimination and that they make their purchases or sales solely in accordance with commercial considerations. The freedom to apply measures to limit deforestation and promote sustainable forestry may be more limited for such actors.

Conclusions

While soft law instruments such as the New York Declaration on Forests can play a role in realising a more sustainable commodity chain, hard law measures also seem necessary. For example, the limited uptake of forest certification in the southern hemisphere combined with WTO rules to avoid discrimination and unnecessary trade restrictions, suggest that market-based instruments alone cannot be the solution to the global problem of deforestation and forest degradation. More clarity is required regarding the possible limitations of WTO rules for countries and market actors in this area. Perhaps the new GPA Committee Work Programme on Sustainable Procurement can be used as a basis for discussing such issues and finding ways to provide procuring entities sufficient flexibility to implement the declaration.

A nuanced analysis of the prospects and limits of trade-related measures and retail power to achieve sustainable global forest governance must take into account the fact that the public and private sector initiatives described in the New York Declaration largely stem from the northern hemisphere, they must comply with WTO rules, and they have so far had rather limited impacts on global commodity chains.

Indeed voluntary initiatives have to date not been nearly enough to offset the broader effects of big corporations as engines of consumption and drivers of deforestation and forest degradation. However, the growing power of big retailers to act as responsible sustainability leaders within global commodity chains could make a significant difference, particularly if such retail power could be extended to China, India, and other emerging economies.

Lars H. Gulbrandsen, Deputy Director and Research Professor at the Fridtjof Nansen Institute (FNI) in Norway. FNI is an independent foundation engaged in research on international environmental, energy, and resource management politics and law.

Ole Kristian Fauchald, Research Professor at FNI. Law Professor at the Faculty of Law, University of Oslo.

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