Examination of Witnesses (Questions 200-219)
MR DUNCAN
BRACK, MS
JADE SAUNDERS
AND MS
EMILY FRIPP
1 NOVEMBER 2005
Q200 Chairman: So if we can move
on to timber procurement and compare with what has happened here
in the UK with CPET, with other European countries? How do you
think we fare in relation to Germany, Netherlands, France and
Denmark, to what they are doing?
Mr Brack: I think we compare very
well. I think the UK policy is both more effective and more worked
through and has come into effect quicker than most other countries.
What my concern is slightly—and I alluded to this in my
written evidence—that at the moment you are seeing five
EU countries develop procurement policy along slightly different
lines. So everybody is developing it differently, which potentially
creates barriers to people aiming to import into the EU because
they have to know information about the five different schemes.
I think there is a role to be played by the European Commission
in helping to at least make the provision of information about
procurement policies easier for people outside of the EU. The
second thing, which I think is quite disappointing, is that 20
Member States out of the 25 are making no progress whatever on
timber procurement, and so if it is possible for the UK and successive
presidencies to encourage these countries to do something more
about it as an element of the FLEGT Action Plan, then I think
that would be extremely helpful. But I think that the UK itself
has developed a model that is worthy of emulation by other countries.
Q201 Chairman: But there has been
some criticism from NGOs of CPET, has there not?
Mr Brack: Yes.
Q202 Chairman: Is that justified?
Mr Brack: On the certification
schemes and the extent to which it has judged those, I would like
to hand that over to Emily, who has worked on this more than I
have.
Ms Fripp: I am not a certification
expert, but the bit that I know about, the assessment side, it
is reported that on the initial assessment, PEFC and SFI did fail
on the criteria that Saskia was mentioning beforehand—PEFC
on the unbalanced approach to standard setting and SFI on its
audit systems. Both schemes responded within a three or four-month
period and got back and tried to change and address the criticisms
that were given by CPET. Whether they addressed them to the level
that perhaps NGOs would like, I do not know; and I am not in a
position to judge. But I think considering that there has been
debate and pressure on those key issues for a number of years
by NGOs to the certification scheme, and the fact that CPET manage
to get change within a period of months—regardless of whether
it is enough, the process there is for continual review—I
think that is a significant impact of CPET moving forward.
Mr Brack: Could I add briefly
that the principle of CPET is an important thing, which other
countries do not seem to have? You have to have some way of assessing
existing certification schemes but also allowing companies that
are not certified at all to prove that they are meeting the same
standards. There is an important element of WTO and EU procurement
rules, and therefore I think it is a very logical response to
set up a body like CPET, and that possibly ought to be developed
EU-wide in the long-term.
Q203 Chairman: What would you say
would be CPET's ten greatest achievements to date?
Mr Brack: It is too soon to tell.
Q204 Chairman: Their two greatest
achievements to date?
Mr Brack: In coming into existence.
In assessing the certification schemes, I think you can certainly
make criticisms of that and that is worth looking at. But in setting
up a mechanism to assess alternative forms of documentation for
people who are not certified, which, as I said, is an important
part of any procurement rules.
Q205 Chairman: You were saying earlier
on about the five different European schemes where you had a fear
that they were moving to an unlevel playing field in respect of
timber procurement. I am moving on to the WTO rules, and I
am keen to question you, Mr Brack, about how you could see a sustainable
timber procurement policy being compatible with WTO rules. I have
read with interest the evidence you have given to us. Are you
actually saying to us that if the government wanted to, if the
UK wanted to, if it took the leadership role within the EU, that
there would be nothing to stop the EU within the WTO coming up
with just such a policy in respect of procurement?
Mr Brack: Yes, I think so. I do
not think that WTO rules are very important constraints on the
EU Member States, partly because the WTO agreement on government
procurement has been signed by relatively few States and by no
important tropical timber exporting companies, but largely because
the EU procurement rules are far more detailed. They build on
the same principles as the WTO procurement agreement anyway, but
they are much more important constraints for the UK and other
Member States. But I think that they give enough latitude to allow
Member States to impose quite tough standards for sustainability.
I think a more important constraint is the lack of availability
of sustainable timber in the market place. So I think again that
the UK and others are right to say, "We will make sure that
legal timber is the basic requirement, but above that we will
go for sustainable timber where it is available." The big
debate I think is about the extent to which you can incorporate
social standards, for example the treatment of forest dependent
people, indigenous communities within your procurement policy.
It is clear that there is substantial disagreement here. The UK
has interpreted so far the EU procurement directives as not allowing
that. Other countries appear to interpret them as allowing that.
I think it is a substantial area of uncertainty. Partly we have
no idea because there has never been a dispute case on this before
the European Court of Justice following from the new EU procurement
directives. So the interpretation is unclear and it would be useful
to have further discussion about that.
Q206 Chairman: I am not altogether
clear. Are you saying that if the UK government wished to proceed
with getting approval through all the different layers of bureaucracy
that it would have to go through, if it set out to achieve a sustainable
timber policy of procurement that it could actually do that? Or
are you not including this issue of social alongside economic
and environmental in the definition of sustainable?
Mr Brack: Yes, that is the problem.
The Member States can broadly do whatever they like, but if someone
thinks that they are exceeding the constraints set by EU procurement
rules they would launch a dispute against them and the European
Court of Justice would hear it. So to that extent we are not completely
clear how the ECJ would interpret procurement directives. I think
there is not much disagreement that you can impose quite high
environmental standards, so the environmental angle of sustainability
is not likely to cause a problem. The area of dispute is about
the social element of sustainability.
Q207 Chairman: Are you saying that
that could be included as well?
Mr Brack: I am saying that it
is unclear whether it can be included. I do not know, personally.
But clearly different Member States are interpreting this in different
ways.
Q208 Chairman: In terms of the contact
that you have had with other European countries, what do you know
about the stance of the UK government on this? Are they sympathetic
to try to overcome the problems that there are in this definition
of social, or do you think that there would be sufficient support
to proceed and, if necessary, take whatever action needs to be
taken through the WTO to get that on to the WTO agreement level?
Mr Brack: Again, it is an EU
procurement directive problem and not a WTO one. I honestly do
not know; I am not sure that I could say. I think that there is
sympathy within the UK Government for incorporating stronger social
criteria, but they feel constrained by EU procurement directives.
Other Member States do not appear to feel as constrained as the
UK. So it would be helpful to discuss this further and perhaps
get a legal interpretation of the procurement directives.
Q209 Chairman: So I am right that
the answers you have just given now are slightly at odds with
the written submission you have given to us, that really if there
was a will to do it there would be a way of doing it?
Mr Brack: I think my written submission
just said it was unclear, which it is—unclear.
Q210 Mr Ainsworth: We have not had
much evidence yet which gives us confidence that the FLEGT Action
Plan and the Voluntary Partnership Agreements are going to amount
to a row of beans in terms of making a practical difference. Is
that your view?
Mr Brack: No, I do not agree with
that. I think a lot of the criticisms that the NGOs made in the
previous talk are to some extent justified, but I think you need
to see the licensing scheme that the FLEGT Action Plan is bringing
in as the first step in a series of further steps, and in that
sense it should be compared to any environmental agreement, where
the initial agreement is often clearly inadequate to deal with
the problem but it creates a step beyond which you can take further
steps. For example, the Montreal Protocol on ozone depleting substances,
the Kyoto Protocol on climate change—clearly their first
versions were inadequate to deal with the problem, but they created
the systems and the will to move beyond that in due course. So
I think if the licensing scheme stopped at where it is likely
to be in the first year or so, and did not proceed any further,
it would not be terribly effective. But I do not think that is
necessarily the case, I think it can develop and evolve. The problem
is, as Saskia said in the earlier session, there is no multilateral
agreement on forestry or on illegal logging under which you can
bring in a licensing scheme, and other licensing schemes, again
for example in the Montreal Protocol or in the Kimberley Process
on conflict diamonds, have taken place within multilateral frameworks
and have worked effectively to exclude illegal products, or, for
the Kimberley Process, conflict diamonds, from world markets.
I think they have a good record and they can work. But because
there is no multilateral agreement on illegal logging you can
meet that problem in two ways: one is to try to negotiate a new
multilateral agreement and really there is not much political
will, since the collapse of the attempts to negotiate the Forests
Convention at the Earth Summit 15 years ago, for a new multilateral
agreement. Or you can choose to do what the EU is trying to do,
which is to build up the system from the bottom up, through bilateral
agreements with individual countries. If you do that then you
face the inevitable problem that there will be some countries
that probably will not join your bilateral agreements and therefore
potentially provide gaps, loopholes, through which illegal timber
can be imported. It is true to say also that a processing country
causes potentially quite a big gap. If the agreement, for example,
is between Ghana and the EU, (Ghana is quite likely a first signatory)
and Ghana exports primarily straight to the EU without any intermediate
country, then I think the licensing system, in those circumstances,
ought to work well, as long as it has things like independent
monitoring built into it, which I think will be there in the partnership
agreement. If you are seeing a longer chain of movements, if a
country like Indonesia exports to China and then China exports
to the EU, then that makes the system, as it is envisaged at the
moment, much more difficult, but I think that is something that
needs to be tackled and we need to think how you can deal with
chains of countries exporting and shipping. In theory, conceptually,
there ought not to be a problem with developing that; it needs
more political will, it needs more effort, it needs a willingness
to move beyond the initial system. I think that the FLEGT Action
Plan—the licensing system and the partnership agreements—are
setting up the first stage of that process, which we then ought
to move beyond. So I am much more optimistic than the NGOs.
Q211 Mr Ainsworth: You certainly
are and it is quite refreshing to hear somebody who is optimistic
about these things. Let me explore a little further how justified
that optimism is. We heard just now the way that the whole licensing
system had been watered down, reduced basically, and you yourself
said it is very modest, it is more emblematically important than
practically. I think you said that 20 out of 25 of the EU Member
States are doing nothing. With that kind of political inertia
how likely is it that any of this is really going to happen soon?
Mr Brack: Two comments on that.
The reference to 20 out of 25 was about procurement policy, which
is separate and different from the licensing scheme. I think procurement
is very important and it can come into effect faster than licensing,
but it is not connected; they are different things. The licensing
scheme will affect the whole of the EU, through a regulation that
will apply without the need for any more national legislation.
I do not agree with the comment made by WWF that it has been watered
down. Actually the original text of the Action Plan referring
to the licensing scheme covering a more limited number of categories
of timber than has now actually proved to be the case. Because
of the impact studies that the Commission carried out on the likely
effect of a licensing scheme they actually extended those categories
that the licensing scheme will cover to include plywood and veneer,
which was not envisaged originally. So I simply think that was
an inaccurate comment. I accept that again the licensing scheme
will be more effective if it covers all categories of timber and
timber products, including processed products, engineered wood
and pulp and paper, and again that is something that they need
to be prepared to move on to very rapidly. But, again, it is the
first step in the process.
Q212 Mr Ainsworth: You are currently
looking at alternatives that the EU could adopt. Are there any
promising signs there?
Mr Brack: There are two elements
in the Action Plan on which we are carrying out studies on behalf
of the UK Government, and I think again I would agree with the
NGOs in saying that the Action Plan has been rather slow in implementing
some of these studies. The first one is an examination of national
legislation in countries to see if there is any kind of law that
might be relevant to control the import of illegal timber, for
example laws on theft or receiving stolen goods or money laundering.
We have not finished those studies yet—there are five or
six going on in various Member States of the EU—but my preliminary
conclusion would be that there are no domestic laws that are likely
to be very useful in controlling the import of illegal timber,
particularly from countries that do not sign a partnership agreement.
So the second stage then is to look at what the options are for
additional legislation at the EU and Member State level that might
be helpful to control the import of illegal timber, and again
I would agree with the NGOs that this kind of legislation would
be extremely useful as a reinforcement to the licensing scheme.
There are a series of options that we will be looking at—we
have not finished the study yet—and one is modelled on legislation
in the United States that makes the import of illegal fish and
wildlife produced illegally overseas illegal in the US. I think
it should be possible to adopt something like that at EU and EU
Member State level.
Q213 Mr Ainsworth: Does the WTO come
into the equation at some point?
Mr Brack: It depends what the
legislation says. The US legislation, the Lacey Act, is not a
border measure, it is not a requirement that is imposed at the
border—if it was then there would be a WTO case. What it
simply says is that if you are found in possession of fish and
wildlife produced illegally overseas or if you sell it or market
it or transport it or export it, then that is an illegal act and
you can be subject to prosecution in the US courts, and even if
you did not know that the material was illegal you can have it
confiscated from you. So it is important to say that that is not
a border measure, it is a change to criminal legislation; and
the German draft legislation which made the marketing and possession
of timber produced illegally in virgin forests illegal in Germany—it
is not implemented yet, it is still draft legislation—is
an attempt to do something like that at the EU level. I think
that kind of measure adopted at the EU Member State level would
be a very important reinforcement for the licensing scheme. It
is not a panacea because it is still quite difficult to get evidence
of the fact that the timber has been produced illegally; you need
to have good cooperation with the producing country and you need
to have evidence of the crime there, and that is not easy by any
means. But it is another kind of reinforcement, a shoring-up of
the licensing scheme.
Q214 Mr Ainsworth: But you also need
political will within Europe.
Mr Brack: You need the political
will. I think it is very helpful that Germany published its draft
legislation because it rather moved the debate on. I think the
view amongst the EU Member State Governments and the Commission
has been, "We want to see the licensing scheme come into
effect first and that is the top priority," and I think they
are right on that. And, "When we have that in place we will
look at other options as well." I think they could have been
faster in looking at the other options but they are due to look
at the other options.
Q215 Colin Challen: Turning to the
role of investment finance, particularly as it supports the destruction
of forests and encourages unsustainable timber production, what
sort of investment are we looking at, in both public and private
senses, and what kind of figures might we be talking about?
Ms Saunders: I was told yesterday
that you would ask for figures and unfortunately it is the one
thing that I cannot really give you. As to the kinds of investments,
there is a really broad scope and it goes from everything on the
public side where there are export credits, development assistance,
development banks, and on the private side equity investments,
bond trading, project finance and corporate finance. They are
all involved in different ways and in different sectors that are
damaging or high risk at least. There is not a lot of international
investment in actual forest management or logging because they
are not particularly capital-intensive sectors, but there is investment
in, for example, the pulp and paper sector. The extractives quite
often are in forested areas so although they are not ostensibly
forestry investments they still have an impact. The infrastructure
and investment in road building and those kinds of things, and
timber processing such as ply, are all quite critical sectors
that do get international investment.
Q216 Colin Challen: I understand
that in China the pulp and paper mill sector is already over capacity
measured against its legal sources of supply. Are we still seeing
a lot of investment going into that sector?
Ms Saunders: If you talk to analysts
now it is still being punted as an exciting sector in which to
be investing.
Q217 Colin Challen: Where are those
analysts based?
Ms Saunders: Europe and North
America.
Q218 Colin Challen: British banks?
Ms Saunders: I have spoken to
one analyst in the UK and two in Dutch banks and they have been
talking about it quite positively. I have also seen recommendations
from Asian arms of European banks, Asian subsidiaries of European
banks. Credit Suisse was the one I read recently.
Q219 Colin Challen: Have any of these
analysts become more aware of things like corporate social responsibility,
those CSR issues that many companies now seem more engaged with?
Ms Saunders: On paper, yes, but
it is very difficult to see the impact of that in investment decisions.
Banks are not particularly transparent about the decisions they
make and they are certainly not transparent about the investments
they decide against. I have been reading recently that there have
been a few big oil palm flotations in Malaysia and in the general
business Press the only risk that is mentioned is the potential
fluctuation in commodity prices. No one is talking about the potential
for that land to have been cleared illegally; I have not seen
anything like that in the mainstream. Obviously you get it in
SRI, socially responsible investment type publications, or if
you talk to those kinds of banks, but I have not seen anything
mainstream suggesting it.
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