Examination of Witnesses (Questions 220-226)
MR DUNCAN
BRACK, MS
JADE SAUNDERS
AND MS
EMILY FRIPP
1 NOVEMBER 2005
Q220 Colin Challen: Is the World
Bank or the Asian Development Bank doing anything at all to try
to moderate this problem, to try to pull back the enthusiasm of
these analysts to pour their money wherever they see a profit?
Ms Saunders: It is quite difficult
to know, actually; I do not think I can really honestly answer
that with any authority. They have safeguard policies but how
well they are implemented is really highly political. It seems
to me that there are a lot of legitimate NGO kind of concerns
and then there are lots of NGOs that just do not like the World
Bank, so it is very difficult. The World Bank comes out with incredibly
positive glossy brochures about how great their investments are
and then it is really hard to make a judgment unless you are on
the ground.
Mr Brack: The impression I get
within the World Bank is that the country and the regional desks
are far more important than the thematic desks, like the people
who work on forestry. The people who work on forestry are completely
switched on to this debate but would seem to have less influence
than we would probably like on the people who work with the countries
and the regions.
Q221 Colin Challen: The FLEGT Action
Plan includes a commitment to encourage due diligence in these
parts of the financial sector in forestry operations, but is any
progress being made on this area as regards the Action Plan?
Ms Saunders: Not in the Commission,
no. This is it![38]
The paper I wrote seems to be the only thing at the moment that
is being done. The Austrian Presidency is being encouraged to
hold a meeting on export credits because there is quite a lot
of evidence to suggest that export credits from Austria, Germany,
Finland and Sweden go towards supporting the export of pulp and
paper machinery around the world, so that is one area of impact.
There are others.
Mr Brack: As we said before, you
can criticise the Commission for allocating insufficient resources
to implement the Action Plan and, as I said before, they have
chosen to concentrate on the licensing scheme, which is probably
right and is probably the most important element of the Action
Plan, but it does mean that other elements of the Action Plan
have not had much attention paid to them.
Q222 Colin Challen: On the issue
that you mentioned before between the country desks and the thematic
desks in the perhaps various international organisations, the
World Bank and perhaps the WTO too—I do not know if they
have similar separations—I am wondering, since China joined
WTO three or four years ago—and I forget how long ago it
was exactly—have you any knowledge of how the trade in illegal
timber has developed, whether it has particularly gone up or down?
And to what extent the international organisations are really
taking an interest in that, or whether there are internal conflicts
over the need to get China into a full membership of the WTO,
as opposed to its environmental responsibilities.
Mr Brack: I was actually at a
meeting in China last week that was put together partly at the
request of the State Forestry Agency, and we had representatives
from the Ministry of Commerce and the Ministry of Foreign Affairs
there, and also some NGOs from China. Partly it was an awareness
raising exercise about this whole issue, what is happening within
the FLEG process, the Europe and North Asia FLEG process, for
which the ministerial conference will be taking place in three
weeks' time, in which of course China will be participating. But
they were very interested in what the EU is doing to control imports
of illegal timber, and I think the impact of Wolseley Build Center
stopping imports of Chinese plywood in response to the Greenpeace
report certainly had an impact on them, so they are becoming aware
slowly of the interest amongst importing countries in controlling
and knowing more about their imports and being concerned about
trying to keep illegal timber out of their markets. What I think
they are not completely aware of yet is the need to have better
evidence from the countries of origin from where they are importing.
China has developed as an importer incredibly rapidly and is climbing
very rapidly up the import tables—far more important than
they were even five or six years ago from our point of view—but
they are still prone to say, "We are importing from Papua
New Guinea, okay, we asked the customs officials in Papua whether
the material was okay and they said yes, it was," and that
is the end of it. They have not really made the switch to say,
"We need extra proof because you cannot trust the documentation
from countries like Papua."
Ms Fripp: Just to add to that,
the structure of the Chinese industry as well, it is huge and
there are thousands of these smaller plywood producers and loggers
and they themselves were undercutting. There are three or four
very big producers in China and I recently met with some of them
and they were complaining about undercutting in the international
markets by their own producers because the thousands of the small
guys getting it from Burma and elsewhere and producing a mixture
of plywood, some pure tropical, some combi-plywood, and the anti-dumping
regulation from the EU they felt particularly unfair because it
was targeted at China, but they felt it was more at this half
of Chinese production that they could not implement. And the guys
we spoke to said, as Duncan said, that if one of the UK buyers
said to them, "Give us evidence," they would ask that
question on, but they were not fully up to speed as to what it
meant, what was going on. And maybe an approach with those businesses
that want to maintain business and trading with Europe would be
more of a business to business approach, a bit more through the
Tropical Forest Trust or the WWF FTN framework where they are
linking in with buyers in Europe and then acting as a middleman
and then being helped and assisted in, "What information
do we need from our producers?" The Chinese are very good
businessmen and if they feel that they might lose a market, or
they might gain a share of the market by having that little bit
of evidence, then it might well be something they would look at.
For some of these big producers they have set up factories in
Central Africa and around the globe and that in itself causes
many issues, but looking at it objectively from a supply chain
process, if they already have a good link with a particular producer—and
at the moment they are allowed in a particular producing country
to bypass the laws and not necessarily pay all the taxes and ship
it to themselves—because they owned and managed two of ends
of supply, they own the supply and they could work with a buyer,
then in theory they could do something about it. So it might be
that looking more at the individual cases as well might be a way
that could speed up and share some lessons from the Chinese point
of view.
Mr Brack: I did not answer your
question about the WTO. One thing that the Chinese wanted to know
was why this was not being discussed at the WTO. It is true to
say that the WTO Secretariat has displayed very little interest
in this.
Q223 Chairman: What would need to
happen in order for the WTO Secretariat to take an interest in
it?
Mr Brack: Probably for a dispute
case to arise, if some WTO member alleged that another WTO member
was unfairly constraining imports because of concern about illegal
timber. It is difficult to see that happening actually and the
licensing system should not lead to that because it is a mutual
agreement amongst importing and exporting countries. Japan has
raised the issue once actually in the Committee on Trade and Environment
in the WTO and it led to not a very good discussion and a very
brief one. I would query whether there is much point in raising
it in that kind of general way. The Committee on Trade and Environment,
which is probably the logical place it would come up, was set
up in 1995 along with the rest of the WTO and has yet to reach
a conclusion on anything. The WTO has bigger questions on its
plate at the moment, for example the possible failure of the Hong
Kong Ministerial in December, and they simply do not pay much
attention to these, what they see as fringe issues. Also, I think
you would have a discussion—though in a sense all discussion
is useful—amongst trade negotiators, who are not necessarily
particularly familiar with these issues and tend to see everything
in terms of impairments to trade and do not really understand
the basic argument. So I would query whether injecting it into
the WTO Committee would be of much value.
Q224 Chairman: We will take one last
quick point on that.
Ms Saunders: This might seem like
a slight tangent but it seemed to me that in your question originally
there was an element of saying, on the political trade-off between
China into these international institutions and influencing them,
where does the balance lie? I have to say that everything I have
read about the World Bank and the Asian Development Bank suggests
that the balance lies on bringing them in. Arguably safeguard
policies have been changed in the last couple of years, so once
they bed in and get implemented you might have more of a sense
that there is more leverage, but I have not seen any evidence.
The World Bank's remit is growth, they need to get people repaying
loans, that is where their basic capital comes from. In terms
of leverage it is quite difficult to see how much leverage they
have. I do not know how much they have but how much they exercise
does not seem to be particularly strong.
Q225 Chairman: Finally, on that point
do you think there would be any mileage in our Committee inviting
the regional desk, presumably for South-East Asia, to give some
evidence to us on this issue, given what you have both said?
Ms Saunders: The regional desk
of the World Bank?
Q226 Chairman: Yes.
Ms Saunders: I think it would
be really interesting. I think it would also be interesting to
perhaps get some of the relevant sectoral representatives. So
if you had, for example, the Asia regional people and somebody
from the agribusiness sector and somebody from the extractives.
I do not know if you know about the Extractive Industries Review,
it was a review within the World Bank—and I have seen a
leaked version of the first report—and it actually came
to some substantial recommendations, and its analysis was quite
critical of the impacts of extractives investments by the World
Bank. A similar process on forestry and related sectors would
be a really powerful tool, I think, if you could get them to talk
together. They might even talk to each other over a coffee!
Chairman: We will have to leave it there.
Thank you very much indeed to all three of you for coming along
this afternoon.
38 Jade Saunders, Improving Due Diligence in Forestry
Investments (Chatham House, June 2005) Back
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