VOLUNTARY PARTNERSHIP AGREEMENTS
(VPAS)
44. Voluntary Partnership Agreements are bilateral
agreements between a timber producing country and the EU. Their
aim is to ensure timber entering the EU from that partner country
is guaranteed to have been harvested in conformity with its relevant
national legislation. Timber from a partner country will not be
allowed into the EU without proof of this conformity, which will
be provided through compliance with the proposed licensing scheme.
The crucial characteristic of the proposed scheme is that it is
voluntary and bilateral, involves mutual agreement and no third
party countries. As a result it does not fall within WTO rules
that would apply to a unilateral border control aimed at limiting
the movement of illegal timber, and is therefore not in danger
of being challenged by any WTO member.
45. The Regulation putting in place the licensing
scheme was agreed by the Council of Ministers in October 2003.
As yet there are no VPAs in place. In its memorandum the Commission
told us that work is currently underway to explore the possibilities
of setting up Voluntary Partnership Agreements with counties such
as Ghana, Gabon, Democratic Republic of Congo, Malaysia, Indonesia
and Vietnam. Negotiations are most advanced with Ghana and Malaysia.[48]
46. The original Commission document setting out
the proposals for the FLEGT Action Plan made very clear what would
be required for the proposals to be successful:
In order for the scheme to function properly,
FLEGT Partner Countries would need to establish reliable and credible
systems and structures to identify and certify timber harvested
in conformity with national legislation and monitor its flow to
the EU and elsewhere.[49]
The document also recognised the need to deal with
timber from a partner country entering the EU via a third country,
which would therefore avoid having to conform with the licensing
scheme and the VPA's requirements:
This could involve development of a means of
verifying that timber imports from third countries, which were
then subject to further processing and exported to the EU, were
harvested in conformity with national legislation in the country
where the wood was logged.[50]
The original Commission communication also highlighted
some other areas that would have to be addressed, namely:
procedures for distinguishing legal from illegal
timber arriving from countries which are not participating in
the voluntary licensing scheme; and how to treat shipments of
wood from non-partner countries which are suspected to be of illegal
origin.[51]
47. Unfortunately, despite the real awareness present
within the Commission from the beginning of negotiations of the
importance of dealing with these areas of concern the licensing
scheme that was approved in October 2005 by the Council of Ministers
was incomplete and failed to tackle these issues. That this was
likely to be the case was made clear in DEFRA's memorandum to
the Committee drafted before the October agreement "FLEGT
is not a panacea. It is voluntary and will not cover all wood
products at the outset. Furthermore, displacement of illegally
logged timber to markets that are less discriminating than the
EU cannot be wholly prevented".[52]
The memorandum went on to state that proposal to tackle circumvention
by requiring a certificate of origin for all timber imports to
the EU was a matter of debate amongst Members in Brussels as it
"presented significant practical difficulties".[53]
48. As a result of objections from some Member States
the final document included no measures to address the issue of
circumvention via third party countries, such as China. Furthermore
VPAs and licensing schemes will not address the issue of illegal
timber from non-partner countries being allowed into the EU to
compete unfairly with legally harvested timber - nor will it cover
all wood and wood products, at least to begin with.[54]
Measures that properly address circumvention and illegal imports
from non-partner countries are of crucial importance for Voluntary
Partnership Agreements to be a success. It is an enormous lost
opportunity that the licensing scheme approved by the Council
of Ministers does not satisfactorily address either of these.
The Commission told us that the principal behind FLEGT is to encourage
improved governance in producer countries, which is one of the
reasons that the partnership approach has been taken: thus the
legal basis for the legislation is Article 133 (trade) rather
than Article 173 (environment) despite objections from some Member
States and the European Parliament.[55]
Whilst there may be good reasons for this, it must not be forgotten
that there are also fundamental environmental concerns that also
need to be addressed by the FLEGT Action Plan.
A Case Study: Ghana
49. All the above issues were raised with members
of the Sub-Committee by the Ghanaian Parliamentary Committee of
Land, Forestry and Mines, which visited London in October 2005,
and were reiterated to the Sub-Committee by the Ghanaian Deputy
Minister for Land, Forestry and Mines, the Hon Adjei Yeboah in
November 2005.
50. Europe is a major market for Ghana, with up to
54% of its export timber purchased by EU member countries, although
this is only 6% of the total amount of tropical hardwood timber
imported by the EU. During our meeting with the Ghanaian Committee
its members expressed serious reservations regarding the equity
of a situation in which Ghana as a country will have to legislate
to ensure that only legally sourced timber is exported to the
EU but none of the individual EU Member States are willing to
legislate to outlaw the import of illegal timber—nor is
FLEGT aiming to achieve the same on a EU-wide level, at least
in the short to mid-term. Furthermore neither will the EU or its
individual Member States be making any commitment to purchase
Ghanaian certified timber, which is likely to become more expensive
as a result of the costs associated with putting in place a proper
chain of custody and certification system that can guarantee that
timber is legally sourced.
51. Concerns were also expressed regarding both the
transitional costs of implementing the necessary chain of custody
scheme and the fact that setting up a national certification system
for timber is likely to increase the cost of exported Ghanaian
timber by around 10% but would only result in a price premium
of 2-3%. We cannot help but agree with the Ghanaian Committee's
concerns. If we are asking poorer producer countries to spend
what are often precious and limited resources in improving their
forestry management the onus must surely then be on the EU and
Member States to do the utmost in their power to secure a stable
market for the resulting certified timber. This should include
some form of commitment to purchase timber from VPA signatory
countries. The cost of implementing a reliable chain of custody
for Ghanaian timber was set at 11 million euros and the time-frame
for achieving this, and therefore being able to enter into a VPA,
was the end of 2006. We urge the UK Government, through its own
channels and those of the EU, to assist Ghana and other interested
countries in every way—financial or otherwise—to achieve
their aim of putting the necessary procedures in place to verify
legal timber production and enter into a VPA with the EU.
52. A further concern was that licensed Ghanaian
timber, which will be more expensive to produce, will be competing
with illegally logged timber which is believed to depress the
market price by between 7% and 16%. The solution proposed during
both the meetings with Ghanaian representatives was one that was
heard many times during the course of this inquiry: a ban on imports
of illegal timber into the EU. If this does not comply with WTO
rules, then legislation needs to be put in place to make it an
offence to purchase or supply illegal timber within the EU.
LEGISLATION
53. The FLEGT Action Plan includes the commitment
to work towards a multilateral agreement on illegal timber and,
failing this, towards a ban on the import of illegal timber into
the EU. Given the acknowledgement the Sub-Committee received from
both the Minister and the Commission that a multilateral agreement
in any form is currently a very remote possibility, we had hoped
to see in its place some effort being made towards implementing
EU legislation to deal with illegal timber. This unfortunately
has not been the case despite the Minister telling us that a ban
of illegal timber "is the logical conclusion, the logical
end result of this process."[56]
The Royal Institute of International Affairs (Chatham House) is
in the process of producing an assessment of additional measures
to exclude illegal timber from EU markets which includes examining
the potential for introducing legislation. Duncan Brack who is
carrying out this work, stated in evidence that his "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 countries that do not sign a partnership agreement".
In addition, he stated that he "would agree with the NGOs
that this kind of legislation [to control the import of illegal
timber] would be extremely useful as a reinforcement to the
licensing scheme". [57]
54. The TTF also called for a ban on imports of illegal
timber, stating that it "would support a ban on illegal
timber […] any pressure that we can bring both on the supply
and the demand sides of the equation to bring an end to this practice
has got to be welcomed."[58]
Indeed, 73 retailers and members of the European timber industry
have called for the European Commission to "adopt new
EU legislation which makes it illegal to import all illegally-sourced
timber and wood products into the European market".[59]
TTF did qualify its support stating that an immediate ban would
be unworkable and a lead-in time for producers and the industry
to adapt would be necessary.[60]
In fact, the only industry body that has expressed the view that
legislation on illegal timber is not necessary—although
it does agree that illegality is a problem—is Forest Industries
Intelligence (an industry consultant) which stated that Voluntary
Partnership Agreements "may well be the most effective
and efficient policy response to the problem" [61]
55. There is also very strong support for legislation
within the European Parliament. The Parliament's Committee on
Industry, External Trade, Research and Energy wrote to the Commission
in March 2004 to express the view, with which we wholeheartedly
agree, that the proposed "measures are not sufficiently
far reaching to tackle a problem of this scale". And
that:
A coherent solution to this problem cannot rest
solely on partnership agreements with willing countries. Binding
legislation is required to tackle the trade in illegally logged
timber and forest products directly, irrespective of the countries
of origin so as to enable the authorities in EU Member States
to prosecute companies and individuals importing or marketing
illegally sourced timber and forest products.[62]
We are disappointed at the lack of will both within
the UK Government and the EU to push legislation on illegal timber
forward as an integral part of putting in place successful Voluntary
Partnership Agreements (VPAs). Without legislation to underpin
VPAs they will undoubtedly fail—if
they are taken up at all.
WTO Rules
56. The main obstacle to legislation raised during
our inquiry was the possibility of conflict with WTO rules. These
rules take a dim view of any restrictions that could be construed
as representing trade barriers between member countries. Proposals
for environmental measures often fall foul of WTO rules if they
are likely to be viewed by any members as protectionist measures,
and a threat of a challenge under the rules is often enough for
countries to drop any proposals. In this case, the concerns appear
to be not with the actual ban on illegal timber imports but how
this would be enforced. As has been made clear during this inquiry,
the majority of timber traded, particularly of temperate origin,
is not illegally harvested. Imposing a requirement to provide
proof of legality on all timber could be seen as an unnecessary
administrative burden as some form of certification would be required.
In addition, to be equitable, a control of imports into the EU
would also require controls of timber movements between Member
States, which again would be likely to prove unpopular as the
vast majority of timber produced within the EU is legally, although
not necessarily sustainably, produced. The difficulties were acknowledged
by the Minister:
I think a ban on illegal timber is entirely justified
and defensible even within the WTO context. But there are considerable
legal difficulties and I think that the way forward is probably
a step-by step process, and what we are seeing with the EU FLEG
is the beginning of that process, not the end of the process.[63]
The suggestion has been put forward that legislation
based on the principles contained in the Lacey Act in the United
States would circumvent any WTO objections, as this would impose
restrictions on the ownership and sale of illegal timber rather
than ban imports directly. This is the type of legislation that
was proposed by the German Government in March 2005. The Virgin
Forests Act, if it comes into force in Germany, will "prohibit
the possession and marketing of timber and timber products that
were illegally logged in virgin forests".[64]
