Market Coverage of Wood Imports by the EU Timber Regulation
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Market coverage of wood imports by the EU Timber Regulation Holger Weimar, Niels Janzen and Matthias Dieter Thünen Working Paper 45 Holger Weimar, Niels Janzen, Matthias Dieter Thünen Institute of International Forestry and Forest Economics Leuschnerstrasse 91 21031 Hamburg (Germany) Phone: +49 40 73962 -314 / -310 / -300 Fax: +49 40 73962 399 E-Mail: [email protected], [email protected], [email protected] Thünen Working Paper 45 Hamburg/Germany, August 2015 Executive Summary i Executive Summary Illegal Logging is one of the major global causes for deforestation and the degradation of forests. The further manufacturing of illegally logged wood and products made thereof as well as the associated trade has also negative social and economic effects on both sides of the wood markets, the producer and consumer countries. One of the key measures of the European Union (EU) to combat illegal logging is the EU Timber Regulation (EUTR). The EUTR came into effect on March 1, 2013 and it prohibits the placing of wood and wood products made of illegally logged wood on the EU internal market. This placement can either be done by selling removals from European forests or by importing wood and wood-based products into the EU. But for what kind of products does the regulation apply exactly? The EUTR refers to its An- nex where a list is provided with respective commodities. The products are structured ac- cording to the trade classification of the Combined Nomenclature (CN). The main focus is laid on wood and articles of wood (chapter 44 of the CN), on pulp of wood (chapter 47) and on paper and paperboard and articles made thereof (chapter 48). Additionally commodity codes for furniture and one code for prefabricated buildings are listed. However, as certain wood-based products are not included in the EUTR, the question arises, how many wood- based products are not covered by the EUTR. What is the coverage ratio of the EUTR if we are looking at all wood-based products? Hence, the objective of this analysis was to identify to which share the EUTR applies for wood and wood-based products, to provide knowledge of trade flows and markets in this regard. We firstly defined the scope of the wood-based products based on the definition of the forest-based sector. We then analysed the imports to the EU from other countries of the world by using three different reference units: the mandatory trade values as a monetary reference unit denoted in Euro, and two physical reference units, the roundwood equivalent and the wood fibre equivalent. The roundwood equivalent is measured in cubic meter (m³ (r)) and expresses the amount of roundwood which is needed for the production of one unit of a product. The wood fibre equivalent is also measured in cubic meter (m³ (f)). It is defined as the equivalent volume of the wood fibres or wood-based fibres that are con- tained in the product and it describes how many wood fibres effectively have been traded with a given product. Our results show that approximately 90% of the imported quantities (i.e. 71 million m³ (f) and 119 million m³ (r), respectively) and three quarters of the imported values (i.e. 22 bil- lion Euro) are covered by the EUTR. This means, the EU imported in 2013 a wood quantity of 6 million m³ (f), 17 million m³ (r) or a value of nearly 8 billion Euro respectively, that is not covered by the EUTR. This quantity is almost equally distributed between wood products and paper products. The coverage ratios for further differentiated product groups differ. Typically raw materials have a higher coverage ratio and finished products have a lower coverage ratio. The wood quantities that are not covered by EUTR are highly concentrated on few commodities like wood charcoal, articles of wood n.e.s. (not elsewhere specified), recovered paper, printed books and brochures and seats (with wooden frames). ii Executive Summary Table: Imports to EU by product groups and by EUTR coverage, measured in Euro, m³ (r) and m³ (f) 1,000,000 Euro 1,000 m³ (r) 1,000 m³ (f) covered by EUTR coverage covered by EUTR coverage covered by EUTR coverage no yes total ratio no yes total ratio no yes total ratio wood products 3,148 10,742 13,890 77% 8,235 64,730 72,965 89% 2,952 49,548 52,500 94% paper products 3,199 11,015 14,214 77% 6,752 54,420 61,172 89% 2,853 21,590 24,443 88% other wood based products 1,182 0 1,182 0% 1,520 0 1,520 0% 212 0 212 0% total imports 7,528 21,757 29,286 74% 16,507 119,150 135,656 88% 6,017 71,138 77,155 92% Source: own calculation The most relevant exporting regions to the EU were Russia and Eastern Europe (Non EU) (25 million m³ (f)) followed by North America (16 million m³ (f)) and Western, Northern and Southern Europe (Non-EU) (14 million m³ (f)). These 3 regions account for about 70% of total imports measured in wood fibre equivalent. However, the coverage ratios vary between regions according to export composition of commodities and product groups. Imports from Oceania (99%) and Russia and Eastern Europe (Non-EU) (98%) are almost completely cov- ered by the EUTR. While Russia and Eastern Europe (Non-EU) is the major exporting region to the EU, Oceania is the least important region in this regard with a total share of 0.3% of all imports. The highest volume of imports of wood and wood-based products not covered by the EUTR can be attributed to Eastern and South-Eastern Asia and Western, Northern and Southern Europe (Non-EU) (1.8 million m³ (f) each). For the former region the uncovered import quantities are in the product groups finished wood products, printed matter and fur- niture, while for the latter region it is mainly due to import of recovered paper commodities. For Africa the most important commodity of the imports that are not covered by the EUTR is wood charcoal. It is obvious that the coverage analysis we calculated in this study mainly depends on the definition and scope of wood and wood-based products in total. Beside the defined scope a lot of other commodities contain wood or products made of wood: Either products where wood has only a minor share in the given commodity code (e.g. caravans) or products with a high content of wood which are commingled in a commodity code with products made of other materials (e.g. toys). In this respect also wood-based packaging material can be men- tioned (e.g. cardboard boxes that only cover the actual product). For these kinds of products the EUTR might not serve as an appropriate measure for combating illegal logging due to limits of practical implementation. Costs for acquisition of necessary information, legal un- certainty and administrative workload come to mind. Basically, the EUTR can be a suitable measure for all wood-based products. However, it must be pointed out, that such measure can have also negative effects if e.g. imported quantities decrease, product prices increase or trade diversions occur from stricter regulated regions to less regulated markets. Additionally, if EUTR acts as a non-tariff-barrier, a loss of welfare and undesired substitutions by other materials with worse environmental external effects are likely to occur. Keywords: EUTR, coverage ratio, wood-based products, illegal logging, international trade, reference units Content I Content 1 Introduction 1 2 Methodology and Data 3 2.1 Scope of wood and wood-based products 3 2.2 Trade data and reference units 4 3 Results 7 3.1 Analysis of global imports to the European Union 7 3.2 Analysis of commodities not listed in the EUTR 11 3.3 Regional analysis 13 4 Discussion and Conclusion 17 5 References 21 6 Annex 23 II Abbreviations Abbreviations CN Combined Nomenclature CR Coverage ratio EE Eastern Europe ESE Asia Eastern and South-Eastern Asia EU European Union (with 28 member states) EU28 European Union with 28 member states EUTR European Union Timber Regulation FLEGT Forest Law Enforcement, Governance and Trade kg kilogram kg 90 % sdt kilogram of substance 90 % dry LAA Lacey Act Amendment Latin Am. Latin America m³ (r) roundwood equivalent in cubic meter m³ (f) wood fibre equivalent in cubic meter n.e.s not elsewhere specified North Am. North America UN United Nations U.S. United States VPA Voluntary Partnership Agreement WCS Asia Western, Central and Southern Asia WNS Europe Western, Northern and Southern Europe WP Wood product List of Tables III List of Tables Table 1: Scope of wood and wood-based products 4 Table 2: Samples of conversion factors for the two physical reference units wood fibre equivalent m³ (f) and roundwood equivalent m³ (r) 6 Table 3: Imports to EU by product groups and by EUTR coverage, measured in Euro, m³ (r) and m³ (f) 7 Table 4: Import shares to EU by product groups and by EUTR coverage, based on calculations with Euro, m³ (r) and m³ (f) 7 Table 5: m³ (r): Top 10 of products “not covered by EUTR” 12 Table 6: m³ (f): Top 10 of products “not covered by EUTR” 12 Table 7: Wood and wood-based products: Imports to EU by export region and by EUTR coverage, measured in m³ (f) 14 Table 8: m³ (f): Top 10 of wood products “not covered by EUTR” 23 Table 9: m³ (f): Top 10 of paper products “not covered by EUTR” 24 Table 10: m³ (f): Top 10 of other wood-based products “not covered by EUTR” 24 Table 11: Imports in 1,000 m³ (f) into EU by EUTR coverage, region and product group 25 Table 12: Import shares by product groups (based on m³ (f)) 26 Table 13: Import shares by regions (based on m³ (f)) 27 Table 14: Import shares (based on m³ (f)) of regions and product groups to total “not covered by EUTR” imports 28 Table 15: Imports in 1,000 m³