The International Timber Trade: A Mechanism for Third World Development Azlan Adnan MA Environmentalism and the North/South Divide Today, the industrial world's voracious appetite for natural resources threatens to change irrevocably the earth's atmosphere and cause global climate change, to the detriment of the rest of us and of the environment. In their pursuit of wealth and consumption, these rich countries of the North emit 70% of global greenhouse gases (which causes global warming), even though as the world's richest 1.1 billion inhabitants, they make up only 20% of the world's population. They devour a disproportionately large share of global resources while making 64% of the world's income. Broadly speaking, an average citizen in the OECD countries, for example, consumes 18 times as many chemicals, ten times as much energy and three times as much grain as an average citizen of a G15 country. The richest fifth of the world's population, by nation, earns over 60 times more than the poorest fifth. The OECD countries of the North, consume 70% of the world's energy, 75% of its metals and 60% of its food. The explosion of consumerism and consumption by the world's rich consuming class is a major feature of today's environmental crisis for the Northern way of life depends on the excessive use of resources; particularly energy, chemicals, metal and paper. The developing G15 countries of the South, however, are in an opposite position: they emit less greenhouse gases but are among the poorest and most populated countries of the world. They do have invaluable assets: a huge proportion of the environmental resources of the planet-its forests and biodiversity, bodies of water and its atmosphere-lie in the Third World. These are the most valuable assets known to humankind. Yet, until now, the only way to realise their value is by destroying them: a forest which preserves biodiversity and contributes to the atmosphere's quality is cut to sell the wood of its trees or burned to give way to arable land. The large populations of the countries of the Third World require land for housing and food production; this is an undeniable fact. The Challenge The challenge facing the South, then, is how to get rich, house and feed its burgeoning population, and yet be an environmentally-caring society. Getting rich is easy in theory: industrialize, increase productivity and encourage economic dynamism. You can then use the money earned to import food. Alternatively, one can simply grow more food but in order to do this one has to develop more land or increase agricultural productivity or both. These activities are all constrained by legitimate concerns for the environment. The right to emit carbon dioxide is equivalent to the right to burn the fossil fuels of oil, gas and coal. Most industrial economies would screech to a halt if they were unable to burn fossil fuels. If the South relinquishes its right to emit carbon dioxide, developing countries would also be relinquishing their right to industrialize. This would mean they will forever remain trapped in poverty. Lessons from the North Some will say that fossil fuels are not the only sources of energy. For the time being, we can discount solar, wind and tidal energy. The technology is not adequately developed and, in any case, would be far too expensive to generate the amounts of electricity required for industrialisation. Hydro-electricity is a viable option, if one can assuage the environmentalists of their concerns about the loss of biodiversity due to the flooding of forests. Nuclear energy is a Pandora's box that has as much environmental costs as there are benefits; witness the Chernobyl catastrophe. In any case, the technology is not available in the South, and the fear of nuclear proliferation has all but put paid the notion of the Third World acquiring nuclear technology. So, is the future that bleak for the Third World? Case Study: The International Timber Trade I would like to suggest international trade in timber as a mechanism for Third World development. By selling their timber on the world market, countries of the South can earn much-needed foreign exchange that can be utilized for industrialisation. Only 17% of all tropical hardwood harvested is used for industrial purposes (most of the rest is used for fuelwood). Out of the total volume of industrial timber (275 million m3), approximately 31% is exported in round or product form by tropical countries. Therefore, only a modest 6% of total tropical hardwood production enters the international trade. These exports from tropical developing countries account for only a small share (11.3%) of the total value of world timber exports (US$11 billion out of US$97.5 billion). However, for a few countries (e.g. Central African Republic, Ghana, Indonesia, Malaysia and Papua New Guinea) timber exports are an important source of foreign exchange earnings (i.e. over 10% of total export earnings). If they manage their forests for biodiversity and sustainable development, they can have their cake and eat it too. Yet, the rate of tropical deforestation is significant (0.9% for 1980-90) and has increased in recent years. So the question now is of defining what exactly is the sustainable management of forests and in determining the maximum allowable yield of a forest. The question is a complex scientific issue. The Malaysian Case Now, having set the context and background, allow me illustrate these issues by taking the specific case of Malaysia, a tropical country of the South with 58% of its land area under natural forests. A further 14% consists of plantation forests and agricultural tree crops giving a total of 72% of Malaysia's land area under tree cover. Almost 5% of Malaysia's GNP is obtained from its timber exports. Further contributions to its economy derived from Malaysia's forests are accounted for under manufacturing exports. These value-added forestry-based products include rubber products (tyres, gloves and condoms) and furniture. These products are exported and earn foreign exchange which is then re-invested in the capital goods required for industrialisation. In all, Malaysia's forests are a major contributor to Malaysia's economy and industrial development process. A Lesson from Germany This is nothing new. Germany, for example, underwent a similar process in the last 200 years, cutting down its forests as the country industrialized. In fact, sustainable management of forests was a concept developed in Germany as long ago as 1713 by Hans von Carlowitz in his Sylvicultura Oeconomica. Having upheld the principle and practice of sustainable forest management for the past two centuries, Germany remains a net exporter of roundwood. It is interesting to note that the German Forest Owners' Association, which represents one million forest owners practising good forest management in Germany, believes that biodiversity in their forests is not threatened by bad forest management, but by other factors such as acid rain and air pollution caused by industrial emissions, etc. Perhaps Germany is now experiencing the limits to sustainable growth. This story is repeated for the rest of the industrial world. The role of timber in the industrial revolution is perhaps under-estimated, with the overwhelming emphasis on iron and steam. In Britain, however, were it not for timber there would have been: * no railways, for railway sleepers were made of wood, * no coal-mining, as coal mine props were made of wood, and * no factories, as timber-framed structures were the mainstay of building construction. As a side note, it is important to realise that 45% of the materials used in the world's construction industry today is wood, or wood-based. Britain relied so much on timber that it cut down its forests at an alarming rate. Today, only 10% (from a low of 4.8%) of its land area is covered with forests and Britain still relies on imports for 87% of its timber needs. Its is perhaps understandable why Britain, unlike Germany, did not practice sustainable forest management. With its Colonies to exploit and rely on for cheap timber imports, Britain never did see an urgent need to replant her forests. The Current Situation The international trade in timber has come into the spotlight as a result of the alleged role it plays in the degradation of the world's forests. Environmental groups such as the WWF, while saying that they have no wish to see the timber trade disappear altogether, nevertheless urge that the trade be managed in a very different way than it has been until today. All parties in the timber trade seeking to improve forest management and the reputation of wood and wood products agree that the trade needs to be redefined to bring it in line with the concept of sustainable development and management of forests. Such a view is advocated, despite its misleading title, in the WWF report Bad Harvest? published on December 7, 1995. Evolution of the Timber Trade As far as the international trade in tropical timber is concerned, a basic trend over the last 30 years has been that more and more value-added transformed products (such as plywood, veneers and furniture) as opposed to roundwood are being exported from the tropical producer countries of the South. This trend has been accompanied by industrialisation in the South as well as export restrictions, particularly on logs. Together, these factors have stimulated growth and employment in the processing industries of tropical timber exporting countries. For larger exporters, such as Indonesia and Malaysia, the expansion in processing capacity has contributed to our ability to capture a larger share of international markets. This evolution has not been similar all over the world and has proved more difficult for smaller exporting countries. It has been most evident in Asia, with enormous regional markets and large resources. Africa, on the other hand, still exports mostly raw timber, whereas Brazil entered the market later and is only just starting to export quality transformed products. If forest resources are not sustainably managed and fall prey to land-hungry populations, timber production will shift to new territories such as Cameroon, Papua New Guinea, the Solomon Islands and Surinam, again raising doubts about the long-term viability of timber production. This is best illustrated by looking at the Asian market. As timber production shifted from one area to another, because the foreign (mainly Japanese) logging companies were not concerned with renewing resources, they needed to make higher profit margins in order to cover the higher exploitation costs. Thus, higher value added was required and industrialization of the forestry sector provided this. As a result, countries like Thailand and the Philippines have now become exporters of furniture rather than of raw timber. As explained earlier, Malaysia, too, has become an exporter of furniture and other wood-based value-added products rather than of round logs, but for very different reasons. In all cases, the business strategy relied on a combination of government policy and market demand. Having restricted or totally prohibited exports of raw timber, many timber-producing countries encouraged the growth of their timber-transforming industries. Business interests and the State have therefore joined forces to create an industry based on exports to the countries of the North, mainly Japan and in Europe. The Rise of Misguided Environmentalism The increasing exploitation of rain forests in the South have raised environmental concern in some of the major consumer countries in the North. More and more doubts are being raised by environmental NGOs, through their alarmist anti-tropical timber campaigns, about the sustainability of tropical timber production. These concerns, which have led to import restrictions, boycotts and outright bans in the case of many local authorities, had a quantifiable effect on trade, and have conspired to give tropical timber a bad reputation. The short-term impact of these restrictions to trade in tropical timber for environmental reasons may be to decrease the pace of tropical deforestation but in the long term developing country producers would be economically worse off and therefore incentives to invest in sustainable forest management may be reduced. Non-tariff barriers to trade in tropical forest products also discriminate against processed wood imports such as furniture. These barriers are extremely diverse and have a more significant impact than formal tariff barriers. Non-tariff barriers are on the increase in most developed consumer markets. In Germany, for example, alarmist NGO reaction to rain forest deforestation in recent years has led to a partial boycott of tropical timber imports. This, in turn, had the negative economic consequences of devaluing wood, accelerating the conversion of rain forests to other land use in many tropical timber-producing countries. The sad truth is that forests are burnt when the land is wanted for other uses - agriculture, mining or for cattle-ranching. But these fires are not ignited by foresters or the timber industry. Far from destroying forests, study after study has shown that the timber industry has a vital role in ensuring that forests are valued and not lost forever to agricultural or industrial use. Careful logging practices, sound management and extensive re-planting practices mean that man's economic exploitation of forests is sustainable. Furthermore, developments in genetics, tissue culture and plant breeding are creating new cultivars (cultivated varieties) of species with faster growth rates. Other domestic environmental regulations in timber importing countries can have particular important implications for the international trade in tropical timber. In particular, regulations which increase costs to temperate forest industry or decrease the available timber inventory may lead to higher world prices, stimulating supply from other areas. Given the prevailing market and policy failures prevalent in many tropical forest countries, this could mean that more stringent environmental regulation in temperate zones will, indirectly, accelerate deforestation in the tropics. Overall, the combined effect of tariff and non-tariff barriers on imports of processed tropical timber products into major consumer markets hinder the ability of producer countries to develop their own value-added wood-processing industries. Wood-Substitutes and their Environmental Unfriendliness While environmental NGOs may be altruistic in their motives, it is vital that in trying to solve the problem of the world's forests, they do not also contribute to the creation of a whole new set of problems by driving consumers to purchase wood-substitutes such as iron, PVC, steel, aluminium and glass. All these materials have higher environmental costs than wood for, in their production, these materials require more energy and water than wood. Indeed, in the production of the energy required for their manufacture, more carbon (in the form of carbon dioxide) is emitted into the atmosphere than the world's forests can sequester, thus contributing to global warming. Sustainable Forest Management and Certification A number of parties have proposed a strategy based on ecolabels or timber certification. Ecolabels would be reserved for timber products who have managed their forests in a sustainable manner. However, it has been extremely difficult to agree on a common standard for sustainability for all forest types (i.e. boreal, temperate and tropical), let alone implement it. The only common agreement between producers and consumers at the moment is on the International Tropical Timber Organisation (ITTO) goal of only trading in wood products based on sustainable forest management from the year 2000 onwards. Despite this difficulty, Malaysia is working on a framework of 27 criteria/indicators of sustainable forest management supported by 88 measurable activities based on ITTO guidelines. Although the enforcement of sustainable forest management policies and regulations may impact on the trade somewhat by increasing the costs of tropical timber harvesting, the impact does not appear to be that significant, as log costs are only one component of the total factor costs of processed timber products. For timber product exports, supply and demand conditions in international markets appear to outweigh the effects of any sustained-yield restrictions on harvesting. Moreover, if competing timber exporting countries adopt sustainable forest management policies and regulations in concert, then they may mutually benefit from the strategy. The risks may be greater for one country adopting sustainable management practices unilaterally if its competitors continue to deplete forest resources more heavily. We therefore see co-operation among tropical timber producers as a necessary, but not sufficient, factor in the issue of timber certification. The principal South-East Asian producers, Malaysia and Indonesia, have vividly taken part in this debate on timber certification, with campaigns illustrating the sustainable features of our timber production. Improved development and enforcement of sustainable forest management practices and regulations are a more appropriate and direct means for tropical timber exporting countries to reduce timber-related deforestation than interventions to restrict timber product exports. In Malaysia, the focus of sustainable forestry is on selective logging (7 trees per hectare per cutting cycle of 30 to 50 years), reduced impact logging (directional felling, heli-logging), and reserving 50% of our land area as Permanent Forest Estates to preserve biodiversity. Conclusion The conclusion is that, although state intervention has been strong in some cases, trade in tropical timber is still mainly driven by business interests and market demand and is, therefore, revenue-generating. Although tropical sawnwood imports in Europe have declined, this is due to several reasons and not solely due to environmental concern. Other reasons are an increase in prices, the economic recession in Europe and the increased competition from wood-substitutes. These price increases can be attributed to a decrease in supply as South-East Asian producers restricted or totally prohibited exports of raw timber. As these South-East Asian producers industrialize and increase exports of value-added products as opposed to round logs or primary sawnwood, these raw materials are in turn imported into Europe from cheaper sources, such as Africa and South America. As the trend towards the increased production of value-added products in tropical countries continues, it is clear that the international trade in timber and timber-based value-added products is a mechanism that brings financial benefits and socio-economic development throughout the whole of the Third World. The international tropical trade deserves to be supported, not restricted. ### 2,936 words ###
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