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International Timber Trade Review

Background
During a discussion of potential funding sources for reducing emissions from deforestation in developing countries (REDD) at the Accra meeting of the UN climate change negotiations, delegates mentioned a levy on international timber trade as a possible source of funds. This review provides a short overview of the main flows in the international timber trade as a background for those who may be interested in this proposal.

Trade Overview
World-wide, 50% of trade value is in paper and paperboard, 16% is sawnwood, 14% is wood-based panels, 13% is pulp for paper and recovered paper, 5% is roundwood, and 2% is other products. In 2006 the world total for all wood products imports was $159.6 billion. Within the top importing countries (Australia, Canada, China, EU Countries, Japan, and the United States), these trends shift a bit (Table 1). Of the countries listed, China and Japan proportionately import the most tropical roundwood. The EU and Canada proportionately import the most veneer. Trade values among the highest exporting tropical counties (Brazil, Indonesia, Democratic Republic of Congo, Malaysia) are shown in Table 2. Imports of Brazilian products are primarily wood pulp in the EU and the US. Imports of Indonesian products are primarily plywood in Japan and wood pulp in China. Imports of Malaysian products are primarily plywood in Japan and tropical roundwood in China. Imports of DRC products are primarily non-coniferous sawnwood and tropical roundwood in the US.

The United States could produce the following annually:
All imports taxed at 0.5%: $130m
All imports taxed at 1%: $260m
All imports taxed at 3%:  $770m
All imports taxed at 5%: $1.3b
Tropical imports taxed at 0.5%: $7.5m
Tropical imports taxed at 1%: $15m
Tropical imports taxed at 3%: $45m
Tropical imports taxed at 5%: $75m

Where tropical trade values were calculated using imports from Brazil, Indonesia, Malaysia, and the Democratic Republic of Congo.

Illegal Logging
A Congressional Research Service report from 2007 reviewed the small amount of data available regarding the illegal timber trade1. There are estimates that as much as 23% to 30% of hardwood lumber and plywood traded globally could come from illegal activities. As much as 80% of logging in the Brazil Amazon, and 80% of forest products from Indonesia are considered illegal. Some analysts believe that the approximately $23 billion of suspicious wood products traded annually depresses world prices by 7 – 16%4. The same report cited a World Wildlife Fund estimate that the EU spends 3 billion GBP a year on illegal wood. In 2008, the European Commission2 estimated that 19% of European timber imports could come from illegal sources. Estimates of U.S. imports of potentially illegal wood are billions of dollars annually3, therefore the 2008 Farm Bill bans importation of illegal timber into the U.S.

Possible Sources of Error
These values are based on very few references, and all the trade data are from the FAO Stat Center (faostat.fao.org), whose data are almost 3 years old. There are other possible sources of error. First, we did not use the "Others (Adjustments)" category from the FAO data. Within the data reported by FAO, sometimes the reporting country included imports from itself. Finally, all values are in $US and not related to carbon stocks in each product.
Regarding illegal trade of timber – it is important to consider that there are many ways in which timber can be illegal. For example, the timber could have been cut from land that should not have been used for that purpose. On the other hand, the logging of the timber could be legal, but no taxes were paid on the product. There is no international definition of illegal timber, and in this summary report we make no distinctions among how timber may be illegal.

Sources
All trade data from the FAO Stat Center (faostat.fao.org), 2006
1: CRS "Illegal Logging: Background and Issues", 2007
2: European Commission Communication, 2008 (http://ec.europa.eu/environment/forests/illegal_logging.htm)
3: INECE "Recent Amendment to U.S. Lacey Act Should Help Protect Forests Worldwide", 2008
4: Global Witness "Illegal Logging", 2008

Table 1: Percent of Imports, by value, for various product categories (All data from 2006, FAO Stat Center)