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International Forestry Review 5(3), 2003 195 OVERVIEW Illegal logging and the illegal trade in forest and timber products D. BRACK Head of the Sustainable Development Programme, Royal Institute of International Affairs, Chatham House, 10 St James’s Square, London, SW1Y4LE, UK1 Email: email@example.com INTRODUCTION recover and grow in developed countries, most of the world’s forests are still located in a small number of areas – the The destruction of the world’s forests is a well-known by- Amazon Basin, Central Africa, South East Asia and the product of the development of modern society. Of the Russian Federation – where they are significantly threatened. forests that originally covered the Earth 80% have been Logging for wood products is responsible for about one- cleared, fragmented or otherwise degraded by logging, third of total global deforestation; and possibly more than mining, clearance for agriculture or urbanisation. Although half of all the logging activities in the most vulnerable increased public awareness, re-afforestation initiatives and regions are conducted illegally. Worldwide, estimates improvements in air pollution levels have helped forests to suggest that illegal activities may account for over a tenth BOX 1 Illegal activities associated with the timber trade2 Illegal logging Transfer pricing • Logging in breach of contractual obligations (e.g. without • Nil profit accounting and manipulating revenue flows for an Environmental Impact Assessment). services to avoid revenue. • Illegally obtaining concessions through, for example, corrupt means. Illegal processing • Logging nationally-protected species without explicit • i.e. at unlicensed facilities. permission. • Logging outside concession boundaries. Grand corruption • Logging in prohibited or protected areas such as steep slopes Characterised by long-term, strategic alliances with high level or river catchments. of mutual trust. For example, companies providing support to • Removing under-sized or over-sized trees. senior politicians, political parties or major components of the • Laundering illegal timber through a concession. state’s apparatus to: • Use of old log permits or licences to collect illegally felled • Obtain or extend a concession or processing licences. timber to ‘sanitise’ illegal timber. • Avoid prosecution or administrative intervention for non- compliance with national legislation. Timber smuggling • Negotiate favourable terms of investment, i.e. tax holidays • Log import/export in defiance of trade restrictions and/or or non-collection of statutory duties etc. national control measures. • Unauthorised or unreported movements across state Petty corruption boundaries. Shorter-term, more tactical, employer-employee relationship, • Avoidance of CITES restrictions. facilitated by and may develop into grand corruption. Most obvious as graft given to or solicited by junior officials to: Misclassification • Falsify harvest declarations. • Under-grading and misreporting harvest. • Avoid reporting restrictions. • Under-valuing exports. • Overlook petty infringements • Misclassification of species to avoid trade restrictions (e.g. • Ignore logging or laundering of logs from outside proscribed mahogany) or higher taxes. boundaries. 1 RIIA maintains an independent website acting as a central point of information on all aspects of the current international debate around the control of illegal logging and forest crimes: www.illegal-logging.info 2 Taken from Duncan Brack and Gavin Hayman, Intergovernmental Actions on Illegal Logging (Royal Institute of International Affairs, March 2001; available at www.riia.org/sustainabledevelopment/). For a more extensive discussion, see D. J. Callister, Corrupt and Illegal Activities in the Forest Sector: Current Understandings and Implications for World Bank Forest Policy: Draft for Discussion (World Bank Forest Policy Implementation and Strategy Development Group, May 1999). 196 D. Brack of the total global timber trade, itself worth over $150 bn tax declaration – to survive. As the World Bank reported, a year. ‘widespread illegal extraction makes it pointless to invest Illegal logging takes place when timber is harvested, in improved logging practices. This is a classic case of con- transported, bought or sold in violation of national laws. current government and market failure’ (World Bank 1999). The harvesting procedure itself may be illegal, including corrupt means to gain access to forests, extraction without permission or from a protected area, cutting of protected TACKLING THE PROBLEM species or extraction of timber in excess of agreed limits. Illegalities may also occur during transport, including illegal There is no global agreement on forestry. An attempt was processing and export, mis-declaration to customs and made to reach an agreement at the Rio ‘Earth Summit’ in avoidance of taxes and other charges. Box 1 summarises 1992, but most developing countries regarded it as an illegal activities associated with logging and the timber trade. infringement of their national sovereignty. A series of Illegal logging is not confined to developing countries, generally ineffective international bodies, the latest of course, but the problems there are worse as resources incarnation is the UN Forum on Forests, set up in 2001, are limited, international companies which offer investment has been created to act as a forum for debate. This lack of are proportionately more powerful and civil society is an overall framework for international enforcement has weaker. Allocation of timber concessions has often been hindered attempts to control what is a global problem. used as a mechanism for mobilising wealth to reward allies Nevertheless, there is growing interest in addressing the and engender patronage. The clandestine nature of the problem. The G8 Action Programme on Forests, launched illegal activities makes their scale and value difficult to in 1998, included illegal logging as one of its five key areas estimate, but it is true to say that extensive unlawful for action, and the World Summit on Sustainable operations have been uncovered whenever and wherever Development in August/September 2002 featured some authorities have tried to find them. To give a few examples, discussion of the topic. The World Bank, with support from a joint UK-Indonesia study of the timber industry in major donor countries such as the US and UK, is Indonesia in 1998 suggested that about 40% of throughput facilitating a series of conferences on Forest Law was illegal, with a value in excess of $365 million (Indonesia Enforcement and Governance; the first took place in UK Tropical Forestry Management Programme 1999); Indonesia in September 2001 and the second is scheduled more recent estimates comparing known domestic for Cameroon in October 2003. consumption plus exports against legal harvesting, suggest The European Commission’s action plan on Forest Law over 70% of logging in the country is illegal in some way Enforcement, Governance and Trade published in May (Scotland and Ludwg 2002). Similarly, over 80% of logging 2003 includes proposals for a licensing system to identify in the Amazon may not be compliant with government legal products in producer countries and license them for controls (Ibid). Studies in Cambodia in 1997 by Global import to the EU, provide capacity-building assistance to Witness and the World Bank suggested illegal extraction, producer countries, to give encouragement for voluntary worth between $0.5–1 billion, may be over 4 million m3 a industry initiatives and government procurement policy, year, at least ten times the size of the legal harvest (Global arrange to buy only from legal sources, and put pressure Witness 1999). If this level of extraction continues, the on financial institutions to scrutinise flows of finance to country would be logged out in just ten years from when the forestry industry.2 the industry officially began. The UK Government in particular has been active in The scale of illegal logging represents a major loss of pushing the issue up the agenda inside various forums, revenue to many countries and can lead to widespread including the G8 and EU. In April 2002 the UK signed a associated environmental damage. A Senate Committee in Memorandum of Understanding on forest law enforcement the Philippines estimated that the country lost as much as and governance with Indonesia, which may act as a pilot $1.8 billion per year from illegal logging during the 1980s for similar agreements between the EU and other major (Callister 1992). The substantial revenues from illegal producer countries (see Speechly in this issue) (Indonesia logging sometimes fund and thereby exacerbate national has signed similar agreements with other consumer and regional conflict, the strongest recent example being countries, including Japan and China).3 Cambodia, where Khmer Rouge forces were sustained There are three broad sets of actions that can be primarily by logging revenues for several years in the mid- undertaken by governments concerned with illegal logging: 1990s. reduce the demand for illegal timber, reduce the supply of The illegal trade may also distort the entire global it, and control the trade that moves the illegal material from marketplace for a number of key timber products, making sources of supply to sources of demand. it difficult for sustainable management – which has to To reduce the demand for illegal logs and timber endure additional costs from good husbandry and proper products essentially requires replacing it with a demand 2 Available at http://europa.eu.int/eur-lex/en/com/cnc/2003/com2003_0251en01.pdf 3 See www.illegal-logging.info/Bilateral.htm for copies of these agreements. Illegal logging and illegal trade 197 for legally produced material – which in turn requires some what constitutes illegality. The definition of illegal logging means of identification all along the ‘chain of custody’. used above – ‘illegal logging takes place when timber is No such system yet exists, though schemes established to harvested, transported, bought or sold in violation of identify sustainability of production, such as the Forest national laws’ – relate to infringements of national Stewardship Council certification scheme, generally imply legislation, but in many countries forestry legislation is legality of production as well. often clearly inadequate. For example, a 1998 review of There is increasing interest in establishing a simpler Cambodian forest legislation by the legal firm White and certification system, identifying only legality of production, Case found it was ‘difficult to obtain, difficult to analyse, possibly as a first stage towards full sustainability. The UK– provides few objective standards for forest protection and Indonesia MoU includes provision for piloting such a provides no integrated guidelines or standards for forest system and, as noted above, the European Commission’s management’ (White and Case 1999). An overview of action plan envisages a requirement for a ‘license of legality’ Indonesian forest governance in 2001 revealed for all imports into the EU from participating producer inconsistencies and contradictions between laws and countries. Government procurement policy, which in some between government department decrees (Suparna 2001). countries (particularly the UK) is moving towards sourcing In countries such as Brazil different levels of government only legally and sustainably sourced timber, is also a – federal, state, and local – possess overlapping legal and potentially important tool. regulatory systems that may not always be consistent with Strategies aimed at reducing the supply of illegal timber each other. need to concentrate on the underlying economic, social and In some countries there may simply be no clear political drivers behind the illegal activities – and are definition of what is and is not illegal. The definition therefore difficult and complex to implement. Much illegal of what is legal and what is not may depend on logging stems from over-allocation of logging concessions administrative order, or may be easily changed by local or and processing licenses, frequently associated with national governments seeking to maximise revenue. corruption. Reform of the systems therefore usually Many undesirable (and environmentally unsustainable) requires thorough reform of legislation (which is often practices in the forestry sector, such as excessive allocation outdated and inadequate) and of the administrative of quotas or processing capacity, may in fact be legal systems which implement it. The reform of taxation under existing laws. And even where the law is adequate, in systems, which are currently often volume-based, thereby terms of setting out clear definitions the compliance encouraging maximum exploitation of concessions, is also costs, such as applying for permits, may be so high in a valuable route to follow. And it is important not to forget terms of time or money that legal operations become the involvement of local communities and the availability uneconomic. of alternative forms of employment and economic activity. This should not be blown out of proportion: in some Finally, there are a number of points along the chain important producing countries, legislation is clear and of production and supply where enforcement efforts can adequate, and it is its enforcement that is inadequate. be aimed at controlling the trade in illegal timber. In In these cases the application of external pressure producer countries, specialised enforcement units – such through the control of exports, coupled with capacity- as the Malaysian task force set up by the police, Anti- building, may well be a helpful reinforcement to assist Corruption Agency, Forestry Department and the army – domestic enforcement efforts. In many other countries, bypassing local bureaucracies, have been used with some however, reform of legal and regulatory systems is a success. Private industrial surveillance companies can also prerequisite for the effective control of the trade in illegal be used; the Swiss firm SGS, for example, has been called timber. in to monitor customs departments, and increase revenue Possible law reforms include creating clear definitions collection, in a number of countries including Cameroon, of illegal activities, including corrupt or improper allocation Ghana, Indonesia and Malaysia. Close cooperation with of concessions, reducing or removing discretionary powers, local communities is helpful, both because they are good establishing significant deterrent sanctions including sources of intelligence and because the provision of powers to confiscate equipment, and specifying alternative employment opportunities is usually necessary enforcement responsibilities at every stage in the timber to end small-scale illegal activity. Much of this, of course, commodity chain. Simplification is often called for, requires the allocation of greater resources, in terms of ensuring that legal activities are not so over-regulated that finance and personnel – though as most cases of illegal they become impossible or uneconomic for enterprises – logging involve unpaid taxes or charges, investment here particularly small-scale and community-based can reap financial as well as environmental dividends. organisations – to carry out. Reform of laws outside the forestry sector is also frequently necessary, including laws dealing with land ownership, bankruptcy and corruption. DEFINING LEGALITY Transparency of all private and public activities to the outside world (including both domestic and foreign An immediate problem facing any attempt to control the observers) should be an important principle underlying all trade in illegal timber and wood products lies in defining such reforms. 198 D. Brack REFERENCES SCOTLAND, N. and LUDWIG, S. 2002. Deforestation, the timber trade and illegal logging. Paper for EC workshop on BRACK, D. and HAYMAN, G. 2001. Intergovernmental Forest Law, Enforcement, Governance and Trade, Brussels, Actions on Illegal Logging, Royal Institute of International 22–24 April 2002. SUPARNA, N. 2001. Forest Governance and Forest Law Affairs. (Available at www.riia.org/sustainabledevelopment). Enforcement in Indonesia. Paper for Forest Law Enforcement CALLISTER, D. 1992. Illegal Tropical Timber Trade: Asia- and Governance East Asia Ministerial Conference, Pacific Cambridge TRAFFIC International. September 2001. GLOBAL WITNESS. 1999. The Untouchables: Forest Crimes WHITE and CASE. 1999. Legal Component – Report to Senior and the Concessionaires – can Cambodia afford to keep them? Officials in the Royal Government of Cambodia and Global Witness. London. International Donors. Summary Presentation. White & Case, INDONESIA UK TROPICAL FORESTRY MANAGEMENT Legal Counsel, Washington, D.C. PROGRAMME. 1999. Illegal Logging in Indonesia. ITFMP WORLD BANK. 1999. Forest Sector Review World Bank, New Report No. EC/99/03 Jakarta. York, p. 40.
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