Trade and Environmental Issues in Forest Production

Trade policy influences the environment directly and indirectly, while environmental policies have an impact on competitiveness. In the past, trade's potential role to contribute to sustainable forest management has been largely unexplored. This paper is aimed at assessing the possible impacts of various policy instruments on trade and the environment. Although the Latin American and the Caribbean region accounts for only about 4% of the world trade of woodbased products, some of the region’s producers are among the world market leaders. The environmental pressures in the marketplace are increasing and already influence exports of such wood products as sawnwood, plywood, pulp and paper, and furniture. Furthermore, the promotion of environmental friendliness is starting to be used as a marketing argument for plantation-based forest products and various non-wood products from natural forests. Reduction of tariff and non-tariff barriers, together with market liberalization and structural adjustment, have led to trade expansion with some negative effects on forests. These effects could be mitigated by complementary policy provisions. Forestry subsidies have been justified on the basis of environmental objectives, but there is a danger that such subsidies could cause trade disputes. Log export bans, restrictions, and export taxes have a tendency to lead to inefficiency, and cannot be justified on environmental grounds. Ecotaxes on forest products have been ill-conceived, and therefore assessment cannot be properly made. Trading of global environmental services of forests offers possibilities for innovative financial instruments tapping both public and private sources and enhancing the contribution of trade to sustainability. Certification of forest management and eco-labelling of forest products are receiving much attention as potential instruments for promoting export markets and improving the state of managed forest ecosystems. There are both national and enterprise-level eco-labelling initiatives in the Latin America and the Caribbean. Mutual recognition and harmonization remain key issues of debate, as do the division of potential market shares and green price premiums for certified products. While certification has the potential in the Latin America and the Caribbean region to complement the normative framework of the public sector, effective implementation without adverse impacts on small-scale producers should also be an objective.