2011 Statistics - BelgiumTimber trade monitoring in support of effective, efficient and equitable operation of the EU Timber Regulation (EUTR)

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Photo credit: American Hardwood Export Council

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Introduction

This report has been prepared with the support of the Depart-ment for International Development

If you have any comments on this report please contact:Rachel Butler, Independent Technical Advisor

to the European Timber Trade FederationTel: +44 (0) 1780 751497; Mob: + 44 (0) 7988 681 790;

Skype: raichbutlerThe report has been prepared for the ETTF by:

Rupert Oliver, Forest Industries Intelligence Limited, The Little House, 18 Church Street, Settle,

North Yorkshire BD24 9JE, UKMob: +44 (0) 7553 346410; Email: rjwoliver@btinternet.com;

Skype: rupert.oliver

The EU Timber Regulation (EUTR), which comes into force in March 2013, raises important questions for the European wood trade. Will the regulation increase or decrease wood’s competitiveness with other materi-als, or lead to discrimination against suppliers lacking technical or financial resources to provide assurances of legality? Might it discourage smaller operators from engaging in the wood sector at all and encourage retail-ers currently buying, say, wood furniture with long and complex supply chains from Asia to switch to European alternatives with shorter supply chains, or even to alternative materials? There’s a question mark too over whether it will boost demand for certified sustainable forest products or favour alternative risk based legality verification systems. Will it divert wood imports from EU member states with tough enforcement regimes

towards those where enforcement is weaker, or will implementation be so ineffectual that it has little impact at all?To help answer these questions, the European Timber Trade Federation (ETTF) has initiated a program of reg-ular market monitoring to be undertaken by Forest In-dustries Intelligence Ltd (FII), with support from the UK Department for International Development (DFID). The reports, of which this is the first on Belgium, will deliver consistent analysis of EU import and production data derived from Eurostat and a range of UN agencies, combined with statistics on other key criteria; supplier countries’ forest type (boreal, temperate, and tropical), FLEGT VPA status, and coverage by forest certification scheme and other systems of risk mitigation. It will also focus on corruption and national income levels.

Background

The report includes the following data and assumptions for Belgium:n Import data: qcovering softwood and hardwood logs, softwood and hardwood sawn, softwood, hardwood and combi plywood, softwood & hardwood veneer, particleboard, fibreboard, softwood and hardwood joinery products (flooring, doors, glulam, windows), and wood furniture. qderived ultimately from Eurostat but validated using FII’s trade database system.qreported in euro value and quantity unit (m3 for all products except fibreboard and flooring, which are reported in m2). n Production data: qcovering softwood & hardwood saw and veneer logs, softwood and hardwood sawn, softwood & hardwood plywood, softwood and hardwood veneer, OSB, other particleboard, MDF, hardboard and insulating board. qin cubic meters (m3) between 2007 & 2011.qsourced from UNECE Timber Committee databasen Total supply of “solid timber products”:q“solid timber products” include all those assumed

to be derived from saw and veneer logs. Composite panels, such as MDF and OSB, and pulp and pa-per products are not included as these derive from small dimension logs or wood waste material. While imported wood joinery and wood furniture products contain composite panels, for this analysis it is as-sumed they are solid timber. It is also assumed that all wood joinery and furniture comprises wood material, so RWE volumes for these products are likely to be overestimates.qreported in m3 round wood equivalent (RWE) cal-culated from quantity data (m3, m2 or tonnage) using standard conversion factors. qdata provided for 2007 and 2011 as the latter is the most recent year for which full annual data is available and 2007 was immediately before global recession, so a useful indicator of the impact of recent economic trends.qsources of wood product supply to Belgium are summarised by: wood type (softwood, temperate hardwood, tropical hardwood and indeterminate); major product group (e.g. logs, sawnwood, plywood); and region (e.g. domestic, other EU, N. America, S. America, CIS).

Data coverage, sources and assumptions

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Introduction

Total supply of wood products (in RWE terms) to the EU-25 and individual ETTF countries is summarised against the range of criteria relevant to EUTR implementation.

Exposure to “verified negligible risk”This is a rough measure to identify gaps in independent certifi-cation and verification systems intended to mitigate the risk of illegal wood entering supply chains. It is based on the percent-age area of certified or legally verified commercial forest area in each individual supplier country. For example, if 40% of its forest area is known to be independently certified or legally verified, the ‘level of exposure to verified negligible risk’ of a country’s wood products is assumed to be 40%. The certified/verified forest areas are calculated by comparing data from the various certification and verification systems with UN FAO figures for areas of productive forest land. ‘Level of exposure’ data is broken down by verification system, including FSC, PEFC, or system of legality verification (such as SGS TLTV, Smartwood VLO, or OLB). For this exercise, wood from countries covered by FSC-endorsed National Controlled Wood Risk Assessment is also considered ‘verified negligible risk’. To avoid double counting, areas dual certified to FSC and PEFC are accounted separately. Adjustments are also made for a few countries, such as Brazil and the USA, where there is a big difference in the level of certification in hardwood and softwood forests. The verification systems covered are summarised in the report Annex on ‘Programs delivering verified wood products’. The list is not comprehensive for private sector initiatives, and does not imply endorsement of a system’s reliability by the ETTF or sponsors of this report. It only identifies independent third-par-ty systems that claim to offer legality assurance. The initiatives identified also do not include systems of state regulation that may be at least as effective in eliminating illegal supply risk.

Corruption Perceptions IndexEach year non-governmental anti-corruption organisation Transparency International (TI) publishes a Corruption Percep-tions Index (CPI) ranking countries ‘by perceived levels of corruption, as determined by expert assessments and opinion surveys’. This currently ranks 178 countries on a scale from 10 (very clean) to 0 (highly corrupt). The index is not perfect as, for example, variability in a country’s score can result from both changed perception of a country’s performance, or a change in the sample and method-ology of surveys used. However, separate studies have found significant correlation between the CPI and other proxies for corruption; black market activity and over-abundance of regu-lation. A 2004 study of global illegal logging for the American Forest and Paper Association also suggested a strong relation-ship between independent estimates of suspicious log supply in different countries and CPI scores. The CPI is also seen by the FSC and PEFC as a useful starting point for identifying whether timber suppliers are high or low risk on illegality.

In this report, exposure to corruption is assessed for both domestically supplied and imported wood products and wood supply to the EU-25 and individual ETTF member countries is classified into three types; nlow exposure to corruption from supply countries with a CPI of 7 or abovenmoderate exposure to corruption from countries with a CPI of between 4 and 6.9nhigh exposure to corruption with a CPI of less than 4.

World Bank Income GroupThe report summarises wood supply to the EU and ETTF member countries using the World Bank Income Groups, which are based on calculations of gross national income (GNI) per capita. The World Bank classifies every national economy as follows;nhigh income (GNI greater than $12,475)nupper middle income (GNI of $4,036 to $12,475)nlower middle income (GNI of $1,026 to $4,035)nand low income (GNI less than $1,025).

This measure is used here to assess whether significant changes are underway in the proportion of wood sourced from high and low income countries. In the interests of equity, it is important to monitor the impact of the EUTR on trade flows with the world’s poorest nations. EUTR might encourage a reduction in EU imports from poorer countries as buyers seek to minimise potential risks. Studies by TI suggest a strong relationship between levels of corruption and national income, so it is likely that risk of illegal logging will be higher in poorer countries. Suppliers are also likely to lack resources for inde-pendent legality verification.

FLEGT VPA Licensed TimberThis report assesses the proportion of wood imports by the EU as a whole, and by individual ETTF member countries, derived from countries that are currently negotiating or implementing timber licensing systems through Forest Law Enforcement Governance and Trade Voluntary Partnership Agreements (FLEGT VPAs). Under the EU FLEGT Regulation (2008), controls are estab-lished for entry of timber to the EU from FLEGT VPA countries. Once agreed, VPAs include commitments from both parties to halt illegal timber trade, notably with a license scheme to verify legality of timber exported to the EU. Under the EUTR, VPA-licensed timber does not have to un-dergo due diligence illegality risk assessment by companies that first place it in the EU (termed ‘operators’) and no further risk mitigation action is required.By November 2012, six countries had agreed VPAs with the EU; Cameroon, Central African Republic, Ghana, Indonesia, Liberia, and Republic of Congo. A further six are negotiating VPAs; Democratic Republic of Congo, Gabon, Guyana, Hon-duras, Malaysia, and Vietnam. Fifteen more from Africa, Asia and Latin America have expressed interest in VPAs.

EUTR-specific measurements

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belgium supply trendsWood supplyBelgian forest area is 690000 ha, 22% of land area. 80% of forest is in the Wal-loon (French speaking) region. In volume terms, hardwoods (oak, beech plus ash, maple and walnut) represent 52% of the resource. Softwoods are more intensively

Wood productionAlthough Belgian forest area is limited, management is quite intensive, particularly of softwoods. Sawlog production in 2011 was 2.7 million m3, similar to 2007 and up 15% compared to 2009 during the depths of the recession. Sawn timber production, using both do-mestic and imported logs, was 1.4 million3 in 2011. Belgium produces only small volumes of veneer and plywood. There is significant chip-board capacity, although production fell from 2 million m3 in 2007 to 1.6 million m3 in 2011. MDF produc-tion increased from 265,000m3 to 309,000 m3 in the same period.

Import overviewIn 2011, Belgium imported 9.9 million m3 (RWE) of solid timber products from inside the EU and 3.4 million m3 from outside the EU. These levels were down 2% and 10% respectively compared to 2007. Imports are dominated by logs and sawnwood, although over the last 5 years there has been a slight increase in the relative importance of joinery and furniture products in the profile of imported prod-ucts. Intra-EU imports consist mainly of softwood and hardwood logs from France, the Netherlands and Germany, and sawn softwood from Germany, Sweden and the Netherlands. Extra-EU imports are led by: sawn softwood from Russia; sawn tropical hardwood from Cameroon, Malaysia, Brazil and Indonesia; sawn temper-ate hardwood from the USA; plywood from Brazil, China and Indonesia; and floor-ing and furniture from China.

managed and contribute 75% of wood production. The relatively small size of Belgium’s forest has led to heavy dependence on imported wood. With major ports and easy access to the EU, Belgium is also an important distributor of wood products to neighbouring coun-tries. Most wood importers and wood working industry is concentrated in Flan-ders where the main maritime gateways are situated. During the recession, wood products imports into Belgium have remained more stable than in some other EU countries. In 2011, roundwood equivalent (RWE) volume of imports of wood products based on saw and veneer logs was 13.4 million m3, down only 4% from 13.9 million m3 in 2007. Much wood entering Belgium is re-ex-ported. In 2011, Belgium exported 6.6 million m3 of wood products, down 8% from 7.2 million m3 in 2007.

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Photo credit: AHEC

belgium supply trendsImports by supply regionOver the last 5 years, Belgian imports of tropical hardwoods from Africa, particularly Cameroon, have increased at the expense of Brazil, Malaysia and Indonesia. China has increased in importance as a supplier to Belgium, particularly of plywood, flooring and furniture. Share of imports from Rus-sia, North America and non-EU Europe have remained stable over the last 5 years.

Between 2007 and 2011, the “level of exposure to verified negligible risk” of Belgian imports from within the EU decreased from 58% to 55% due to a slight fall in imports from countries with high levels of PEFC or FSC certified forest. An increase in supply from EU countries covered by FSC National Controlled Wood Risk Assessments was insufficient to offset this trend. Level of exposure to

Imports & FLEGT VPAsCountries having signed or now ne-gotiating VPAs supplied Belgium with 800,000 m3 (RWE) of wood in 2011, 25% of imports from outside the EU. VPAs have strong potential to fill the gap in alternative risk mitigation op-tions for products supplied to Belgium from Africa and South East Asia. Lack of FLEGT VPAs or equivalent legality verification systems in China, Russia and Latin America is a challenge for EUTR implementation in Belgium.

Imports and corruption87% of wood imported into Belgium from outside the EU derives from coun-tries with high perceived levels of cor-ruption - notably in China, Russia and Latin America. Certification is still not widely used in many of these countries. While N. American supply is not well covered by certification, this is less of a problem where corruption is perceived to be low. Some Belgian intra-EU imports come from countries with high perceived corruption - notably Italy.

verified negligible risk of imports from outside the EU increased between 2007 and 2011 from 17% to 24%. This last trend is mainly due to increasing FSC and/or PEFC certified forest area in Russia and Latin America. Belgium has relatively high exposure to operator-based legality ver-ification, mainly due to high dependence on tropical hardwood from Cameroon and Congo Republic where these systems are widely used. The level of exposure for domestic wood shows a significant fall between 2007 and 2011. However this is primarily because when compiling data in Oc-tober 2012, PEFC certified forest area in Belgium was temporarily omitted from the PEFC register (but has since been reinstated).

Exposure of imports to legality verification

Imports by income groupBetween 2007 and 2011, Belgian imports from low income countries fell from 210,000 m3 to negligible levels.This was due to Vietnam, Ivory Coast and Ghana all moving into the “low middle income” category. Total imports from the “low middle income” cat-egory also fell from 1.43 million m3 to 670,000 m3 due to China moving into the “upper middle income” category. Only 6% of Belgian’s extra-EU imports derive from high income countries.

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belgium imports 2007-2011The value of Belgian wood products imports fell from 3.35 billion euro in 2007 to 2.59 billion euro in 2009 before rebounding to 2.93 billion euro in 2011. Wood furniture is the single largest component of wood product imports by value, accounting for 40% of all import value over the last 5 years. 78% of Belgium’s wood furniture import value derives from other EU countries. However China is taking a larger share of Belgium’s furniture market, accounting in 2011 for 13% of all wood furniture import value. Sawnwood is the second largest wood product group imported into Belgium. Much comprises softwood from Germany, Sweden, and Russia. But Belgium is also a large importer of tropical sawnwood, play-ing an important role in distribution of this product to other parts of Europe. Belgium’s imports of tropical sawnwood fell very steeply between 2007 and 2009, but then rebounded strongly in 2010 and 2011. Over this period, there has been a significant increase in Belgian imports of tropical sawn from Africa at the expense of Asia and Brazil. However Belgium continues to import relatively large volumes of high-value hard-wood mouldings from both Indonesia and Brazil. Belgium is importing an increasing amount of hardwood plywood from China.

Source: Forest Industries Intelligence Ltd analysis of trade data supplied by Business Trade Statistics Ltd

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belgium imports 2007-2011

Source: Forest Industries Intelligence Ltd analysis of trade data supplied by Business Trade Statistics Ltd

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belgium imports 2007-2011

Source: Forest Industries Intelligence Ltd analysis of trade data supplied by Business Trade Statistics Ltd

This report has been prepared with the support of the Department for International DevelopmentIf you have any comments on this report please contact:

Rachel Butler, Independent Technical Advisor to the European Timber Trade FederationTel: +44 (0) 1780 751497; Mob: + 44 (0) 7988 681 790; Skype: raichbutler

The report has been prepared for the ETTF by: Rupert Oliver, Forest Industries Intelligence Limited,

The Little House, 18 Church Street, Settle, North Yorkshire BD24 9JE, UKMob: +44 (0) 7553 346410; Email: rjwoliver@btinternet.com; Skype: rupert.oliver