SIA of proposed WTO negotiations: Final report for the forest sector study

Executive summary: Key findings for policymakers

Summary and Conclusions

Further reduction of tariffs as the result of Doha negotiations would result in overall economic gains; while environmental and social impacts would be ambiguous. Trade liberalisation is not likely to influence forest product consumption and production much in aggregate, but it would result in increased trade. The already low import tariffs and relatively small share of forest products traded internationally explain the expected small aggregate impacts of full liberalisation on forest product consumption levels. Further, the majority of trade in forest products takes place within EU, NAFTA, APEC, and under other various regional trade agreements, which may already apply zero or close to zero tariffs. However, there would be considerable differences between different countries in terms of their response to the changing terms of trade and what economic, environmental and social impacts may result from further trade liberalisation. Impacts can be either positive or negative, or a combination of both.

At the world level, the incremental impacts in wood harvesting are likely to be small compared to the impacts due to economic growth, population growth and price development of forest products. Trade liberalisation will naturally have impacts on sustainability, but in most contexts, increased trade alone is unlikely to cause significant direct negative sustainability impacts.

However, further trade liberalisation can accentuate negative sustainability trends unless appropriate forest governance systems are in place and enforced. Because of cumulative impacts and the threshold effect, in principle small incremental changes can result in significant negative sustainability impacts in individual countries with sustainability and governance problems. Also, in biodiversity hotspot countries, such as Brazil, Indonesia, Congo Basin countries, and Papua New Guinea, possible negative impacts on biodiversity can be irreversible. Developing countries, which have established forest industries protected by high import tariffs, may incur considerable environmental and social costs due to downsizing of the industrial capacity and closing some industries entirely. Sometimes social costs may outweigh short-term economic gains unless adequate safeguards are adopted. Consequently, in selected countries like these, it would be wise to adopt a precautionary approach to trade liberalisation, e.g. using a phased approach, and/or addressing these issues and associated mitigation measures in bilateral negotiations and agreements.

The implications of the findings for impacts on the Millennium Development Goals are discussed in the overall project report for the SIA studies.

Economic impacts:

There would be both positive and negative producer and consumer welfare impacts depending on whether the country has forest resources and is already export-oriented, and whether it has the capacity to benefit from improved markets access. Some of the main predicted economic impacts are:

• Global (aggregate) production and consumption of forest products, including roundwood, would change only a little because of elimination of import tariffs. Global roundwood production is predicted to increase only by about 0.5% compared to the baseline.
• The impacts on harvesting volumes would not be uniform. The small overall increase in the production of industrial roundwood is a result of both reductions and increases in production in different countries. The aggregate figure hides considerable variation in production from