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The EU and Honduras signed their FLEGT Voluntary Partnership Agreement (VPA) in Brussels on February 23 in Brussels.

Viet Nam appears to have overcome the immediate market challenges of the COVID pandemic remarkably quickly. In April 2020 in the immediate aftermath of lockdown measures in the US and Europe, the Vietnam Timber and Forest Product Association (VTFPA) issued a statement that the wood industry in the country faced a ‘disaster’ as ‘many Vietnamese wood processing enterprises have had orders cancelled or suspended,’ that they were ‘sitting on 100s of containers of finished goods that cannot be shipped and must be stored in warehouses at considerable cost for an unknown length of time’, while also ‘facing sharp rises in input prices for wood and other materials’ and freight costs that ‘have increased $500-1,000 per container’.

Although there was a sharp decline in EU27+UK wood product imports from Cameroon in 2020, trade with the leading African supply country was not noticeably more volatile than in previous years (Chart 14). In the 12 months to October last year, EU27+UK imports from Cameroon were US$256 million, down from US$306 million in the previous 12-month period. Most EU27+UK trade with Cameroon comprises sawnwood destined for Belgium. The last time imports from Cameroon were at this low level was in 2017 when shipments via Douala port were severely affected by dockyard workers strikes, delays in VAT reimbursements and other red tape. EU27+UK imports from the Republic of Congo (RoC) were rising consistently throughout 2018 and 2019 but slowed significantly in 2020. Rolling 12-month imports increased from US$78 million in January 2018 to a peak of US$107 million in January 2020 before sliding back to US$83 million in October 2020. This trend is driven mainly by Belgian imports of logs and sawnwood and French imports of veneers from the RoC.

Indonesia’s exports of forest and wood products to all destinations held up better than expected in 2020. According to a statement in January 2021 by Bambang Hendroyono, the Secretary General in the Indonesian Ministry of Environment and Forestry, Indonesia’s 2020 export target for forest and wood products was projected to be exceeded despite the impact of the corona pandemic on production and trade. Early in 2020 the export target was lowered from US$10 billion to US$7 billion to take account of the anticipated disruption of business. However, export earnings in 2020 were expected to exceed US$11 billion, even more than the original target and only 5% below that of 2019. The Secretary General emphasised that Indonesian Government incentives and relaxation of regulations helped achieve this success.

The Covid-19 pandemic led to a sharp fall in EU27+UK imports of wood products from VPA Partners and other tropical countries during 2020, although the immediate effects were concentrated in the second quarter of the year and varied widely between product groups and countries. The downturn in 2020 also followed on from a significant rise in trade in 2018 and 2019 and the overall effect was to reduce trade to the level of two years before. The early signs are that the COVID downturn in EU27+UK tropical wood imports will be less dramatic, and more short-lived, than the downturn following the financial crises in 2008-2009 which effectively halved the size of the trade over the long term.

The COVID pandemic led to upheaval in the EU27+UK wood market and wider economy in 2020. The first half of the year saw the deepest recession in history in both the EU and the UK. With strict lockdowns in place in many countries between March and June, the EU27 economy shrunk 14.6% in the first 6 months of the year, while UK GDP fell 22.3% Then between July and September, the economy picked up, with record growth of 11.5% in the EU27 and 15.5% in the UK (Chart 1).

Entrants in the Conversations About Climate Change design competition, the latest manifestation of the UK Timber Trade Federation’s government-funded FLEGT communication campaign, were given a demanding brief. They had to create a product or artwork entirely in timber from FLEGT VPA partner countries. It had to reflect the creator’s concerns about the environment, and invite discussion about the key role of the forest in averting climate crisis, the part using legally and sustainably sourced timber plays in helping maintain the forest, and, of course, about FLEGT. The TTF acknowledges it laid down quite a challenge. But even before the online exhibition featuring the six winning designs went live on February 12, the conversation triggered by the project had gone global. It attracted over 100 entries from around the world.

To grow and develop EU and UK demand for FLEGT-licensed furniture requires promotion in these markets of what a FLEGT Licence stands for and the business benefits in terms of assured legality and exemption from EUTR due diligence.  It also demands that more FLEGT VPA partner countries join Indonesia and get to FLEGT licensing stage to boost the EU’s choice of FLEGT-licensed products and supplier.

Speaking at the November 2020 Sustainable Tropical Timber Coalition (STTC) Conference, Iwan Kurniawan of The Borneo Initiative recommended greater collaboration and synergy between FSC and the EU FLEGT programme in Indonesia to streamline auditing and improve the economics of certified sustainable forest management. “The current average annual cost of auditing separately for FSC and SVLK is around $49,000,” said Mr Kurniawan. “Joint auditing could cut this by 31%. He added that a motion proposing joint FSC and SVLK audits would be discussed at the 2021 FSC general assembly. 

In 2020, IMM commissioned a follow-up study of FLEGT impact on forest sector investment in Indonesia and Viet Nam (the full study can be found here). The study identified correlation between a rise in forest sector investment and a shift in investment from the pulp and paper towards the wood processing and furniture manufacturing sector in Indonesia during the last decade.

Analysis of trade data shows in the latest IMM Annual Report demonstrates that the goal of closing world markets to illegal wood products is already well advanced – even if recent steps towards regulation in China are discounted for now. In 2019, 66.5% (US$27.6 billion) of the total value (US$41.5 billion) of recorded tropical wood product exports worldwide were destined for countries with regulatory measures to eliminate illegal trade (Figure 1). This compares to 62.2% of tropical trade in 2018. The rise in the proportion of tropical wood products destined for regulated markets in 2019 was due primarily to the decline in imports by China, considered here an unregulated market, while US imports of wood products from tropical countries, particularly Viet Nam increased sharply during the year. 

IMM’s 2019 EU trade survey saw Indonesia and Malaysia overtake Cameroon as the expected most important supplier of tropical timber five years from now (chart 1). In 2018, Cameroon had been perceived to be the most important future supplier, followed by Brazil, Congo Republic, Malaysia and Indonesia. The survey question on the future of tropical timber supply was answered by 95 European timber and timber product importers and merchants in 2019 and by 67 in 2018.