Workshop 1 of the First IMM Trade Consultation held in London on 8 March 2018 focused on reasons for the 15-year decline in tropical wood import volume and share in the EU, future market prospects and the role FLEGT licensing could play in reversing the market trend.

Participants had experience of UK, Netherlands, German, and Belgian markets. They were asked to consider nine potential reasons for falling EU tropical timber demand:

1. Economic downturn 2008 to 2013
2. Diversion of supply to other markets
3. Erosion of infrastructure for EU supply
4. Import and financial sectors aversion to commercial risk
5. Just-in-time favouring more regular less volatile supply
6. Substitution by temperate, chemically and thermally modified wood, composites and non-wood materials.     
7. Prefabrication and the switch from adaptable utility woods to tightly specified materials
8. Competition from China for material access and in markets for finished goods
9. Environmental prejudices and uncoordinated marketing

There was group consensus that all the factors are relevant, but that fashion changes should be added, notably the EU trend towards the oak look and shrinking demand for redwood finishes in interiors. It was also noted that EUTR has been an important driver to increased aversion to commercial risk. 

Participants agreed that the factors in the decline in EU tropical wood imports have been “environmental prejudice and un-coordinated marketing”, combined with “substitution by temperate and modified woods, wood composites, and non-wood materials”.   They also highlighted the link between these factors, suggesting that other material sectors have exploited environmental prejudices and lack of effective marketing from the tropical industry to take its market share.

On the potential role of FLEGT licensing in reversing tropical timber imports, the view was that it was likely limited.

It was felt that licensing currently was not well suited to overcoming environmental prejudices as ‘sensitive’ sections of the EU market are already conditioned to favour FSC and/or PEFC certified forest products. There is also no consumer awareness of FLEGT licensing. Even in the timber trade it was thought there is widespread belief that licensing is “legality verification” only and there is little understanding of wider governance reforms it entails.  

Licensing was also perceived by the group only to address factors related to environmental prejudice and, to some extent, commercial risks, not various other technical factors contributing to tropical wood’s decline in Europe; including other materials sectors’ innovation and superior marketing, the shift to prefabrication, rise of engineered wood products, and volatility in tropical supply.

The fact that only one country is currently FLEGT licensing was also seen to limit its value, at least to the importing industry represented in this group, as a tool for building a market development strategy. 

Although the overall view of the group was negative on future EU market prospects for tropical wood and the role of licensing, they suggested ways to improve the situation:

• Extending FLEGT licensing to a wider range of countries to enhance its visibility and value as a tool for regulatory compliance and a market development platform, and bringing on board a large Asian supplier like Vietnam and a large African suppler like Cameroon to give the whole framework a boost.
• Promoting wider awareness and deeper consumer understanding of the role of FLEGT licensing/FLEGT VPAs in enhancing national forest governance and reducing the risk of bad forestry. Given environmental prejudice is reckoned to be a key reason for the decline of tropical timber in the EU market, this would have potential to play a significant role in removing barriers.  
• Creating opportunities to overcome environmental prejudices and improve competitiveness in relation to substitute products through linkage of the licensing system to LCA-based systems of environmental assurance. These could include Environmental Product Declarations (EPDs) and Product Environmental Footprints (PEFs), currently being developed   to promote a EU market for environmentally friendly products.
• Putting much stronger emphasis on targeted promotion that matches specific tropical products with technical demands of specific EU market niches, given that, while important, market development strategies focusing only on generic legality and environmental issues can go only so far to remove barriers.