Impacts of the FLEGT Action Plan and the EU Timber Regulation on EU Trade in Timber Product

Paul Rougieux,Ragnar Jonsson

doi:10.3390/su13116030

Abstract

The EU Timber Regulation (EUTR) is a key element in the efforts of the European Union to curb the trade in illegal timber products. This study helps to remedy the lack of systematic, statistical analysis of the EUTR’s potential impacts on international trade in timber products. Using cointegration intervention—or shock—models we quantify potential shifts in import prices and quantities of tropical hardwood lumber and oak lumber after the entry into effect of the EUTR. We further estimate import demand models to assess the relation between temperate and tropical hardwood products and whether there was a structural change in demand elasticities after the entry into force of the EUTR. The shock model analysis indicates, for most of the bilateral trade flows where we observe cointegration and a significant shock variable, increasing import prices and decreasing import quantities of tropical hardwood lumber following the EUTR start date, consistent with a contraction of the supply of tropical timber. The results of the import demand models do not give a clear indication as to whether oak lumber is a complementary or substitute product for tropical hardwood lumber, and there are no clear signs of structural changes in demand elasticities. Aside from the analysis, an important contribution of the paper is the procedure for building a long and homogeneous time series of tropical hardwood lumber.

Highlights

Illegal logging and the associated trade in timber products undermine legal timber trade and have detrimental environmental, economic, and social impacts [1]
In an attempt to isolate the effect of the policy change from other economic variations, we analyze the price series of substitute or complementary products. Such products should be affected by economic variations in a similar way throughout the period, we look for a difference in how they relate to each other before and after the entry into force of the EU Timber Regulation (EUTR)
The EU Timber Regulation (EUTR) is a key element of the Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan aimed at curbing illegal logging and its associated trade

Summary

Introduction

Illegal logging and the associated trade in timber products undermine legal timber trade and have detrimental environmental, economic, and social impacts [1]. Commission presented the Forest Law Enforcement, Governance, and Trade (FLEGT). Action Plan [2] as part of its endeavors to tackle illegal logging. Acknowledging the shared responsibility of exporters and importers, the objective is to eliminate illegal timber in international trade. A cornerstone of the FLEGT action plan is establishing Voluntary. Partnership Agreements (VPAs) with timber producing and exporting countries, and the introduction of FLEGT-licensed timber [1]. A second key element of the plan is the EU. VPAs and the EUTR are meant to reinforce each other, addressing the supply (export) and demand (import) side of the timber product trade respectively (Figure 1)

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