FII Comment on UK Green Supply Chains Initiative

I was asked today to comment an ongoing move by UK Government, led by Michael Gove, Zac Goldsmith and others, to draw up a “Green Supply Chains” initiative in which one proposal is that due diligence obligations, similar to those already imposed on the timber trade through EUTR, should now be extended to other “forest risk” commodities, such as palm oil and soy.

This move is apparently being resisted by some UK government ministers and advisors who fear it may jeopardise a US trade deal and be overly burdensome for commodity traders. Apparently, a central argument against these measures being introduced is that it will only lead to displacement – i.e. unsustainably produced palm, soy and other forest-risk commodities sold to the UK will just be sold elsewhere.

This is my response.

Experience with timber is that displacement is not a good argument for not implementing due diligence requirements. Displacement was, in fact, a much greater issue for timber than for other commodities since the EU (and no doubt also the UK) is a much bigger market for these other commodities from high risk countries than it is for timber. And there was some significant displacement in the case of timber (although it is of course debatable how much of the ‘displacement’ was due specifically to EUTR since it was introduced just at a time when the Chinese and other emerging markets were going into overdrive).

All the analysis undertaken on this to date have shown that, for most “forest risk” commodities, the volumes entering domestic markets are much more significant than the volumes entering international trade. Therefore, if we take the displacement argument at face value, there would be no case for any trade related “green supply chain” measures at all and Michael Gove and Zac Goldsmith can go do something else.

However, what EUTR clearly demonstrates is that leadership by setting an example is essential in this area. If we don’t do it, then it is very easy for other trading nations to wriggle out of their obligations. We saw that, with timber, once the US led the way with the Lacey Act Amendment, followed shortly after by the EU, this encouraged in fairly swift succession Australia, Japan, South Korea, Switzerland, Norway, Indonesia, Malaysia, Vietnam, to implement something similar. Even China has taken some steps down the same road.

We’re now in a position where, even excluding China, 70% of all wood and wood furniture exports from tropical countries is subject to some sort of risk based import control (in 2019, that broke down as 15% EU28, 28% US, 14% Japan, 6% Korea, 3% Vietnam, 2% Australia, 1% each Malaysia and Indonesia). If China is included, that rises to 92%.    

And why, exactly, would this be a problem for UK trade with the US – the US is itself a pioneer of this sort of legislation, and in the current environment I’d expect is also likely to be inclined to support measures making it more challenging to trade in commodities from countries which are high risk from a legality or deforestation perspective.

Due diligence doesn’t mean everything must be “certified”, only that operators must acquire evidence and take steps to demonstrate negligible risk of illegal harvesting. This is something the US achieved perfectly well in the wood sector using a regional risk-based approach (in the case of hardwoods, through the Seneca Creek study). If the US were assured this model would be followed for other commodities, why would they raise any objection given all the evidence of robust governance in the US?

As for specific data on other commodities, the EC published a wide-ranging data-based report in 2013 considering the links between EU commodity trade and deforestation. The comment I made on that report for the ITTO Market Information Service at the time is still relevant.

The report uses the concept of ‘embodied deforestation’ to link deforestation to consumption. Essentially it quantifies the area of deforestation associated with the production of any good, commodity or service. The report combines a detailed review of data on the scale and location of deforestation with an analysis of the various drivers of deforestation around the world. It then determines the volume and direction of trade flows of all commodities linked to the deforestation process.

For all relevant traded commodities, the report considers both the direct (e.g. conversion of forest into agricultural land) and indirect impacts (e.g. pollution from mining activities leading to forest degradation and later forest conversion).

Working through the numbers, the report ends up attributing 200,000 hectares of total global deforestation of 232 million hectares between 1990 and 2008 to the EU’s imports of wood products. This compares to 8.7 million hectares attributed to EU imports of agricultural cash crops and livestock products. The report also shows that worldwide only 33% of deforestation embodied in crops and only 8% of deforestation embodied in livestock products enters international markets.

The report confirms forcibly something that many people in the wood industry have long suspected, that policy measures in consuming countries targeting only the wood trade – whatever their merits in improving environmental and social performance in other areas  – can play little or no role to prevent or slow deforestation. Measures targeting consumption of agricultural commodities, which have long been neglected, would be more effective. But even here the value of trade-based measures in isolation is constrained by the fact that a majority of product remains within the country of origin.

At the very least, the report might discourage European policy makers and environmentalists from presenting EUTR, forest certification and legality verification as a necessary and effective response to deforestation. Instead, they might be encouraged to present such mechanisms for what they are, as a demonstration of innovation and leadership by the wood industry with useful lessons that urgently need to be applied to other industrial sectors. The report “The impact of EU consumption on deforestation” funded by the European Commission is at:

Perhaps not the answer my correspondent was looking for. But frankly, in this instance trade data may be used to show whatever you like – whether strongly in favour or against this sort of policy intervention. At the end of the day, it boils down to a question about the values we adhere to and want to promote.

These are the important questions for the UK government, and anybody else in the UK with an interest in this: do you believe the UK should be taking action to ensure the products we import do no damage to forests and forest communities? Should the UK lead on this, or should we take no action because we are more worried that others will not do the same and we can all default to the lowest common denominator?

Share this: