Initiatives: Sustainable Forest Markets

 

The Rainforest Coalition is facilitating a coordinated negotiation platform related to the upcoming renewal of the United Nation's International Tropical Timber Agreement (ITTA 1994), which expires in December 2006.

It is imperative that tropical logging markets are restructured in order to disintermediate existing middlemen and link resource owners directly to product retailers.

In cooperation with the International Timber Organization (ITTO), the Rainforest Coalition will facilitate certification of sustainable logging, develop disincentives to illegal logging and support the establishment of businesses within developing countries that can process lumber locally to the standards of, and in partnership with, end users in industrialized markets.

While the forests are being clear-cut, the indigenous forest-owners suffer further injustice by receiving only a pittance for their wood (often less than 0.5% of the market value within industrial nations) – a totally unsatisfactory situation from any perspective. 

For example, export prices in many of the member states currently average $40-$60 per cubic meter for round logs. In contrast, such hardwood prices average $700 per cubic meter unprocessed in rich countries according to USAID – so the owners realize less than half a percent of true market value for their unprocessed timber. 

Furthermore, low-technology processed hardwood products can realize what equates to over $2,300 per cubic meter selling through retail outlets. Of those already depressed export revenues, on average, community forest-owners realize less than $3-$10 per cubic meter (according to a recent World Bank study)

This is a classic example of ‘market failure’ due to the ‘private versus social’ benefit variances. A market correction will require solidarity between Industrialized and Developing Nations.

There are a variety of factors at play, but the key factor involves unscrupulous operators leveraging corruption and intimidation to eliminate ethical competitors.  Furthermore, these operators primarily export ‘round logs’, thereby capturing value-added profits off-shore in tax beneficial jurisdictions.

To address these market dynamics, the Rainforest Coalition seeks to cooperate with the ITTO to facilitate selective logging, value-added local processing, direct market access and marketing alliances with forest product retailer.