IV. MEASURES FOR INTEGRATING ENVIRONMENTAL CONSIDERATIONS INTO AGRICULTURE

[ IV | IV-A | IV-B | IV-C | IV-D | IV-E ]

C. Impact of environmental measures on Malaysian exports

[ C | C-1 | C-2 ]

1. Vulnerability to external environmental requirements

The vulnerability of exports to domestic and external environmental requirements depends on many factors, such as the composition of exports in terms of products and markets, industrial structures, rate of economic growth, level of development, and domestic and international facilitating policies.

Considering the structure of trade, Malaysian exports could be vulnerable to external environmental requirements in sectors such as timber and timber products, textiles, air conditioners and electronics. As discussed in chapter III (section E), Malaysia has taken a firm position in international forums against the use of unilateral trade measures for environmental purposes.

(a) The case of tropical timber

Timber, comprising both saw logs and sawn timber, was Malaysia's third largest commodity export in 1993, after petroleum and palm oil. Apart from "commodity timber", Malaysia exports timber products, such as plywood/veneer, mouldings and furniture. Since independence, forest utilization facilitated the process of industrialization and poverty eradication, but Malaysia's economic development has become much less dependent on its forest base. Development and industrial policy now promote the manufacturing of timber products, rather than exports of "commodity timber".

The volume of commodity timber exports decreased from 20.4 million m³ in 1990 to 9.3 million m³ in 1993, which resulted entirely from a fall in saw log exports. That decrease can be attributed both to domestic and external policies. With regard to domestic policies, both environmental regulations and Malaysia's development and industrial policies played a role. Domestic environmental regulations aimed at sustainable forest management (under the National Conservation Strategy) caused a reduction in logging areas, and hence in the volume of timber production. Indeed, the production of saw logs fell from 50 million m³ in 1991 to 37.3 million m³ in 1993. Apart from environmental policies, national development and industrial policies were aimed (through export taxes and other measures) at discouraging exports of timber as a commodity in favour of high-value-added manufactured exports. Those policies were, at least in part, responsible for the reduction from 85 per cent in 1980 to 25 per cent in 1993 in the share of production destined for exports.

External factors, such as unilateral measures and consumer concerns over deforestation

have also had adverse effects on exports. Studies have pointed out that unilateral measures constitute non-tariff barriers to trade, in particular where such measures target only tropical timber. Unilateral measures include bans or restrictions on the use of tropical timber, mandatory and voluntary labelling requirements and campaigns.

Studies list Austria, Belgium, Germany, Hong Kong, China, the Netherlands, Switzerland and the United Kingdom of Great Britain and Northern Ireland among the countries and territories implementing or contemplating unilateral measures. Such measures have also been implemented by local authorities, including municipalities. Austrian legislation concerning labelling of tropical timber was eventually revoked after Malaysia had taken up the issue in the GATT Council.

The significance of the effects of external environmental requirements depend to a large extent on the geographical distribution of timber exports as well as the Malaysian response to external developments. In the case of saw logs, the principal Malaysian export markets are Japan, the Republic of Korea and Taiwan Province of China (together, those countries and territories accounted for 86 per cent of the value of Malaysian exports in 1993). Those countries and territories have not implemented environmental regulations affecting timber trade.

In the case of sawn timber, however, some Malaysian export markets (notably the Netherlands) have implemented or intend to implement measures which may affect trade in timber.

Malaysia’s response to developments in overseas markets has been, first, to organize campaigns to oppose unilateral measures. Second, Malaysian industry has responded by diversifying its export markets, including the substitution with other markets where unilateral measures are emerging. Malaysian policy is to encourage domestic higher value-added activities, which could also be considered as one form of market substitution. Finally, the responses consist of adaptation, i.e., altering production methods to suit the requirements of external markets. In that context, timber certification is increasingly seen as a marketing tool that can help to gain access to green markets. In practice, unilateral measures in overseas markets have not significantly affected Malaysian timber exports. That is at least partially the result of the responses listed above.

International initiatives are likely to focus on eco-labeling or certification of sustainable forest management, covering tropical as well as temperate and boreal timber, and to be based on multilaterally agreed principles.

Several proposals have been put forward for the introduction of eco-labels for timber, and various definitions of sustainably managed forests have also been proposed. Some of the latter proposals refer to the concept of "sustained yield", meaning that harvesting should not exceed the growth rate of a forest. Other definitions are wider, covering also water quality, biodiversity and non-wood forest products. Some definitions include social issues in relation to forest management. Timber certification is seen by the Malaysian industry as a useful marketing tool in greener markets, provided that labelling is applied to all types of timber and based on internationally-agreed criteria for sustainable forest management. Malaysia has attempted, though so far unsuccessfully, to get the International Tropical Timber Organization to include temperate and boreal forests in addition to tropical forests under the International Tropical Timber Agreement. The International Tropical Timber Organization has set the year 2000 as the target date beyond which all trade in tropical timber will be from sustainably managed forests.

Malaysia's position is that labelling must fulfil the following conditions:

• Labelling must be applied to all types of timber. Temperate and boreal timber account for almost half of the world’s forest cover and almost 90 per cent of the world timber trade;
• Labelling must be based on internationally-agreed standards and criteria for sustainable development, and not merely on standards developed by one or a few countries;
• All actions not consistent with the foregoing should be revoked or abrogated.

Top