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Thursday, 16 August 2012
Page: 8895

Mr BANDT (Melbourne) (11:35): Illegal logging and the international trade in illegally logged timber is a major driver of environmental damage. It costs govern­ments—especially developing country governments—billions of dollars in lost revenue, promotes corruption and under­mines the rule of law and good governance. Overall, it retards sustainable development in some of the poorest countries of the world. By definition, the scale of illegal logging is difficult to estimate, but it is believed that more than half of all logging activities in the most vulnerable forest regions—South-East Asia, Central Africa, South America and Russia—may be conducted illegally. Worldwide, estimates suggest that illegal activities may account for over a tenth of the total global timber trade, representing products worth at least $15 billion a year.

For too long, consumer countries, including Australia, have contributed to these problems by importing timber and wood products without ensuring that they are legally sourced. The breaking of laws on harvesting, processing and transporting timber or wood products is widespread in many timber-producing countries. By logging in protected areas, such as national parks, or having over allowed quotas, processing the logs without acquiring licences and exporting the products without paying export duties, companies may be able to generate much greater profits for themselves than by adhering to national laws and regulations.

The extent of illegal logging in some countries is so large, and law enforcement so poor, that the chances of detection and punishment are often very small and the incentives to operate illegally are correspondingly large. The impacts of these illegal activities are multiple. Environ­mentally, illegal logging depletes forests, destroys wildlife habitats and impairs the ability of land to absorb carbon dioxide emissions, with resultant impacts on climate change.

Physically, the destruction of forest cover can often have knock-on effects. For example, in December 2004 flash floods and landslides in the north-eastern Philippines killed over a thousand people. The government blamed illegal logging, which had denuded the mountain slopes.

In a budgetary sense, illegal logging loses governments revenue. A Chatham House briefing paper reports estimates from Indonesia that the government there is losing more than $1 billion a year in unpaid taxes and charges—and that is out of a total budget of about $40 billion in 2003.

Developmentally, future generations will suffer even more. World Bank studies in Cambodia in 1997 suggested that illegal extraction, worth between $0.5 billion and $1 billion, was over four million cubic metres a year—at least 10 times the size of the legal harvest, and a level of harvesting that is unsustainable.

Socially, illegal logging undermines respect for the rule of law and of government, and is frequently associated with corruption, particularly in the allocation of timber concessions.

From a trade related perspective, as illegally logged timber is invariably cheaper than legitimate products, it distorts global markets and undermines incentives for sustainable forest management. A study published by the American Forest and Paper Association in 2004 estimated that world prices were depressed by between seven and 16 per cent—depending on the product—by the prevalence of illegal products in the market. This explains why the Australian forestry industry is largely supportive of this bill.

Politically, revenues from illegal logging have been known to fund national and regional conflict, most recently in Liberia and the Democratic Republic of Congo. In Cambodia, for several years Khmer Rouge forces were sustained primarily by the revenue from logging areas under their control. When, under donor pressure, Thailand and the Cambodian government cooperated to close their joint border to log exports at the end of 1996, the insurgents opened peace negotiations.

That is a summary of the bad news about illegal logging. But the better news is that, in recent years, producer and consumer countries alike have paid increasing attention to illegal logging. One of the main initiatives includes measures to exclude illegal timber from international markets—notably the EU's Forest Law Enforcement, Governance and Trade Action Plan. This initiative centres on the exclusion of illegal products from EU markets. The major problem with this approach, of course, is that there are currently no means of distinguishing legal from illegal products at the border. The EU's solution is, therefore, a new timber licensing system designed to identify the legality of production and relying on credible—probably independent—verification of legal behaviour at every stage of the chain of custody of the products. This is similar in effect to systems already in place in several international agreements, including the Convention on International Trade in Endangered Species of Wild Fauna and Flora and the Kimberley Process on conflict diamonds, which feature licence or permit systems and tracking mechanisms designed to exclude particular categories of products from international markets. This bill is similar in its intent.

It is important to first emphasise that that the Greens are strongly of the view that much of the legal native forest logging in Australia is clearly contrary to the national and global interest. Further, while this logging is supposed to be controlled by a suite of laws, regulations and policies, compliance with these laws is uneven across the various states, and assertions about failures to comply are frequent.

However, today we are discussing the importation of illegally logged timber, and it is the case that, compared to the domestic situation, the extent of illegal logging in developing nations is far worse and our ability to prevent its import is severely limited. The only regulation that exists at the moment in Australia to control importation of illegally logged timber is the Convention on International Trade in Endangered Species. This convention targets only a limited number of timber products that have been derived from endangered species and, therefore, large amounts of timber continue to be imported into Australia without any requirement for verifying its legality, other than through voluntary industry measures.

At the 2010 election the government committed to encouraging the sourcing of timber products from sustainable forest practices and to seek to ban the sale of illegally logged timber products through five identified measures. This bill represents the regulatory elements of the government's illegal logging policy, focusing on measures 3 and 4 of the policy. The government says that these regulatory controls will be complemented by investment in capacity-building and bilateral and multilateral engagement. That is appropriate and follows the European approach and, of course, the Greens will be scrutinising this investment.

In order to determine the most effective policy approach to implementing the regulatory aspects of this election commit­ment, a regulation impact statement was undertaken by the Department of Agriculture, Fisheries and Forestry. The regulation impact statement outlined three options that may achieve the objective of changing the behaviour of timber producers by directly limiting opportunities for the production and trading of illegal timber. These options were: quasi-regulation with codes of conduct enforced by industry; co-regulation, using a prohibition element and a requirement for due diligence; and explicit regulation requiring a minimum standard for verification of legality.

The bill reflects the due diligence co-regulation approach identified in option 2 of the regulation impact statement. The key regulatory elements of the bill are a prohibition on illegally logged timber and wood products, with an additional prohibition on the processing of illegally processed raw logs and a requirement for industry to carry out due diligence to mitigate the risk of importing illegally logged timber into Australia. We acknowledge that this represents a significant step by Australia to prevent the trade of illegal timber products both nationally and internationally and although it has been a long time coming we welcome the effort, although I do flag some concerns. Further we also acknowledge that stakeholder consultation during the course of developing this bill has been broad.

As described in our additional comments in the recent Senate Rural and Regional Affairs and Transport Legislation Committee report, the Greens are generally supportive of this bill but believe that, in a number of areas, the balance between providing clarity in the legislation and allowing for flexibility in drafting regulations has not been well struck.

Greater clarity will be important in the following areas. Firstly, it will be important in the definition of 'illegal logging'. Numerous stakeholders, including the timber industry, timber retailers, and environmental and social organisations agree that the definition of illegal logging should be expanded. The Greens are not persuaded by the government's reasoning that an unintended consequence of a prescriptive definition of 'illegally logged' may be that some elements of the applicable legislation are overlooked or excluded through omission, and we retain the view that the Australian definition should be consistent with the EU definition.

Secondly, as far as due diligence is concerned, the Greens can find no reason why the due diligence provisions relating to the declaration form should remain unclear. The bill should specify that the declaration form must include detailed information critical to satisfying due diligence. There would be a range of information from name of importer and name of supplier through to vessel name, voyage number and, of course, quantity of timber. We emphasise, in particular, that the due diligence require­ments must provide for traceability to coupe level and an assessment of the risk of illegality due to corruption. There is evidence around the world of companies paying bribes to officials to secure the 'legal' allocation of logging rights. Corruption criteria must allow for scrutiny of the logging permit application process.

Thirdly, as to assessing and reporting compliance, the Greens agree with Greenpeace that, in order to determine the levels of compliance and assist in assessing the standards used in due diligence documentation on an ongoing basis, the bill would benefit from a requirement for regular, preferably quarterly, compliance audits and aggregate data reports. As noted by the committee report, having annual compliance audits was a measure proposed by DAFF following the legislation committee's report, and the minister's office did not appear opposed to its inclusion.

I flag that my Senate colleagues may move amendments in the other place reflecting these concerns but, subject to those comments, I commend the bill to the House.