Illegal Timber logging, proposed Australian law and WTO

Reports of Indonesia challenging the Australian legislation relating to prohibition of importation of illegal timber logging is the news here. The Australian Government has introduced a legislation in Parliament called the "Illegal Logging Prohibition Bill, 2011" relating to combatting illegal logging. A few salient provisions of the Bill are:

The Guide to the Bill states:

"This Act prohibits the importation of illegally logged timber and the processing of illegally logged raw logs.

This Act also requires importers of regulated timber products and processors of raw logs to conduct due diligence in order to reduce the risk that illegally logged timber is imported or processed.

Importers of regulated timber products must provide declarations, at the time of import, to the Customs Minister about the due diligence that they have undertaken."

 The definition of "illegally logged" as per the Bill , in relation to timber, means harvested in contravention of laws in force in the place (whether or not in Australia) where the timber was harvested.

"Section 8  Importing illegally logged timber  A person commits an offence if: (a)  the person imports a thing; and (b)  the thing is, is made from, or includes, illegally logged timber; and (c)  the thing is not prescribed by the regulations for the purposes of this paragraph. Penalty:  5 years imprisonment or 500 penalty units, or both.

Section 9  Importing illegally logged timber in regulated timber product (1)  A person commits an offence if:(a)  the person imports a thing; and                (b)  the thing is, is made from, or includes, illegally logged timber; and                      (c)  the thing is a regulated timber product; and (d)  the thing is not prescribed by the regulations for the purposes of this paragraph.Penalty:  5 years imprisonment or 500 penalty units, or both. (2)  The fault element for paragraph (1)(b) is negligence.(3)  A regulated timber product is a timber product prescribed by the regulations." 

The Bill states that importers have to follow "due diligence" for importing regulated timber products. The due diligence requirements that would be prescribed in the regulations have been broadly prescribed in Section 14.

" 14  Due diligence requirements for importing regulated timber products

 (1)  The regulations must prescribe due diligence requirements for importing regulated timber products.

(2)  The requirements must be prescribed only for the purposes of reducing the risk that imported regulated timber products are, are made from, or include, illegally logged timber.

(3)  The requirements may include requirements in relation to one or more of the following:

      (a)  gathering information for the purposes of assessing that risk, including in relation to the following:

       (i)  the kind, origin and details of harvest of timber;

      (ii)  the name and business addresses of, and other details about, suppliers of timber or timber products;

     (iii)  evidence of compliance with the laws of the country in which timber was harvested;

     (iv)  the completeness, accuracy or reliability of information gathered;

      (b)  assessing and identifying that risk;

      (c)  depending on the level of risk, measures to mitigate that risk;

      (d)  making declarations to the Customs Minister under section 13;

      (e)  providing statements of compliance;

      (f)  auditing;

      (g)  taking remedial action in prescribed circumstances;

      (h)  providing reports and other information to the Minister;

      (i)  publishing information."

Joe Ludwig the Australian Minister for Agriculture, Fisheries and Forestry supporting 

the Bill stated:

"The Government has been careful to make the bill consistent with Australia's trade obligations. It is true that the bill will support the trade in legally harvested timber. In fact, the University of Sydney Centre for International Law's submission to a previous inquiry commented it would be difficult to imagine a country prosecuting Australia for restricting the trade of a good which is against the law in the country of export."

 The Bill essentially penalises importation and processing of illegally logged timber and timber and timber products as well as processing illegally logged timber in Australia. Hence, timber that is logged illegally in contravention of national laws where they are logged would not be able to be imported. Further, timber illegally logged in Australia would also be punishable. Thus, both importation of illegal logged timber as well locally 

logged timber illegally is prohibited.

Is this Bill in contravention of Australia's WTO obligations? Two legal opinions from the Australian academicia provide divergent views:

1. Arguing that the Bill does not contravene Australia's WTO commitments with certain caveats, Tim Stephens and Ben Saul from the Sydney Centre for International Law, University of Sydney have opined:

"In our opinion, the Bill is largely compatible with Australia’s obligations under WTO law, although there are a number of issues which may require further scrutiny.

First, the Bill falls squarely within Article XX(g) exception for conserving timber as an ‘exhaustible natural resource’. 

Second, there is a sufficient nexus between illegal logging abroad and importing such timber into Australia. While the timber prohibited from import is harvested wholly in the territory of other states, Australia has a legitimate interest in preventing illegal logging in other states so as to maintain reserves of biodiversity and carbon stocks.

Third, the measures clearly relate to the environmental object of conservation (as well as to pursuing legitimate anti-corruption objectives). 

Fourth, strictly speaking, Australia is not a party to any multilateral agreement which requires it to legislate to prohibit imports of foreign illegally logged timber. Nonetheless, as note above, unilateral environmental measures which restrict trade may still be lawful even in the absence of binding bilateral or multilateral agreements, and Australia’s measures are consistent with the objects  and purposes of the various environmental law sources above."

They have further opined:

"  Careful consideration is therefore needed of the extent to which Australia has pursued genuine negotiations with affected countries with a view to reaching agreement on bilateral or multilateral measures to prevent trade in illegal logging. Such negotiations should relevantly include consideration of possible alternative non-restrictive measures (such as those suggested by Indonesia in its submission, among others).

...

Finally, it was noted above that WTO law requires a restrictive measure to be enforced evenly as between domestic and foreign products. We draw attention again to Canada’s objection that the Bill may favour domestic timber processing by imposing more onerous due diligence obligations in respect of foreign timber in certain circumstances (eg, composite products). 

This submission does not take a view on the facts whether this is a correct characterisation of the Bill’s impact. If, however, the Bill does in fact treat certain domestic and foreign timber differently without justification, it may be regarded by the WTO as unjustifiably discriminatory."

 2. On a divergent note, a more detailed legal analysis by Andrew D. Mitchell and Glyn Ayres have addressed the issue of consistency of the Bill in the context of Australia's WTO obligations under GATT 1994 and the TBT Agreement. They have concluded:

" H          "However, by conditioning the legality of importing timber into Australia on the laws of the place where it was harvested, the Bill would likely cause discrimination between like products, contrary to Australia’s obligations under the WTO Agreement. Moreover, although Australia’s objectives are to protect the environment and promote fair competition in its domestic market, the shifting content of the term ‘illegally logged’ would likely undermine its ability to pursue those objectives in a consistent way. Finally, government-commissioned economic analysis of the Bill is far from supportive, with the CIE Report concluding that its benefits would be slight, its costs significant and its effectiveness limited.124 For these reasons, it is likely that the Bill would be inconsistent with Australia’s obligations under the GATT 1994."

However, they offer a way out for Australia:

"However, by conditioning the legality of importing timber into Australia on the laws of the place where it was harvested, the Bill would likely cause discrimination between like products, contrary to Australia’s obligations under the WTO Agreement. Moreover, although Australia’s objectives are to protect the environment and promote fair competition in its domestic market, the shifting content of the term ‘illegally logged’ would likely undermine its ability to pursue those objectives in a consistent way. Finally, government-commissioned economic analysis of the Bill is far from supportive, with the CIE Report concluding that its benefits would be slight, its costs significant and its effectiveness limited.124 For these reasons, it is likely that the Bill would be inconsistent with Australia’s obligations under the GATT 1994."

Indonesia and Canada have raised objections to the Bill in their submissions to the Australian Senate Committee. The Bill raises many issues in relation to Australia's WTO commitments:

1. Is the Bill in contravention of various provisions of GATT and TBT Agreements relating to  national treatment and unreasonable restriction of international trade?

2. Is the requirement of "due diligence" imposing an unreasonable restriction as well as treating imported products less favourably than local products? It is a fact that different countries have different standards and law relating to legal logging. Would the requirement of following due diligence of different standards a de facto discrimination?

3. Does the ban on illegally logged timber contravene Article XI (1) of GATT as being a "quantitative restriction" not permitted by GATT?

4. Does the General Exception of Article XX (g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption justify the ban on import of illegal logged timber? Is it a disguised restriction on trade and unjustifiable since "same conditions" don't prevail in different countries in relation to laws or prerequisites related to illegal logging.?

5. Is it in violation of Article 2.1 of the TBT Agreement ? Article 2.1 TBT Agreement states:

"Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country."

By treating timber based on the legal regimes of logging in different countries (some being more onerous than others), is it not treating imported imported products less favourable than locally logged timber? For example, if timber logging standards are much more onerous in X than Australia, is it not in violation of Article 2.1?

6. Another question is that can international trade be restricted based on conditions prevailing outside the importing country? Is it an "extra-jurisdictional" measure? Can the illegal logging example be extended to labour standards and human rights implementation? What if  a country bans imports of products from countries where a product is produced in violation of national labour standards? Does it not have the danger of being a "disguised "protectionist tool?

The Australian Illegal Logging Prohibition Bill is not yet passed and hence is not contestable at the WTO. However, the issues being contested throw up interesting issues of international trade law. Are we missing the wood for the trees?

Time for Oil Sands again

I had earlier blogged about the Tar sands controversy here. The issue comes to the fore again due to a proposed vote on a draft law by EU officials in February, 2012 regarding labelling oil from tar sands as more carbon intensive. 

(A scarecrow lies in a tailings pond in front of the Suncor oil sands extraction facility near the town of Fort McMurray, Alberta. The European Union is expected to vote on a law that would designate oil sands crude as more polluting than other forms of oil.Photograph by: Mark Ralston, AFP/Getty Images)

It was reported briefly here.

" European Union officials are expected to vote on Feb. 23 on a draft law that would label fuel produced from oilsands as more polluting than that from other forms of oil, according to a draft agenda seen by Reuters.

The proposal from the EU's executive to include oilsands in a ranking designed to enable fuel suppliers to identify the most carbon-intensive options has stirred up intense lobbying by Canada.

Home to the world's third-largest oil reserves, almost all of which are in the form of oilsands, Canada has argued the EU is unfairly discriminating against it.

Previous EU meetings have repeatedly failed to get as far as a vote, but the agenda for a fifth meeting of the fuel quality committee later this month schedules a vote on an amendment to the Fuel Quality Directive proposed by the European Commission."

 This dispute looks like a long winding one before it reaches the doorsteps of the WTO, if at all.

Environmental WTO on the cards?

The World Trade Organisation (WTO) is often faced with the challenge of dealing with issues other than international trade like environment, labour and human rights. There are strong views on either side of the debate - while one side recognises the limitations of WTO addressing these issues and the possibility that it would be used as a protectionist tool by developed countries, the contrary view is that WTO must address all issues related to making international trade more efficient, sustainable and humane.

In all these debates the effectiveness of the WTO as an international organisation and  its ability to enforce rules of international law seem to be the guiding factors. The strong dispute settlement mechanisms and the treaty based approach of the organisation is a tribute to its perceived effectiveness that compels stakeholders to insist that issues other than international trade be brought within the prism of the international organisation's mandate to ensure compliance in an otherwise weak institutional setting.

This piece brings another idea to the table: creation of a United Nations environmental agency following the model of the World Trade Organization (WTO) or the International Labor Organization (ILO). 

"The idea to create an United Nations environmental agency following the model of the World Trade Organization (WTO) or the International Labor Organization (ILO) is growing. The proposal to create the World Environment Organization (WEA) came from European Union and it is being discussed by France and Germany and can be one of the major achievements of the United Nations Conference on Sustainable Development, Rio+20, in June, in Rio de Janeiro. 

More than one hundred countries support the strengthening of the United Nations Environment Program (UNEP). The UNEP would be the natural embryo for the new environment agency. Various countries suggest the creation of the WEA or a similar agency. The emergence of the agency could be a strong decoy to attract large number of leaders to the Rio +20 and it could ensure the success of the event. 

However, the establishment of the World Environment Organization (WEO) has strong opponents. The United States does not want to even hear about it. Historically, the USA does not accept agreements or international organizations that can interfere in its own domestic decisions. Moreover, the American resistance is a great obstacle for the idea. Ironically, but for other reasons, the USA is aligned in this position with Venezuela, Cuba e Bolivia. The Latin countries fear that such an agency will serve to mask protectionist trade actions of rich countries."

Is an environmental WTO on the cards? It would be interesting to see how these international organisations operate when disputes touch areas of trade and environment. While the goal of the reduction of trade barriers and facilitating international flow of goods and services, albeit with constant rumblings, is accepted as the way to go, is there a clear vision for an environmental agreement to be enforced by an international organisation?