Not yet out of the woods: Australia's attempt to regulate illegal timber imports and World Trade Organization obligations.

• Author: Saul, Ben

Abstract

The Illegal Logging Prohibition Bill, introduced in the Commonwealth Parliament in 2011, gives effect to a 2010 election commitment of the Gillard government to restrict imports of illegally logged timber products into Australia. This article assesses whether the Bill safely navigates the competing norms and values that the international trade and environmental law regimes embody. It finds that while the Bill pursues legitimate environmental purposes, aspects of it raise potential problems of incompatibility with WTO law because it takes a decentralised national standards approach. The article also considers the main regulatory alternative to the Bill, namely the creation of uniform Australian standards for all timber products (embracing both imports and locally produced timber) which would meet minimum requirements of sustainability, biological diversity and pollution control. It is argued that this encounters its own trade law difficulties. The article concludes by placing the trade law issues in the broader political context of WTO dispute settlement, and contends that the Bill has a reasonable chance of operating successfully and stimulating similar regulatory approaches in other timber-importing jurisdictions.

I Introduction

In November 2011, the Illegal Logging Prohibition Bill ('Bill') was introduced in the Commonwealth Parliament. The Bill gives effect to a 2010 election commitment of the Gillard government to restrict the importation of illegally logged timber products into Australia. To achieve this objective, the Bill establishes offences that impose criminal sanctions on those who import or process illegally logged timber. The Bill has been the subject of extensive Parliamentary scrutiny which has raised several important issues of international environmental law and international trade law.

The Senate Rural Affairs and Transport Legislation Committee issued its original report on an exposure draft of the Bill in June 2011 supporting the legislation. (1) In November 2011 the Senate referred the Bill to the Committee a second time, and in February 2012 the Committee again recommended that the Bill be passed. (2) The Liberal Party members of the Committee issued 'Additional Comments' that identified several concerns about aspects of the legislation, including the concerns of Indonesia and several other states over the consistency of the Bill with Australia's obligations under World Trade Organization ('WTO') law. (3)

The Bill has now been referred for yet further review by another Parliamentary committee, the Joint Standing Committee on Treaties ('JSCOT'). JSCOT's usual role is to consider whether the Australian government should enter into treaties; however, it does have the capacity to inquire generally into 'matters arising from treaties'. The Bill falls within this latter category because of its potential international legal implications. Effectively, though not expressly, the Bill seeks to balance Australia's commitments under several international regimes, specifically those under multilateral environmental agreements, anti-corruption treaties, and WTO law.

The purpose of this article is to assess whether the Bill safely navigates the competing norms and values that these regimes embody. It finds that while the Bill pursues legitimate environmental purposes, aspects of it raise potential problems of incompatibility with WTO law because it takes a decentralised national standards approach, imposing trade restrictions on the import of timber harvested unlawfully in the place where it was logged, rather than according to general Australian-identified criteria for sustainable forest products. While this article disagrees with a recent assessment of the legislation as being clearb, inconsistent with WTO rules, (4) it acknowledges that legitimate questions have been raised, and that the consistency of the Bill with WTO law will depend to an extent on the quantification of certain unclear costs and benefits under the scheme, as well as the nature of implementing regulations yet to be enacted. This article also considers the main regulatory alternative to the Bill (other than the status quo), namely the creation of uniform Australian standards for all timber products (embracing both imports and locally produced timber) which would meet minimum requirements of sustainability, biological diversity, and pollution control. While on its face such an approach appears simpler and more cost effective, it encounters its own trade law difficulties, not least (somewhat ironically) the availability of the less intrusive approach embodied in the Bill--that is, deferring to foreign states' own regulatory standards. The article concludes by placing the trade law issues in the broader political context of WTO dispute settlement, and suggests that if the Bill is enacted it has a reasonable chance of operating successfully and thereby stimulating similar regulatory approaches in other timber-importing jurisdictions.

II The Illegal Logging Prohibition Bill

Illegal logging is among the most serious yet poorly regulated of global environmental problems. (5) The practice is driving the degradation of many forest ecosystems, reducing plant and animal biodiversity, and making a significant contribution to climate change. As noted in a recent World Bank study, '[e]very two seconds, across the world, an area of forest the size of a football field is clear-cut by illegal loggers' and some countries, up to 90 per cent of all logging taking place is illegal'. (6)

Clearly the most desirable policy response to illegal logging is to control the problem at its source. The World Bank study emphasised the need for criminal justice systems in many countries to be strengthened to stamp out illegal logging practices. This is particularly so because around 85 per cent of illegally logged timber is consumed in the jurisdiction where it is harvested. (7)

However, there remains a role for measures to be taken by states that import the remaining 15 per cent of illegally logged timber for at least two reasons: legal systems may be weak and corruptible in source countries, and importing states have a responsibility not to aid illegal logging and harm ecosystems elsewhere. The policy responses available to importing states include labelling requirements, optional or mandatory certification schemes (such as that administered by the Forest Stewardship Council), (8) and the restriction of imports of illegally logged timber. (9)

Australia is not alone in seeking to adopt measures of the type found in the Bill. In the United States the Lacy Act was extended in 2008 to prohibit the import of 'any plant taken, possessed, transported, or sold in violation of ... any foreign law', (10) and other jurisdictions have considered similar legislation. (11) There is also considerable interest by civil society and environmental, social justice and wildlife organisations in addressing illegal logging. (12)

The Bill seeks to restrict imports of illegally logged timber by imposing criminal sanctions in Australia against importers and processors (but not upon those who sell illegally imported timber). To this end the Bill establishes offences for, among other things, importing illegally logged timber (13) processing illegally logged raw logs, (14) importing regulated timber products (that is, timber products specifically identified in Regulations) without undertaking due diligence requirements, (15) and processing raw logs without undertaking due diligence requirements. (16) Whereas minor breaches of the Bill would attract administrative sanctions or civil penalties, the Bill also provides for significant fines for individuals and corporations, and up to five years imprisonment.

The Explanatory Memorandum (17) to the Bill provides an estimate of the annual global cost of illegal logging at over US$100 billion, a figure which includes both the economic costs of illegal logging (such as the financial costs to legal producers) and the ecological and social costs (such as the displacement of forest dependent communities). (18) Australia makes a small but significant contribution to the global economic bill, as around nine per cent of timber imported into Australia is believed to originate from illegal sources. (19) In terms of economic costs specific to Australia, the importation of illegal logs distorts the market, lowering prices for domestic producers and suppliers and resulting in unfair competition. (20)

III Australia's International Environmental Obligations

Illegal logging, particularly in tropical forest countries, and in Australia's region, (21) has a range of adverse environmental impacts. These include damage to habitats and natural landscapes, loss of biological diversity, the removal of large stocks of forest carbon, and the impairment of sustainable economic development by local communities. As a party to a number of multilateral environmental agreements, non-binding arrangements and partnerships with various states (notably Indonesia and Papua New Guinea), Australia has a strong interest in removing incentives for illegal logging in the Asia Pacific and globally.

Australia is a party to a host of regional and global environmental regimes relevant to sustainable forest management. Key multilateral environmental treaties include the 1973 Convention on International Trade in Endangered Species of Wild Fauna and Hora, (22) the 1990 Convention for the Protection of the Natural Resources and Environment of the South Pacific Region, (23) the 1992 Convention on Biological Diversity, (24) the 1994 Convention to Combat Desertification in those Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa, (25) and the 1994 International Tropical Timber Agreement. (26) While all of these conventions have relevance to the illegal logging problem, and while addressing illegal logging helps to achieve the objectives of...