ITTO analysis of Brexit implications for timber trade and FLEGT

The International Timber Trade Organization (ITTO) has analysed potential impacts of a UK departure from the EU (so called Brexit) on timber trade and FLEGT.

by Infocongo

In the latest edition of its Tropical Timber Market Report, the ITTO says: “For timber importers in the UK, weakening of pound sterling to a 30-year low against the US dollar, and a 30% fall in the share value of the largest UK house builders following the referendum – are certain to result in a big decrease in buying.”

“Whether this is short term or long term depends heavily on the progress of the challenging political processes now underway and the extent to which the wider economy is able to ride the storm. A key issue for the longer term is the eventual terms of any trade deal between the EU and the UK.”

“There is a strong consensus in the UK construction sector that Britain’s departure from the EU will hit housebuilders’ work-forces hard and further slow activity in this sector.”

Impacts on tropical timber trade

The ITTO says “Brexit will have significant implications” for the tropical wood sector. It notes that the UK is the EU’s largest importer of timber from tropical countries by a significant margin. In 2015 the UK accounted for around 25% of the total value imported into the EU from tropical countries. This compares to 15% imported into France, the second largest EU market for tropical timber.

UK import value of tropical timber products increased by 32% from EUR 720 million in 2011 to EUR 960 million in 2015. This is in contrast to other leading EU markets for which, during the same period, tropical timber imports were either flat (Belgium) or declining (all others).

“The expected economic slowdown in the UK on the back of the uncertainty after the referendum result is therefore likely to have a disproportionately large impact on the EU’s imports of timber products from tropical countries.”

“A large part of the recent growth in UK imports of timber products from these countries has been in the form of furniture from Vietnam, Indonesia and Malaysia – a trade now likely to slow in the short to medium term. Longer term, the prospects for tropical timber products in the UK and the EU will be partly dependent on the speed of underlying economic adjustment and partly on the terms of trade agreed.”

The ITTO says that If UK recovery is relatively swift, there may be longer term advantages for tropical timber producers if the new arrangements lead to introduction of tariffs or otherwise impede trade in timber products between the UK and continental Europe’s large and dominant wood product manufacturing sector.

Implications for UK policy and FLEGT

The ITTO also notes uncertain policy implications for the timber sector associated with Brexit. UK technical standards for the vast majority of building products are now set at EU level under the terms of the EU Construction Products Regulation.

“This situation won’t change any time soon, particularly as even after the UK has left the EU, UK manufacturers selling any product into the EU will have to continue to abide by EU standards. However, the UK’s exit from the EU would open the door to gradual divergence of UK and EU standards for construction and other products.”

The ITTO says that while such divergence could also affect application of the EU Timber Regulation (EUTR) in the UK, it is “unlikely there will be any significant change in the terms of this regulation in the UK in the foreseeable future.”

“The UK in both the public and private sector has been a leading player amongst EU countries to develop measures such as the EUTR, provide political and technical support for FLEGT and promote responsible timber procurement policies.”

“There’s no reason to expect Brexit to lead to a reduction in this level of commitment, nor a reduction in cooperation between EU and UK agencies seeking to address these issues.”

Source: ITTO Tropical Timber Market Report 16-30 June 2016 (page 17)

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