WORLD TRADE  
ORGANIZATION  TN/MA/W/64 
18 October 2005 
 (05-4784) 
Negotiating Group on Market Access Original:   English 
  
 
MARKET ACCESS FOR NON-AGRICULTURAL PRODUCTS 
 
Tariff Liberalization in the Forest Products Sector
 
 
Communication from Canada, Hong Kong China, New Zealand, Thailand and the United States 
 
 
 The following communication, dated 14 October 2005 is being circulated at the request of the 
Delegations of Canada, Hong Kong China, New Zealand, Thailand and the United States. 
 
_______________ 
 
 I. GLOBAL TRENDS 
1. The forest products industry is one of the world’s largest industrial sectors, with reported 
annual sales of US$950 billion and a gross value-a dded estimated at about US$354 billion. World 
trade in forest products is valued at approximately US$200 billion
1, and has quadrupled over the last 
three decades.    
2. The forest products industry makes an important contribution to the standard of living in 
developed and developing countries alike. Employing over 13 million people in nearly 200 nations, 
the forest products industry is an economic engine and a vital part of the global environmental and 
social fabric. In many developing (and developed) countries, forestry and forest products processing is 
important for economic development and the livelih ood of rural communities. People depend on the 
goods produced by the world’s forest products indust ry on a daily basis. The forest products sector 
includes products such as wood (logs, lumber  veneer, panelling and e ngineered wood products, 
flooring, decorative items, furniture parts and accessories), and pulp and paper products (all mechanical and chemical pulp, paper and paperboa rd packaging such as kraft paper and linerboard 
and folding boxboard, newsprint, pr inting and writing paper, specialty  paper, and sanitary products). 
Forest products are derived from one of the worl d’s few renewable resources and supply the base 
material for a significant number of other key world industries. 
 
II. BENEFITS OF A FOREST PRODUC TS SECTORAL INITIATIVE 
3. Liberalization in the forest products sect or would increase market access and offer WTO 
Members an opportunity to enhance their competiti veness by lowering input costs and by setting the 
stage for increased investment in forest products  processing industries.  In addition, a sectoral 
agreement on forest products would effectively address the “tariff escalation” problem, where 
protection for goods at more advanced levels of processing often runs as high as 20%.  Therefore, 
imposing tariffs on forest products unnecessarily rai ses the prices of finished goods, while also 
providing disincentives for producers to optimize the use of their raw materials and diversify their 
export base. Currently, the average applied tariff ra te in forest products for WTO members is 11%.  
                                                     
 
1 Compiled from FAOSTAT Forestry database. TN/MA/W/64 
Page 2  
 
 The average bound rate is 36%. Some progress has been  made to reduce tariffs in the forest products 
sector, as evidenced by the eight Members who signe d on to the paper and pulp agreement during the 
Uruguay Round and the ten Members that committed  to join in their accession packages. Further 
liberalization in the forest products sector would potentially include wood products, which were not 
part of the Uruguay Round and may have tariffs as  high as 25%. Lower tariffs would reduce the input 
costs for many paper and pulp products. 
 4. Developing countries in particular stand to ma ke significant gains from a sectoral agreement on 
forest products. It is estimated that, for paper a nd paperboard production, developing countries might 
increase their share of world production from 33.7% in 2003 to 39.2% in 2009
2.  This level well exceeds 
anticipated rates in the traditional producing region s of North America and Western Europe. A similar 
pattern is evident in wood products, in which gl obal exports have grown by over 24% since 1998. 3 In 2002, 
developing countries represented 12 of the world’s top 20 exporters of wood products.4 Their dominant 
position in the trade of a number of specific produc t categories makes them well-placed to capitalize on new 
opportunities. A number of developing co untries have also sharply increased  their share of global trade in 
forest products. For example, forest product exports from seven geographically dispersed countries – Brazil, 
China, Chile, Indonesia, Malaysia, South Africa and Thailand – have increased by 47% since 19985. Wood 
product exports alone have increased 45% among these countries since 1998.6 The growth experienced by 
these countries and others illustrates the changing na ture of trade in the forest products industry.  
 5. At a time when the world is increasingly concerne d about the sustainability of its natural resources, 
trade barriers on forest products have the effect of dist orting harvesting decisions and the flow of investment 
capital. Tariff liberalization would increase forests’ intr insic value and foster long-term planning focused on 
sustainability, providing substantial commercial, social and environmental benefits.   6. Forest products – unlike competing goods – ar e derived from one of the world’s few renewable 
natural resources. They are also recyclable and help reduce greenhouse gases by storing carbon dioxide 
from the atmosphere. Wood products are leaders in environmental performance in terms of water quality, 
air pollution and energy efficiency. For example, it takes significantly less energy to produce a wood product than a similar product made from competing materials such as concrete and steel, and wood production yields fewer carbon dioxide emissions than  production of competing materials. Sound forest 
policies that encourage law enforcement, good governan ce and sustainable forest management are far more 
effective tools to protect the environment than tariffs. 
 
III. BUILDING A FOREST PRODUCTS SECTORAL USING CRITICAL MASS 
 7. Like other sectoral initiatives, this forest pr oducts proposal is driven by industry interest. The Santa 
Catalina Group , which has industry representatives from  both developed and developing countries,
7 has 
met with NAMA negotiators on several occasions to discuss its members’ priorities. Responding to this 
strong interest, WTO Members have met on a number of occasions to explore the possibility of a sectoral 
agreement. Discussions are maturing and participat ion has increased, particularly from developing 
countries.        
                                                     
 
2 Compiled from RISI data, “International Paper and Paperboard” in RISI World Pulp & Recovered 
Paper Forecast, April 2005. 
3 Compiled from United Nations Merchandise Trade data. 
4 Compiled from Global Trade Atlas data. 
5 Compiled from World Trade Atlas data. 
6 Compiled from United Nations Merchandise Trade data.  
7 Santa Catalina Group represents forest industry associations from Australia, Canada, Chile, New 
Zealand, South Africa and the United States.    TN/MA/W/64 
 Page 3 
 
 
 8. Critical to the success of any sectoral agreement is the participation of major exporters and 
importers of the goods in question. In the Inform ation Technology Agreement, for example, Members 
aimed for participation representing 90% of global trade in information technology products. Currently, 63 Members participate, representing more than 95% of global trade. This demonstrates that additional 
Members recognized the benefits of participation and signed on.   
 
9. Members are participating in the forest products  discussions without prejudice to their ultimate 
decision about whether to join  the agreement. They are discussing how to define critical mass in the sector 
and will also decide on product covera ge, the form of liberalization (e.g., harmonization and/or elimination), 
and provisions for developing countries. This approach encourages all interested Members to participate in 
the negotiations, including those that may not current ly be major traders but see future opportunities for 
economic growth and investment in the forest products sector.  
 
IV. PRODUCT COVERAGE 
10. In the Uruguay Round, a group of WTO Members
8 agreed to eliminate tariffs in the pulp, paper 
and paper products sector. Current discussions centre on the expansion of both participation and product 
coverage in that agreement. In order to maximize in terest among participants, th is initiative should be as 
comprehensive as possible. Product coverage should include Harmonized System Chapters 44, 47, 48 and 
49, and additional products in Chapter 94 (e.g., some furniture items and pre-fabricated buildings).  Ch. 44  Wood and articles of wood; wood charcoal  
Ch. 47 Pulp of wood or of other fibrous cellulosic material; waste and scrap of paper or 
paperboard  
Ch. 48  Paper and paperboard; articles of pape r pulp, of paper or of paperboard 
Ch. 49  Printed books, newspapers, pict ures and other products of the printing 
  industry; manuscripts, typescripts and plans  
Ch. 94  Products made of wood such as certain furniture items and pre-fabricated buildings 
   
V. SPECIAL AND DIFFERENTIAL TREATMENT 
11. Special and differential treatment for devel oping countries is one important component of a 
forest products sectoral agreement. Flexibility could be provided in a variety of ways, taking into 
account the size and export competitiveness of the Members’ forest products industries.  Possible 
options might include, but are not limited to, the following: 
 
• Varied implementation periods to accommodate different needs 
• Zero for X (some Members eliminate tariffs  while others reduce and harmonize them) 
• Limited product exemptions 
• Participation
 credits  (if this is agreed as part of the modalities for the formula). 
 
__________ 
                                                      
8 Group of WTO Members included Canada, the European Union, Hong Kong, Japan, Korea, 
New Zealand, Singapore and the United States.