Domestic market measures in VPAs

Domestic timber markets in tropical countries are often bigger than export timber markets. However, domestic markets are usually poorly regulated. The small-scale, informal suppliers serving domestic markets often lack clear legal status or are illegal. The sheer number and scattered nature of small-scale, informal suppliers makes their activities difficult to control. Nevertheless, these small-scale operations provide livelihoods for many families and meet a big demand within countries for wood products.

In Cameroon, according to a study by the Center for International Forestry Research (CIFOR), the amount of timber harvested for domestic and regional markets increased ten times between 1996 and 2010. The domestic timber market employs 45,000 people, three times the number employed by export-oriented industrial companies. Chainsaw loggers operating illegally produce approximately 75% of the timber harvested for domestic use.

The informality of domestic timber trade in Cameroon and other countries deprives governments of tax revenue and contributes to unsustainable deforestation. In addition, the risk of illegally logged wood for domestic markets mixing with wood for export threatens the integrity of Voluntary Partnership Agreement (VPA) timber legality assurance systems.

Therefore, although VPAs were originally envisaged to cover international trade between partner countries and the EU, many partner countries have chosen to include domestic markets in their VPA.

Challenges

Domestic market governance challenges vary from country to country, and may include:

• Inadequate legal frameworks that make it hard for small-scale loggers to access timber resources legally
• Differing rules and regulations for export and domestic markets
• A lack of statistics about the domestic trade and small and medium-scale enterprises
• Unclear tenure arrangements, including conflicting rights among communities, forest owners and holders of logging permits
• Reluctance among members of the informal sector to formalise as taxation would reduce their profits
• The challenge of tracking wood moving between large numbers of small-scale operators
• The challenge of engaging small-scale operators in a VPA process when they lack organisation

VPA-related opportunities

VPA processes have provided opportunities to address these challenges by engaging stakeholders in domestic supply chains and identifying legal and/or policy reforms. In VPAs to date, opportunities have included:

• Making clear what is and what is not legal through participatory legislative reviews, as in Cameroon, Ghana and Liberia
• Developing new policies for domestic markets, as in Cameroon and Ghana
• Framing the VPA product scope to avoid harming small- and medium-scale enterprises
• Adopting simple rules for defining legal small-scale logging, as in Indonesia
• Formalising informal activities such as chainsaw logging, as in Liberia, which has developed a new regulation and included it in its legality definition
• Making land and tree tenure simpler and clearer
• Improving the monitoring and understanding of domestic markets
• Setting up new institutions and/or organisations of small-scale operators, such as cooperatives and smallholder associations
• Providing information and training to small- and medium-scale enterprises
• Promoting legality on the demand side, through public procurement policies
• Developing a tax system that motivates rather than punishes small-scale operators
• Monitoring the effects of VPAs on small-scale operators

The outcomes of stakeholder negotiations on domestic markets may or may not be embedded in a VPA. Rather than stipulating concrete reforms, most VPAs signed to date indicate that the details of reforms in domestic markets will be developed during the implementation phase. Therefore, it is important for stakeholders to maintain engagement in the process as it shifts from the negotiation to the implementation phase.