1. FLEGT Independent Market Monitoring (IMM)
Rupert Oliver
ITTO IMM Lead Consultant

2. FLEGT Independent Market Monitoring
Required in the text of some Voluntary Partnership Agreements (VPAs)
Market impact of Timber Legality Assurance Systems
Hosted by International Tropical Timber Organisation (ITTO)
Funded by EC through DG International Cooperation and Development
Budget: €4.4 million over 5 years ( )

3. FLEGT VPA Partners Scope and Progress

4. IMM Methodology
Framework of 52 indicators for quantitative assessment of market impacts

5. IMM Indicators: 33 EU-wide
Overall EU market for all FLEGT VPA timber
Examples:
market impact of EUTR implementation;
scope and content of public sector procurement policies;
timber procurement requirements established by EUTR MOs, TTF’s & major retailers
handling of VPA licenses in FSC and PEFC CoC standards
perceptions of VPA licensed timber in design and architectural community
recognition of FLEGT VPAs in guidelines for assessment of forest sector risk in the financial sector

6. IMM Indicators: 19 VPA partner-specific
Changing market for each VPA partner country
Examples:
monitoring of volume and value of trade flows between the VPA partner country, the EU and other markets;
prices for specific indicator products from the partner country;
time to clear customs
size and quality of investment in the VPA partner country
changing perceptions of timber from the partner country resulting from VPA licensing.

7. IMM operational issues
Phased approach - progressively widen monitoring against indicators as more licensed timber becomes available & with rising awareness
Close working relationship with JICs in VPA countries
Network of IMM correspondents in VPA Partner Countries & priority EU Member States reporting regularly
Additional surveys undertaken directly by IMM or commissioned from other agencies
Linkage to trade associations in both producer and consumer countries to encourage input from private sector

8. Proposed Timber Market Monitoring Network
Facilitate info exchange, avoid duplication, improve market monitoring practices & stats, common data protocols
Open to any organisation directly engaged in market monitoring
ITTO, EFI, Eurostat, FAO, UNECE, Indufor, ATIBT, STTC, Global Timber Forum, Chatham House, WRI, Forest Trends
Don’t want to reinvent the wheel!

9. IMM Baseline Report Available March 2015
Considers VPA partner role in global timber trade (Global Trade Atlas & COMTRAD)
Reviews competitiveness of VPA partner timber in EU market (Eurostat COMEXT & PRODCOM)
Share in different market segments (logs, sawn, decking, plywood, flooring, furniture etc.)
Systematic analysis of factors impacting on EU trade in timber from VPA countries

10. FLEGT VPA process engages all major tropical timber exporting countries
Source: IMM analysis of Global Trade Atlas & UN COMTRADE

11. A rapidly changing market with potentially profound implications for the FLEGT process
Source: IMM analysis of Global Trade Atlas & UN COMTRADE

12. IMM support for EFI “Reproducible analysis and on-line database of world trade flows”
IMM financial support for set-up costs
EFI commitment to maintain system long term
Based on Comtrade data
Software developed in R
Assumes value data is most accurate
Calculates regional unit prices and regional unit weights
Compares export flow reported by country A to country B to the import flow reported by country B from country A

13. Overview of EFI trade flow database
Load periodically
UN COMTRADE
Create Report
Export
Validated data
Web server
Clean
Raw data
Report by country or by product (PDF)
Excel and other formats
Search Engine & Visual-isation
User
Display
Explore
Package “tradeflows”
Expert
Compare
Overview of EFI trade flow database

14. Harmonized System : chapters covered
Chapter 44: wood and articles of wood; wood charcoal
Chapter 47: Pulp of wood or of other fibrous cellulosic material; Recovered paper and paperboard
Chapter 48: Paper and paperboard; Articles of paper pulp, of paper or of paperboard
Chapter 49: Printed books, newspapers, pictures and other products of the printing industry; Manuscripts, typescripts and plans
Chapter 94: Furniture; Bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; Lamps and lighting fittings, not elsewhere specified or included; Illuminated signs, illuminated name-plates and the like; prefabricated buildings.
Start-up data set
Data set that will be added once method tested.

15. EFI data refining work flow (first half)
Raw Flow
for product
440799
Volume
available?
Weight
available? no no
yes
yes
Estimate volume using
regional unit weight
(median previous year)
Unit price = value / volume
Unit weight = weight / volume,
Calculated for all flows in one region
Take the median for each NOT the average
Regions are "Europe“ "Oceania“ "Asia“ "Africa“ "North America“ “South America"
Lower bound - 1st quartile, 25% of flows have a price below the first quartile - we take half of this value
Upper bound - 3rd quartile, 25 % of flows have a price above this one - upper bound is twice that 3rd quartile value
COMTRAD flags
0 = no estimation
2 = quantity estimation only
4 = net weight estimation only
6 = both quantity and net weight are estimated.
EFI flags
1x = estimated quantity based on weight
2x = estimated quantity based on the trade value.
30x = quantity replaced by quantity partner because the quantity partner had a smaller standard deviation of unit price over a period of 5 years
400x = shaved quantity based on unit price because the unit price was too high or too low
(-> data marked with flag 10)
Estimate volume
using regional unit price
(median previous year)
(-> data marked with flag 20)

16. EFI data refining work flow (second half)
Price
Within
bounds?
Re-estimate volume
using median
regional unit price no
(-> data marked with flag 4000)
yes
Add partner flow
information
Standard
deviation of unit price
over 5 years smaller
than partner? no
Replace quantity reported
by partner flow quantity
(-> data marked with flag 300)
yes
Validated Flow
for product
440799

17. Sample output from EFI R-based trade flows cleaning package for 440799 “other sawn hardwood”

18. On-going work by EFI
Use yearly unit prices and unit weights to analyse UN Comtrade monthly trade flows
Adapt to Eurostat Comext monthly trade flows
Graphical user interface
Excel and Pdf report generation based on reporting country and 6-digit HS product code

19. IMM/EFI project outputs
R statistical package and documentation on web and open source
Live database of "cleaned" trade flow data
Automated updating routines
Downloadable spreadsheet (.csv, Excel)
Graphical user interface
On-the-fly produced PDF reports following a standard TOC for country-product combination
Social network analysis applied to trade flow data
Basic user interface finalised April 2015, full interface July 2015
TOC : table of contents.
E.g.
Title: [country] trade flows of “[product description]” (HS code [code])
Subtitle: for the period from [yearX] to [yearY]
Subtitle: Report generated by EFI TFDB report generator. For more info, please visit
Abstract text: sentence on country total export [V] and [Q] from [yearX] to [yearY]; sentence on country total import [V] and [Q] from [yearX] to [yearY]; sentence on [country] share (%) of global traded [V] and [Q] during [yearY]; [country] imported [code] from a total of [TPi] countries and exported from a total of [TPe] countries.
Table of contents
Major [Z] import partners (Z should probably be fixed, either absolute number (easiest), or so that C % of global trade is covered (trickier))
plots: x(Q/V)-y(year) with series for partner countries
[Q]
[V]
Major [Z] export partners
Trade data discrepancy report
Overview table (element; number of lows; identical; discrepancies) with explanatory caption
Heatmaps for major trade partners for selected years
Generic explanation on how to interpret the graphs.
Imports
Heatmap Q
Heatmap Q-discrepancies
Exports
‘normalized’ discrepancy graphics (between -1 and 1); decision to be taken: all generalized for the different years, or with series (different dot colors) for different years.
Generic explanation on how to interpret the graphs
Export Q; export V
Import Q; import V
Could main outliers be identified with lables in the charts?

20. IMM Outputs
EU survey team producing regularly updated data and systematic analysis of drivers of change including:
Analysis of timber products imported from VPA countries, their distribution channels, applications in the EU, and substitution trends
Interactions between VPA licensing and forest certification
Impact of EUTR, public and private sector procurement policies, green building
Network of correspondents in VPA countries to provide improved data on production, trade and investment trends in response to VPA
Quarterly e-newsletter
Annual EU-wide report with VPA-specific Annexes
Website at
Market data support for agencies involved in FLEGT VPA process

21. Thank you! IMM brochure available www.itto.int/imm
Rupert Oliver

22. IMM Objectives
Improve knowledge and understanding of the impacts of VPAs on timber prices, trade and market trends globally
Generate information that demonstrates changes in trade of legally verified timber and timber products in the EU market
Ensure VPA countries & EU provide reliable stats and info on FLEGT timber trade and acceptance in their reporting
Inform decisions by VPA Joint Implementation Committees (JICs) by providing timely & accurate info on market impact
Contribute to monitoring the impacts of the FLEGT Action Plan and to inform its implementation
Develop a long-term strategy for sustaining the IMM in consultation with the EU and VPA partner countries

23. Source: IMM analysis of Eurostat COMEXT

24. Barriers
Barriers
Financial crises & fall out
Product innovation in non-wood materials
Shift in global economic activity to emerging markets
Less availability of ‘big name’ tropical hardwoods
Freight & transport factors
EU production of panels & new surfacing technologies
More hardwoods from Europe and N. America
Global plantation expansion
Wood modification
Prefabrication in construction
Exchange rate movements
Opportunities
Interior design trends
Forest certification
Environmental campaigns
Marketing initiatives
Architect and structural engineer’s timber knowledge
Technical performance standards & CE Marking
Green building
Public procurement
Corporate Social Responsibility
Neutral
EU Timber Regulation (EUTR)
FLEGT VPA process
GSP and timber import tariffs
Climate change/carbon footprint
Hardwood use for higher value structural applications
IMM Baseline Report
Systematic Review of Factors Impacting on EU market for timber from VPA countries