TED Case Studies


Austria Timber Import Ban


Cases



          CASE NUMBER:           2 

          CASE MNEMONIC:      AUSTRIA

          CASE NAME:          Austria Timber Import Ban



A.        IDENTIFICATION


1.        The Issue



     Austria implemented mandatory regulations in September, 1992

requiring labels on all tropical timber imports and a tariff of

70 percent.  This eco-labelling law, the first of its kind in the

country, was protested by major tropical wood exporting

countries.  Pressure orchestrated by Malaysia, in particular,

within the Association of South East Asian Nations (ASEAN),

brought this case to the attention of the International Tropical

Timber Organization (ITTO), the General Agreement on Tariff and

Trade (GATT), and the world.  Threats of boycotts on Austrian

products by ASEAN members and a lack of support by other West

European countries, forced Austria to reconsider and eventually

to revoke its ground-breaking law on "eco-labelling."



2.        Description



     In the wake of the world environmental conference in Rio de

Janeiro of 1992, Austria replaced rhetoric with action with

respect to the destruction of tropical rain forests.  Austria

adopted a law for the mandatory labelling of wood products and a

70 percent tax on tropical timber.  The purpose for the measure

was not entirely clear.  Austria's position was that its

innovative "eco-labelling" law was merely to better inform an

increasing number of environmentally conscious European consumers

about their consumption choices.  Other countries protested the

singling out of tropical timber as a means for Austria to boost

its domestic temperate timber production and exports.  With this

latter motive in mind, Austria's `eco-labelling' law soon came

under attack by tropical timber exporting countries, most

ardently by Malaysia.



     Malaysia felt that Austria's action was little more than a

non-tariff barrier to trade.  Malaysia argued such a law could

set a dangerous precedent, where developing countries would be

increasingly threatened by the higher environmental and human

rights standards of the more prosperous, developed countries. 

This perception led to images of a new type of imperialism or

eco-imperialism.



     In its effort to overturn Austria's `eco-labelling' law,

Malaysia approached the Association of Southeast Asian Nations

(ASEAN) for support in leveling political and trade sanctions on

Austria.   Such measures were to be expressed through the threat

of boycott on Austrian products.  In addition, Malaysia argued

ASEAN's case before the council of the General Agreement on

Tariffs and Trade (GATT) by saying that "Austria's demand for

`mandatory labeling on tropical timber products on sustainable

forest management programmes', supposedly made on environmental

grounds, amounted to discrimination against the economic

interests of developing nations." 



     There was little precedent for Austrian tropical timber

labelling. The link to GATT was in the context of standards and

labelling, as in the case of "labelling schemes for dolphin-

friendly tuna", since this would allow the consumer to make

better informed decisions about what products he or she will

purchase.  However, "... GATT is uncomfortable with Austria's

new scheme for labelling tropical timber, partly because it is

mandatory and partly because temperate timber is excluded." 

Indeed, any ruling in any forum on such cases is and will likely

continue to be blurred by the fine line between legislation that

is truly for altruistic environmental gains versus that which is

truly protectionist.



     Although environmentally noble, the Austrian `eco-labelling'

law did contain two major flaws: (1) it is discriminatory because

it singles out tropical timber, while excluding temperate timber;

and (2) it provides no positive incentives to halt the abuse of

deforestation.  The first point may again lead some to conclude

that the Austrian "eco-labelling" is merely protectionism

disguised by environmentally friendly intentions.  The

protectionist flavor of this measure however is not intended to

slow or halt deforestation as a whole.  In fact, the legislation

only focuses on tropical timber deforestation, while the

temperate timber industry of Austria and Europe would be expected

to experience little or no negative impacts.  On the second

point, Malaysia further argued that such laws were

"counterproductive...because they reduce the value of tropical

rainforests...[and]...makes it even more difficult for developing

countries to protect them from people who want to clear them for

small farms."



     Malaysia's intense interest in overturning Austria's

tropical timber labelling law was fueled by the fact that half of

its timber exports would be threatened if other countries

followed suit.  Furthermore, in light of slow progress in

multilateral forums, Malaysia and Indonesia, who represent 50

percent of tropical timber exports, decided to threaten bans on

Austrian exports equal to as much as six billion schillings, or

$520 million.  Some developing countries supported Malaysia and

Indonesia because such moves could potentially hurt them in other

product areas and a general feeling of distrust of developed

country motives.



     Due to threats and the potential detrimental effects of

trade retaliation, Austria began a gradual move away from its

innovative environmental legislation.  Some questioned why:

"Austrian exports to Malaysia and Indonesia are worth less than

half a billion pounds a year, and Austrian imports of their

tropical wood has fallen by 200 per cent in the past two years,

from 50,000 tonnes to 16,000."  Regardless, the Austrian

parliament rescinded its law on the 70 percent tax on tropical

timber (December 4, 1992) and its tropical timber labelling

requirements (March, 1993).



3.        Related Cases



     DUTCHWD case

     INDONES case

     MALAY case

     THAILOG case

     NEMATODE case

     MERCK case



     Keyword Clusters         



     (1): Trade Product            = WOOD

     (2): Bio-geography            = TROPical

     (3): Environmental Problem    = DEFORestation



4.        Author:  Christina Patterson



B.        LEGAL Filters



5.        Discourse and Status:  DISagreement and INPROGress



6.        Forum and Scope:  AUSTria and UNILATeral



     The Austrian Tropical Timber Labelling law began and ended

with domestic legislation, but after the application of bilateral

and multilateral pressure.  Some believe that the GATT and now

WTO would see tropical timber labelling as discriminatory,

similar to its handling of EC efforts to ban animal fur that is

not humanely obtained (see ECFURBAN case).  The Austrian

targeting of tropical timber also appears to have some relation

to the Dutch ban on tropical wood imports, which also generated

a loud number of protests from Malaysia and Indonesia (see

DUTCHWD and MALAY cases).  In addition, the Swiss company Nestle

has been threatened by trade boycotts by Malaysia due to efforts

to label its products as "palm oil free."  Therefore, both

Austria and Switzerland have been threatened with trade

retaliation in response to proposed labelling regulations that

have the potential to harm Malaysian and Indonesian exports.



7.        Decision Breadth: 3 (Austria, Malaysia, and Indonesia)



8.        Legal Standing:  LAW



C.        GEOGRAPHIC Filters



9.        Geographic Locations



     a.   Geographic Domain : ASIA

     b.   Geographic Site   : East Asia [EASIA]

     c.   Geographic Impact : AUSTRia   



10.       Sub-National Factors:  NO



11.       Type of Habitat:  TROPical



D.        TRADE Filters



12.       Type of Measure:  Import Standards [IMSTD]



     The `eco-labelling' import standards also originally

contained a 70 percent tax.



13.       Direct vs. Indirect Impacts:  DIRect



     The Austrian legislation was implemented for environmental

concerns, which then had an direct impact on the trade of

tropical timber exporting countries and eventually Austrian

trade.



14.       Relation of Measure to Environmental Impact



     a.  Directly Related     : YES  WOOD

     b.  Indirectly Related   : NO

     c.  Not Related          : YES  RETALiation 

     d.  Process Related      : YES  DEFORestation 



15.       Trade Product Identification:  WOOD



16.       Economic Data



     For 1991, Austrian exports to Malaysia totaled $84.6

million, while Malaysian exports to Austria had a slightly higher

value at $93 million.  Some predicted that Austria could lose

exports valuing $520 million when faced with retaliation by

Malaysia and Indonesia.  As noted, Austrian imports of tropical

timber had already fallen from 50,000 to 16,000 tonnes so further

declines may naturally occur.  Although specific data and

statistics on output and employment indicators are sparse, some

speculate that difficult times in the Austrian economy have

played a dominant factor in Austria's decision, and their

acquiescence to the Malaysian threats of trade boycotts on

Austrian goods reflects the same feeling.  Indeed, with a

sluggish Austrian economy and record unemployment,

environmentalists worry that long-term environmental issues will 

continue to be ignored in favor of immediate or short-term

economic gains.



17.       Impact of Measure on Trade Competitiveness: LOW



     With already falling demand, the impact of the legislation

would probably have been minimal.



18.       Industry Sector:  WOOD



19.       Exporter and Importer:  MALAYsia and AUSTria



E.        ENVIRONMENT Filters



20.       Environmental Problem Type:  DEFORestation



     The Austrian tropical timber law was implemented with the

desire to pressure tropical timber exporting countries to

increase forest conservation efforts. 



21.       Name, Type, and Diversity of Species 



     Name:          Tropical Hardwoods

     Type:          Plant/Angiospermae/Dicots

     Diversity:     4,311 higher plants per

                    10,000 km/sq (Malaysia)



     Some examples of southeast Asian tropical hardwoods include

rosewood and mahogany, which are woods long valued by the

furniture industry.  An accurate declaration of species

impacted by tropical timber harvesting is complicated by the fact

that rain forests are rich eco-systems which contain a vast array

of plant and animal species, many of which have yet to be

discovered (see MERCK case).



22.       Resource Impact and Effect:  LOW and SCALE



23.       Urgency and Lifetime:  LONG and 100s of years



     Austria hopes to have a more universal system of eco-

labelling by the year 2000 in order "... to certify that the

product being marketed is from sustainably managed forests." 

The urgency of the problem of tropical timber deforestation may

be illustrated through several examples.  "Indonesia, with more

tropical forests than any country barring Brazil, is losing

around a million hectares (2.5 million acres) a year despite

strict laws obliging loggers to replant forest concessions" (see

BRAZIL case).  In Uganda, only 700,000 hectares remain out of

the 4 million hectares that existed in 1987, thus representing a

80 percent loss of its forests.  In addition, Malaysia has had

to ban timber exports from its state of Sabah (see MALAY case). 

Furthermore, the Malaysian state of Sarawak alone is one of the

world's largest exporters of wood, "having exported 18 billion

cubic meters of tropical rainforest in 1991, and environmental

group Global 2000 said 70 percent of Sarawak's forests had

already been destroyed."  



     As long as tropical timber exporting countries have few

outlets for economic diversification, they will continue to

harvest or exploit their tropical timber resources.  At current

rates of deforestation, tropical forests may be gone within the

next 7 to 57 years.  The urgency of tropical timber deforestation

is even more crucial, since the complexity of the tropical eco-

system requires more than the mere replanting of trees. 

Recreating ecosystems comparable to the old growth tropical

rainforests could take as long as 800 to 1500 years.



24.       Substitutes:  RECYCling



VI.       OTHER Factors



25.       Culture: NO



26.       Trans-Border:  NO



27.       Rights:  YES



     The forests in some places, such as on the island of Borneo,

are an integral part of indigenous cultures.



28.       Relevant Literature



"Asia: Boldly Taking on the West."  Inter Press Service  

     (March 22, 1993).

"Austria: Agency Says New Law Won't Curb Log Imports."

     Greenwire (October 19, 1992).

"Austria: Austrian Industry Malaysians Angered Over Tropical 

     Wood Labeling Requirement."  BNA International

     Environment Daily (November 16, 1992).

"Austria: Government Called on to Alter Law Requiring Labels 

     on Tropical Wood, Products." BNA International

     Environmental Daily (March 24, 1993).

"Austria Revokes Eco-Labelling Law for Tropical Timber."  The

     Straits Times (March 18, 1993).

"Austria Satisfied on Indonesian Timber - Envoy."  The Reuters

     Library (March 3, 1993).

"Austria to Scrap Eco-Law on Rain Forest Timber."  The Reuters

     Asia-Pacific Business Report (March 4, 1993).

Blair, Laura. "Business and the Environment: Furniture Industry

     Puts Shine on Safety." The Financial Times (June 5,

     1991). 

Cooke, Kieran.  "Malaysia Hits at Austria Move on Timber

     Imports."  The Financial Times (October 13, 1992): 4.

Gourlay, Candy.  "Environment: Rainforests Saviors or Green 

     Imperialists?"  Inter Press Service (November 4, 1992).

Hamid, Abdul Jalis.  "Malaysia, Indonesia Counter West's Forest

     Policy."  Reuters (December 3, 1992).

"Indonesia Welcomes Austrian Plan to Revoke Timber Law."  The 

     Reuter Library Report (March 2, 1993). 

Lim, Ronnie and Reginald Chua.  "Austria's Label Rule for

     Tropical Timber `Unfair'."  The Straits Times (October 24,

     1992): 18.

Lindemann, Michael.  "Parliament Votes to Scrap World - First

     Tropical Wood Taxes."  United Press International

     (December 4, 1992).

Makabenta, Leah.  "Environment: Eco-Labelling, an Idea Whose 

     Time Has Come."  Inter Press Service (June 4, 1993).

"Malaysia Asks Austria to Delay Timber Law Pending Talks."

     Japan Economic Newswire (November 13, 1992).

"Malaysia: Austrian Eco-Labelling Scheme Will be Fought."  

     Greenwire (October 6, 1992).

"Malaysia Leads Fight on Timber - Import Bans."  World Wood. 

     Information Access Company, Miller Freeman Inc.

     (February 1993).

"Malaysia: Regional Boycott with Austria."  Business

     International, Business Asia (November 9, 1992).

"Malaysia Slams Austria Stand on Tropical Timber Imports." 

     Agence France Presse (November 5, 1992).

"Malaysia Threatens Trade Ban on Austria Over Wood Products." 

     United Press International (October 27, 1992).

"Malaysia Warns Swiss not to Ban Tropical Wood Imports."  Japan

     Economics Newswire (March 18, 1993).

"Malaysians Urged to Boycott Nestle, Austrian Goods."  Japan 

     Economic Newswire (October 6, 1992).

Pastor, Rene. "EC, ASEAN Set Aside Timor Dispute for Trade."  The

     Reuter European Community Report (October 30, 1992).

Ratnasabapathy, Senthil.  "Environment: Ratification of Rio 

     Treaty is Delayed in Austria."  Inter Press Service

     (March 9, 1993).

"Trade and the Environment: The Greening of Protection."  The 

     Economist (February 27, 1993).

Traynor, Ian.  "Another Part of the Forest: Austria's Greens Have

     Been Fighting for World Timber."  The Guardian (April

     16, 1993).

Williams, Frances. "ASEAN Condemns Timber Labelling."  The

     Financial Times (November 6, 1992).



                          References





1/11/97