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FOREST PRODUCTS TRADE POLICY HIGHLIGHTS - JULY 1998

Free Trade Area of the Americas Negotiations Launched

On April 19, 1998, at the Second Summit of the Americas in Santiago, Chile, hemispheric leaders formally launched negotiations to create a free trade area extending from Ellesmere Island (Canada) to Cape Horn (Argentina). The thirty-four leaders instructed their ministers responsible for trade to conclude the negotiations by no later than 2005, and to make concrete progress by the end of the century. The first round of negotiations will be chaired by Canada.

International Tropical Timber Council Meets

The Twenty-Fourth Session of the International Tropical Timber Council (ITTC), the governing body of the International Tropical Timber Organization, met in Libreville, Gabon, May 20-28, 1998. The ITTC took nine decisions covering a wide range of issues during the course of the meeting, but the financial crisis in Asia and the resulting downturn of many markets in the region dominated both the formal and informal discussions and led to a decision by the ITTC to commission a study "to assess the extent and implications of the market downturn for tropical timber, and to recommend appropriate actions to address the problem." Michael Hicks, FFPD's Coordinator for Trade Policy, represented USDA at the meeting.

APEC Initiative to Liberalize Forest Products Trade

APEC senior officials and trade ministers met June 18-23, 1998, in Kuching, Malaysia to continue work on the development of modalities and time tables for the early voluntary liberalization of trade in fifteen sectors (EVSL), including the forest products sector. The forest products initiative is co-sponsored by Canada, Indonesia, New Zealand and the United States, and covers wood products, pulp, paper, printed materials, wooden furniture, and wooden prefabricated housing. Agreements in principle were reached on three of the four elements of the forest products initiative at a previous meeting in Kuala Lumpur, Malaysia in April, i.e. non-tariff measures, economic and technical cooperation, and standards. No agreement has yet been reached on either product coverage or staging, as is the case in many sectors. Trade minister reaffirmed that flexibility for sensitive products in a sector should be dealt with generally in the form of longer implementation periods. Trade ministers instructed their senior officials to finalize work on the sectoral initiatives by September, for their consideration at the meeting of leaders in November. Deputy Under Secretary James Schroeder and FAS Administrator Lon Hatamiya led the USDA delegation at the meeting in Kuching.

APHIS Submits SEIS for Unmanufactured Wood Imports

On May 15, 1998, APHIS submitted to the U.S. District Court for the Northern District of California a Supplemental Environmental Impact Statement (SEIS) on imports of unmanufactured wood articles. The SEIS was prepared to address perceived deficiencies

in the original EIS and in response to a June 5, 1997, court injunction which prohibited APHIS from issuing any new import permits or modifying any existing permits for temperate logs, lumber, and solid wood packing material (as cargo). The judge has assigned a December 11, 1998, court date to hear the injunction case.

U.S. & Japan Release Joint Status Report on Deregulation

President Clinton and Prime Minister Hashimoto issued a joint report summarizing progress made during the first year under the U.S.-Japan Enhanced Initiative on Deregulation and Competition Policy. The report issued on May 15, 1998 covers four sectors including the housing sector, as well as structural issues which cut across the Japanese economy. Discussions, to date, in the housing sector have focused on the $38 billion wooden building materials market and have led to several significant changes in Japan, including the amendment of the Building Standard Law (passed by the Diet) to make it performance-based; introduction of procedures for the expeditious approval of three-story, wood-frame construction in urban areas; and the recognition of U.S. grademarked machine stress-rated and finger-jointed lumber.

Sino-U.S. Cooperation in Housing Area Under Discussion

In preparatory meetings for the upcoming U.S.-China Summit, Chinese Ministry of Construction Deputy Director General Shen Jianguo expressed interest in a U.S. proposal for Sino-U.S. cooperation in the housing sector. Areas under consideration include demonstration projects to highlight new and innovative products or designs, technical assistance with building codes/standards, urban planning, broad-based training programs, and mortgage financing. It is possible that the initiative could be announced at the Summit in late June.

British Columbia Cuts Stumpage Prices

The British Columbian government announced a reduction in stumpage prices (price of standing timber) by an average of C$8.10 on the coast and C$3.50 in the interior, effective June 1, 1998. The reduction follows a re-examination of the cost assumptions underlying the system for determining stumpage prices. These reductions are in addition to cost reductions realized by streamlining the administration of B.C.'s Forest Practices Code. The reductions are intended to improve the competitiveness of B.C.'s forest products industry. The USG is currently assessing the consistency of this latest action with the 1996 U.S.-Canada Softwood Lumber Agreement in that the Agreement prohibits any actions which have the net effect of offsetting the export tax. Under the terms of the Agreement, Canada agreed to place export taxes on softwood lumber, in excess of 14.7 billion board feet, exported to the United States and, in turn, the United States agreed not to pursue trade sanctions against Canadian softwood lumber for the term of the agreement, which is 5 years.

Brazil Lists Mahogany in CITES Appendix III

The Government of Brazil has requested that the Secretariat for the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) include its population of Swietenia macrophylla (bigleaf mahogany) in Appendix III of CITES, the least restrictive of the three Appendices. The listing will become effective July 26, 1998. Costa Rica and Bolivia had previously requested that their populations of this specie be included in Appendix III. Listing in Appendix III means that exports of bigleaf mahogany from these countries must be accompanied by an export permit and importing countries must verify the country of origin of all shipments of this specie.

U.S.-Grademarked Finger-Jointed Lumber Recognized

On June 17, 1998, the Japanese Ministry of Construction (MOC) recognized U.S.-grademarked finger-jointed lumber for use in 2X4 construction in Japan. MOC recognized U.S. visually-graded lumber in January 1997 and machine stress-rated lumber in February 1998. This additional recognition will allow U.S. mills to provide Japanese homebuilders, as well as U.S. suppliers of packaged housing, with finger-jointed lumber without having to grade it to the more costly and time-consuming Japanese Agricultural Standards (JAS).

Mexico Issues New Phytosanitary Requirements

On June 11, 1998, SEMARNAP (Secretariat of Environment, Natural Resources, and Fishery) published in the Diario Oficial two proposed phytosanitary regulations; one covering the importation of sawnwood (NOM-016-RECNAT-1997) and the other covering the importation of old sawnwood and plywood (NOM-017-RECNAT-1997). NOM-016-RECNAT-1997 stipulates that imported sawnwood must be accompanied by an international phytosanitary certificate with an additional declaration stating that the product comes from a pest and disease free area. APHIS has indicated that such a requirement is impossible to comply with and, if implemented, it could severely impact U.S. lumber exports to Mexico.