TED Case Studies

Austria Timber Import Ban

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          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