This document provides answers to some common questions about the Lao-EU Voluntary Partnership Agreement negotiations, FLEGT licensing and the Lao timber legality assurance system.
Lao-EU Voluntary Partnership Agreement
What is the Lao-EU Voluntary Partnership Agreement (VPA)?
Laos and the EU are negotiating a Voluntary Partnership Agreement (VPA), which is a legally-binding bilateral trade agreement that aims to improve forest governance and promote trade in legal timber from Laos to the EU.
- VPAs are among the key tools of the EU Forest Law Enforcement, Government and Trade (FLEGT) Action Plan of 2003. As of mid-2017, 15 countries were negotiating or implementing VPAs with the EU.
- Laos expressed interest in a VPA in 2012. The Prime Minister of Laos approved VPA negotiations in 2015. The EU and Laos met three times via videoconference for technical discussions ahead of their first face to face negotiations in April 2017.
- The VPA negotiations are expected to take several years. Under the VPA both parties would commit to trading only in legal timber products.
- Among other things, a Laos-EU VPA would describe a timber legality assurance system capable of verifying the legality of timber products. When fully operational the timber legality assurance system would issue FLEGT licences to accompany Lao exports of verified legal timber products to the EU.
- Laos would then only export FLEGT-licensed timber products to the EU, if those products fall under the scope of the VPA. The EU would only allow products that fall under the scope of the VPA to enter the EU if they are accompanied by a valid FLEGT licence. FLEGT-licensed timber is considered as meeting the requirements of the EU Timber Regulation, which prohibits EU importers and domestic producers from placing illegally harvested timber and timber products on the EU market.
- The VPA will include a framework for overseeing, monitoring and evaluating implementation of the VPA and the economic, social and environmental impacts of the VPA.
- Learn more about the Lao-EU VPA in this Background.
Why did Laos decide to negotiate a VPA?
Laos' objectives for the VPA process are to:
- Improve law enforcement, capacity and overall governance regime in the forest sector.
- Make progress towards improving local livelihoods through sustainable forest management.
- Maintain timber trade access to regional and EU markets.
How will the VPA be negotiated?
The European Commission (DG Environment) negotiates on behalf of the EU. For Laos, the negotiations are led by the Ministry of Agriculture and Forestry and include participation by representatives of Lao private sector, Government ministries and agencies, and civil society groups.
Much of the content of the VPA will be decided through deliberations among national stakeholders. Laos has created a multistakeholder National Steering Committee, Negotiation Support and Development Committee, and thematic Technical Working Groups for this purpose.
When will VPA negotiations conclude?
Experience from other countries shows that it can take years for VPA negotiations to conclude, and further years to implement the VPA. In VPA processes to date, the period from the start of negotiations to the date the VPA entered into force has been between four and seven years. Several more years of VPA implementation then followed. Meaningful change takes time. The VPA process will take the time necessary to build a consensus among national stakeholders and to design and implement a timber legality assurance system that is robust and credible. It would be wrong to compare the pace of VPA negotiation and implementation between countries.
Which Lao stakeholders and institutions are involved in the VPA process?
The institutions and stakeholders that are involved in the VPA process include the following:
- Government: The national negotiating structure includes representatives of the Ministry of Agriculture and Forestry, and its Department of Forestry and Department of Forestry Inspection, the Ministry of Industry and Commerce and the Ministry of Natural Resources and Environment. The Ministry of Planning and Investment and the Ministry of Energy and Mines take part in thematic expert group discussions on legality of timber derived from forests converted to other land uses. The Ministry of Labour and Social Welfares also has a role to play, especially on safety and health of workers in the timber harvesting and processing sector.
- Private sector: The private sector has followed the FLEGT VPA process from an early stage – in particular, the Lao Wood Processing Industry Association and the Lao Furniture Association.
- Civil society: A group of 27 civil society organisations (CSOs) formed the ‘Lao CSO FLEGT Network’ in 2015 through a transparent selection process, which identified five organisations to represent the group in the national FLEGT structures.
What is the status of the VPA?
The first face-to-face negotiations between Laos and the EU took place in April 2017 followed by the second negotiations in June 2018 and the third in June 2019. Work on the timber legality definition (TLD) which comprise eight TLDs started with five draft TLDs shared with EU in December 2016.
By March 2020, all eight draft TLDs were available and shared with the EU, three of which were set aside, acceptable in principle, during the second negotiation round. A draft product scope is also available. Technical discussions on supply chain controls have also commenced. Currently, Laos intends that all timber sources will be covered, that the product scope will be broad and the TLAS will be applicable to exports to all markets. In October 2018, the Ministry of Agriculture and Forestry issued a regulation supporting the implementation of TLAS.
In 2020, Laos is field-testing elements of its supply chain control and verification under the TLAS, with particular attention on timber from conversion areas.
What is a VPA timber legality assurance system?
Each VPA describes a timber legality assurance system designed to verify the legality of timber from the forest or the point of import through the entire supply chain to the point of final sale or export.
In all VPAs the system includes the following five components:
- Legality definition: The legality definition states the aspects of a VPA partner country’s law for which the timber legality assurance system evaluates evidence of compliance.
- Supply chain controls: Supply chain controls ensure that timber products verified as legal remain legal throughout all processes associated with the supply chain. Supply chain controls also prevent verified legal products being tainted by unverified products entering the supply chain.
- Verification of compliance: Verification of compliance involves checks that all the requirements of the VPA legality definition and supply chain controls have been met to ensure that timber products are legal.
- FLEGT licensing: Once the timber legality assurance system is operational, it will provide for the issuance of a FLEGT licence for each shipment of timber products that is exported to the EU market. Such shipments and their exporters must meet all the requirements set out in the legality definition, supply chain controls and verification procedures.
- Independent audit: An independent auditor will periodically assess the implementation, efficiency and credibility of the timber legality assurance system in order to identify, document and report any non-compliance and weaknesses in the system.
Until Laos issues FLEGT licences, what requirements must its timber and timber products meet to enter the EU market?
Until the start of FLEGT licensing, timber and timber products that Laos exports to the EU will have to go through the normal due diligence process under the EU Timber Regulation (EUTR). The EUTR prohibits the placing on the market of illegal timber and requires companies placing timber on the EU market to assess and mitigate the risk of illegal timber entering their supply chain.
How important is the trade in timber and timber products from Laos to the EU?
Laos has historically exported to the EU only a small proportion of its total timber exports, which solely consisted of paper products. In 2016, the value of Lao wood and wood product exports to the EU was USD 550 000 million, which amounted to 0.05% of the country’s total wood and wood product exports.
Before the 2015 ban on log exports, 87% of Lao exports of timber products went to China and Vietnam. Some of these may have then been re-exported to the EU following processing.
The VPA is an opportunity for Laos to increase exports to the EU, and improve its access to other markets, including those of countries such as Vietnam and China, which are also engaging with the EU on forest governance issues. The Vietnam-EU VPA entered into forced in June 2019.
What products will the Lao-EU VPA cover?
Products covered by the VPA will include all those required by the EU regulation establishing a FLEGT licensing scheme, which are a minimum requirement for VPAs: logs, sawn timber, railway sleepers, plywood and veneer.
In addition to the minimum requirements of the product scope of a VPA, the VPA will also cover other timber products that Laos identifies through deliberation among national stakeholders. An annex in the VPA will list the range of products the VPA covers. Laos has prepared a draft product scope annex, which includes the mandatory VPA products along with others.
How does the VPA relate to domestic action in the forest sector?
Laos has taken important steps to address illegal logging and improve forest governance recently, notably through the Prime Minister’s Order 15 (PMO15) of 2016, which includes measures to strengthen management and control of the timber sector. The VPA and domestic reform processes have common goals and can therefore support each other.
Recent VPA-related policies and actions in Laos include:
- Maintaining a moratorium on harvesting in production forest areas while management plans are developed and capacities built.
- Promoting and streamlining smallholder and private industrial plantations in place of timber from natural forest.
- Identifying severely degraded forest lands in Production Forest Areas suitable for industrial plantations (completed).
- Providing enabling incentives for the private sector to reforest and restore Production Forest Areas.
- Improving the management of timber exports so that revenue is collected accurately and on time.
- Improving the regulation and monitoring system for harvesting in infrastructure project areas.
- Developing a mandatory national chain of custody system in the supply/value chain.
- Prohibiting the import of illegal timber.
- Strengthening the ban on export of logs and sawn timber, with preference for export of finished products.
How useful is the VPA, given that Laos exports so much timber to non-EU markets?
The VPA is useful with respect to both EU and non-EU markets. Laos has historically exported most of its timber to China and Vietnam, both of which are major suppliers to the EU market.
Vietnam is a VPA country, and its VPA entered into force on 1 June 2019. Vietnam is starting to implement its timber legality assurance system and strengthened controls on imported timber. China is also engaging with the EU on forest law enforcement and governance. Furthermore, China is developing a Chinese Timber Legality Verification System that aims to provide assurance that Chinese imports and exports of timber are legal. By engaging in a VPA, Laos therefore aims to meet the rising standards of multiple markets.
- In all VPAs agreed to date, the VPA timber legality assurance system and related regulations apply to all export markets, not just to the EU market.
- With such a commitment, the control and verification of operations will apply to all timber and timber products produced, acquired and/or in circulation in the VPA country.
- Under the FLEGT Action Plan, the EU seeks to work with other major timber consumers to develop a more comprehensive framework to reduce imports of illegally harvested timber.
- Other markets have implemented or are designing measures to eradicate illegal timber from their imports. These markets include the United States, Australia, Japan and South Korea.
How could a VPA boost trade with the EU?
Each VPA describes a timber legality assurance system that, when fully operational, will verify the legality of timber and timber products and issue FLEGT licences to exports bound for the EU. FLEGT licences automatically meet the requirements of the EU Timber Regulation (EUTR). This means operators in the EU can place FLEGT-licensed products on the market without doing further due diligence, thereby saving time and money. FLEGT-licensed products should therefore be more attractive to buyers than equivalent products that do not have FLEGT licences.
What other benefits could a VPA bring?
A VPA between Laos and the EU is expected to bring social, economic and environmental benefits through the reform of the forestry sector.
Different stakeholder groups have different desired outcomes from the VPA process.
- The Government wants the VPA to reduce poverty, improve livelihoods through sustainable forest management, maintain access to markets and improve law enforcement, capacity and governance.
- Private sector interests in a VPA include improved access to logs for processing, and a level playing-field for business with clear regulations that ensures competition is fair. The private sector also sees the VPA as an opportunity to modernise the industry, adding more value, competitiveness and performance.
- Civil society groups see the VPA as a means to improve forest governance, enforce the law fairly, and share more benefits from forestry operations with local communities.
How can the VPA address timber obtained when forests are converted to other uses?
Laos is the first VPA country in which most timber is harvested from conversion of forest to other land uses. This presents the EU and Laos with an opportunity to identify ways to address illegal conversion and strengthen controls over legal conversion.
How will the EU and Laos oversee VPA implementation?
In each VPA, the EU and the partner country create a joint body to oversee VPA implementation. It is foreseen that Laos and the EU will establish such a joint body once negotiations are concluded.
How will the impacts of the VPA be monitored?
In all VPAs, the EU and the partner country make a joint commitment to monitor the economic, social and environmental effects of the VPA. It is foreseen that the Lao–EU VPA will commit to similar monitoring.