Dept of Commerce Says Indonesian Companies Wrongly Benefiting from Timber Subsidies

The BlueGreen Alliance, NRDC and the Sierra Club applauded a preliminary determination by the U.S. Department of Commerce that Indonesian paper producers have benefited from government subsidies.

March 3, 2010

Indonesian Government Questioned on Illegal Logging as Part of Subsidy Investigation

Washington, D.C. – The BlueGreen Alliance, Natural Resources Defense Council and Sierra Club today applauded a preliminary determination by the U.S. Department of Commerce that Indonesian paper producers have benefited from government subsidies, including the government’s provision of timber at below-market prices. During the course of the case, which was filed by the United Steelworkers (USW) and several paper companies, the Department of Commerce has investigated whether illegal logging may be subsidizing paper production in Indonesia.

“We applaud the Department of Commerce for acting on this issue. Illegal timber harvests do not happen in a vacuum,” said Margrete Strand Rangnes, Director of the Sierra Club’s Responsible Trade Program. “Deforestation is responsible for up to 20 percent of global greenhouse gas emissions. Illegal logging practices not only contribute to this, but have also devastating impacts on communities and the economy in Indonesia and the United States.”

The investigation follows a preliminary determination from the U.S. International Trade Commission (ITC) that unfairly traded imports of the paper from China and Indonesia are injuring the U.S. paper industry and its workers. The subsidy investigation will continue as the Department gathers more information on logging practices in Indonesia.

Given the overwhelming evidence linking the Indonesian pulp and paper industry to illegal logging, environmental devastation and unfair trade subsidies, the BlueGreen Alliance, the Natural Resources Defense Council and the Sierra Club said today it is vitally important that the Department of Commerce request and receive complete information regarding the harvest and trade of Indonesian timber products to ensure that the U.S. is not complicit in supporting illegal logging through imported products and sales. Affirmative final determinations by the Department of Commerce and the ITC would lead to countervailing duties to offset these subsidies.

“Strong and immediate action by the Department of Commerce and the U.S. International Trade Commission must be taken to counteract these illegal practices and reinforce a level playing field for American companies and their workers while also ensuring that we reduce the negative environmental impact of deforestation,” said David Foster, Executive Director of the BlueGreen Alliance.

The Indonesian pulp and paper industry is notorious for illegal logging and deforestation practices – the United Nations Environment Programme estimates that 73 to 88 percent of wood from Indonesia is illegally logged. Illegal logging is directly connected to unfairly-priced imports, as logging companies pay less than market prices for timber. The distortion of markets drives numerous environmental, economic and social problems.

Deforestation, in large part due to illegal logging, has made Indonesia the world’s third largest emitter of global warming pollution. According to the World Resources Institute, approximately 25 percent of Indonesia’s forests have been cleared since 1990. Endangered species such as the Sumatran tiger, orangutan, rhinoceros and elephant are on the brink of local extinction as their habitats continue to disappear.

“Today’s decision by the Department of Commerce is a critical step toward curbing the practice of illegal logging, a significant contributor to global warming emissions,” said Jake Schmidt, International Climate Policy Director for the Natural Resources Defense Council. “International action on climate change must address deforestation, and today’s decision will help to ensure that incentives for destruction of the world’s tropical forests are eliminated.”

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