CIESIN Reproduced, with permission, from: Groombridge, B., ed. 1992. Intellectual property rights for biotechnology. In Global biodiversity: Status of the Earth's living resources, 495-99. London: Chapman and Hall.

THE INTERNATIONAL TROPICAL TIMBER AGREEMENT (ITTA)

At about the same time that the CFDT called upon the FAO to establish the TFAP, at the UN Conference on Tropical Timber an agreement on tropical timber was being negotiated and adopted. The International Tropical Timber Agreement (ITTA) came into force on 1 April 1985. The initial term of the agreement was meant to be five years, but this was extended in 1990 for a further two years. The ITTA was originally conceived as a commodities agreement and the initial version, which was drafted by the Japanese, was based upon the 1979 Rubber Agreement and the 1982 Jute Agreement. However, the final form of the adopted agreement is unlike previously negotiated commodity agreements. Typically, commodity agreements are principally concerned with price control and stabilization, and to this end they establish buffer funds and price manipulation mechanisms. The ITTA, however, developed into a mechanism much more similar to an agreement for international development assistance.

This change in emphasis is evident in the preamble to the agreement. There it states that the parties enter into the agreement "recognizing the importance of and the need for proper and effective conservation and development of tropical timber forests with a view to ensuring their optimum utilization while maintaining the ecological balance of the regions concerned and of the biosphere". This emphasis on sustainable development is also evident in the objectives of the agreement. The ITTA's objectives include the development of the industry, but also the promotion of research and development with a view to improving forest management. The purpose of this is to "encourage members to support and develop industrial tropical timber reforestation and forest management activities and to encourage the development of national policies aimed at sustainable utilization and conservation of tropical forests and their genetic resources and at maintaining the ecological balance in the regions concerned.

The agreement establishes a complex institutional structure to facilitate the attainment of these objectives. The administrative structure as a whole is known as the International Tropical Timber Organization (ITTO) which is composed of the following elements:

The ITTC acts as the principal political body of the organization. The ITTC coordinates the work of the three permanent committees and carries out all necessary functions to fulfill the provisions of the ITTA. The Council is composed of all members of ITTO (i.e. parties to the ITTA). The lTTC is obliged to hold at least one meeting a year, although usually two are held - one in Yokohama and the other in a producer country. The voting scheme used at these meetings is quite elaborate, and is based upon achieving balanced representation between industry producers and consumers (Hypay, 1986).

Permanent committees

Most of the decisions taken by the ITTC are on the basis of the recommendations of the permanent committees who function as the operational arm of ITTO (Hypay, 1986). Participation in each of the permanent committees is open to all members of the ITTA. As the operational arm of ITTO these permanent committees play a vital and important role in the implementation of the objectives of the ITTA.

The functions of each of the three permanent committees are outlined in the ITTA. Apart from normal commodity type functions the PCM and the PCF have functions which would normally be associated with an environmental protection organization. For instance, the PCM functions include making recommendations to the council on the need for and nature of appropriate studies on tropical timber including long term prospects of the international tropical timber markets. The PCF is the key committee for the implementation of the environmental objectives and its functions include: reviewing assistance provided at national and international levels for reforestation and forest management; encouraging technology transfers for reforestation and forest management; setting the requirements and identifying possible sources of financing for reforestation and forest management. The most important function of the PCF is "to coordinate and harmonize these activities for cooperation in the field of reforestation and forest management with the relevant activities pursued elsewhere, such as those under FAO, UNEP, the World Bank, Regional Banks and other competent organizations". Overall, the permanent committees are oriented to assisting the general support role which ITTO plays in this area.

The work of the permanent committee

To date the vast majority of the work of ITTO has been carried out by these three permanent committees. By the end of 1990 ITTO had approved 66 projects and commissioned a further 35 pilot studies for further projects. The PCF had been delegated the largest number of these studies and consequently had the largest budget. As of 1 January 1991 this committee was engaged in 19 preproject studies and a further 21 current projects. Its estimated budget for these studies came to over US$12.3 million of which over US$2.5 million had already been paid. The PCM was engaged in six pre-projects studies and a further eight current projects. Its estimated budget for these studies came to over US$2 million of which US$1.3 million had already been paid. The PCI was engaged in nine pre-projects and a further 19 current projects. Its estimated budget for these studies came to over US$6.4 million of which over US$2.4 million had been paid.

Table 32.10a,b outlines the projects which the PCF was then involved in at the end of 1990. An examination of the project descriptions show that these closely match the defined functions of the permanent committee. They also reflect the idea that this agreement is concerned with more than the narrow question of maximum price control of a particular commodity. In fact it appears from the activities of the permanent committees to date that the question of price control has not featured very largely on the agenda of the organization. Furthermore, from Table 32.10a,b the support role envisaged for ITTO in pursuing these environmental objectives is evident in both the nature of the projects and the fact that in only five of the 21 current projects is ITTO the implementing or lead agency.

Apart from sponsoring these projects, the other major initiative of ITTO has been a programme to assist countries in the development of management procedures to direct timber production in tropical forests toward sustainability. The year 2000 was established as the target date for the achievement of sustainable management of tropical forests worldwide. This object has been pursued through the establishment of forestry standards for the sustainable management of natural tropical forests for timber production. These were drawn up by the PCF and adopted by the ITTC at the 7th session of the Council in May 1990. These standards contain a set of 41 principles and 36 possible actions. They cover considerations ranging from general policy to particular aspects of forestry operations. The general principles involved include the establishment of national forestry inventories and a permanent forest estate. They also recommend examination of forest lands ownership, and the establishment of separate institutions for the management of the forest estate in each country. In addition to these guidelines ITTO is presently developing another set of guidelines on biodiversity, known as 'The ITTO Guidelines on the Conservation of Biological Diversity in Tropical Production Forests'. The objective of these guidelines is to optimize the contribution of these forests to the conservation of biological diversity that is consistent with ... the sustainable production of timber and other products. At the time of writing these guidelines, although accepted by the PCF committee, have not gained political support at the lTTC level and are unlikely to be acted upon by the ITTC before UNCED (Anon., 1991).

In addition to the development of these standards, ITTO is also generating financial assistance for producer countries, both directly from its own funds and indirectly through the solicitation of contributions from consumer countries. This assistance is usually employed to help countries in their incorporation of these guidelines into national policy and legislation.

Conclusion

From the above overview of TFAP and ITTA, it is evident there are a number of similarities between the two organizations. This is to be expected as they are both international responses to the problem of deforestation represents a significant global problem. One programme originated out of the international resource community, and the other out of the industry itself.

The stated purpose of TFAP is to harmonize and coordinate actions in the tropical forest sector so that tropical forests can be used by mankind on a sustainable basis. Similarly, the stated purpose of ITTO is "to develop proper and effective conservation and development of Tropical Forests with a view to ensuring their optimum utilization while maintaining the ecological balance of the regions concerned and of the biosphere." ITTO states that it wants to move worldwide production to a sustainable basis by the year 2000.

Despite the fact that the objectives of the two organizations are similar, the way in which both organizations set out to achieve these objectives is ostensibly quite different; this is because of the origins of the two programmes and the difference in their legal structure.

The TFAP is technically a policy which lacks any legal content. From a legal point of view it is no more than an information document which organizations working in the area may choose to adopt to guide their decisions. The funds dispensed under the programme do not pass through the TFAP; instead, they flow directly from the donor to the recipient. At the discussions about the implementation of a national TFAP (Roundtable III), if a donor can be found for a particular aspect of the plan or the entire National TFAP, then that donor will make arrangements for the provision of funds to the recipient. Another consequence of the legal structure of the TFAP is that few of the activities involved in the development of a national TFAP are actually carried out in the name of the TFAP; they are instead coordinated and conducted in the name of the lead agency. In sum, the TFAP is only a name associated with a large number of separate agreements and relationships; it has no structure of its own.

ITTO, on the other hand, is a legally constituted organization which does have its own legal personality, headquarters, staff and budget. ITTO carries out many activities in its own name and raises funds and uses its resources in its own name.

An important reason for the different approaches is the different origins of the two programmes: the TFAP was developed by FAO and various NGOs active in the tropical forest sector whereas ITTO is a product of the UN Conference on Trade and Development (UNCTAD). Whilst TFAP has approached the problem from the coordination of development assistance programmes, ITTO has approached it much more from a trade point of view. Thus TFAP is meant to approach the problem in a cross-sectoral way and has sought to include as many parties as possible in the process. It has traditionally attempted to do this through the Roundtable's, by increasing the importance of the forestry sector and by coordinating the various development assistance programmes that have some impact on the forest sector in the relevant country. On the other hand ITTO is not cross-sectoral and is concerned simply with the forest estate of the producing countries. This different approach is seen in the nature of the projects ITTO is involved in, which on the whole tend to be concerned with quite specific problems in tropical timber production.

Yet, despite these ostensible differences in approach, the work of the two programmes is very similar. The defined functions of the PCF are very similar to the fields of action of the TFAP. For instance the TFAP calls for "the protection and management of natural forests" along with "accelerated industrial reforestation" and ITTO has established a permanent committee whose main purpose is to "promote better forest management and reforestation' the PCF. TFAP states that "financial incentives are needed to encourage investment in reforestation and forest management" and the ITTA empowers the PCF to "identify all possible sources of financing for reforestation and forest management".. Both programmes make extensive reference to promoting training, research and education in the area. Both encourage greater transfer of technology. The guidelines developed by ITTO closely resemble many national TFAPs.

This overlap between the two organizations results in some duplication of effort and illustrates a lack of direct cooperation between the TFAP and ITTO. This is perhaps one of the more easily correctable failings of international efforts to assist in the regulation of this domestic resource.

DEBT PURCHASE

The debt purchase discussed here covers a specific form of debt-equity conversion, widely termed a 'debt-for-nature' swap. Other types of debt-equity conversions such as 'debt-for-development' and 'debt-for-child' also occur. The essential aim of all these types of instruments is to convert the external debt of a developing country into a domestic obligation to support a specific programme. Table 32.11 details the debt-for-nature agreements which have been established so far. Although no two debt-for-nature swaps so far negotiated have been identical, the basic structure used in each case is similar.

The first step is that an international conservation group must raise funds in order to 'purchase' a debtor country's foreign debt. Private banks are usually reluctant to make outright donations of the debt they hold, even though in some countries like the USA such a donation is given a favorable tax treatment. Funds are usually secured from either the international conservation group's own resources or from donations from private individuals or bilateral aid agencies.

The funds raised are used to purchase the country's external debt on the secondary market at a fraction of the theoretical or face value of the debt. The 'secondary market' is a term used to describe the process whereby the original creditor of the debtor country sells on part or all of the debt to another institution. This trading can happen many times and is so prevalent that rarely will the bank who arranged the original loan retain anything but a small portion of the original debt. Table 32.11 shows that typically the country's debt has been purchased at between 15-30% of its face value. This discounting is because of a low expectation of total repayment by the debtor countries; the amount of the discount is proportional to the expectation of repayment.

Once the external debt is acquired, the environmental organization will enter into negotiations with the debtor country to fix a favorable rate for the conversion of the external debt from the foreign currency in which the debt is denominated to the local currency of the debtor country. This rate will usually be somewhere between the local currency value of the debt and the local currency value of the price the environmental organization paid for the debt on the secondary market. The price that is negotiated is referred to as the redemption price. Most commonly the redemption price is 100% of the face value of the acquired debt but in some instances it may be no more than the discount value of the acquired debt.

Lastly, the debtor country's government issues a financial instrument, typically a government bond, denominated in local currency in an amount equal to the redemption price of the debt. These bonds are then used to finance projects in the debtor country through local organizations.

A debt-for-nature agreement is often described as one in which all the parties involved stand to gain something.

The international conservation group is able to increase the spending power of its usually limited financial resources because of leverage provided by the difference between the redemption price and the discount rate of the purchased external debt. The group is also able by this method to influence conservation policy in countries where normally they have little impact. For the international conservation group there are also numerous collateral benefits, such as the relationship created between the parties involved (e.g. the local Ministry of Environment, Ministry of Finance, local conservation groups and creditor banks).

For the investors and the institutions who hold the country's debt there are direct benefits associated with having the extra purchases in the secondary markets, such as increasing both liquidity of the market and the price of the discounted debt.

For the debtor countries there are considerable financial benefits to be gained from the debt-for-nature agreement.