Sustainable Timber Trade: A Study on Data Discrepancies and Risk of Illegality in International Trade Relationships

Abstract

Illegally sourced and traded timber is often linked to social, economic, ecological, and climate issues globally. Forests act as invaluable carbon sinks amid worsening climate change and illegal timber entering markets undercut legitimate harvesters causing them economic losses. Illegal timber trade persists because of the difficulty in detection, but trade discrepancy analysis, the comparison of reported imports and exports in bilateral trade, is a useful detection method. Discrepancy can be caused by errors and is expected, but repeated patterns or excessively large discrepancies can be indicative of illegal activities like tax evasion or trade of protected species. The goals for this research are to develop a tool that uses trade discrepancy to detect potential illegal timber, compare results to other research to test the tool’s reliability, and analyze trade flows identified as high risk. Trade discrepancy and global market share based on data compiled from various custom data sources to assess the risk of illegal trade for bilateral trade flows of logs, lumber, or plywood between the years of 1991 and 2020 and visualized on a global map format using R Shiny. Map results generally complemented existing research, while case studies of trade flows evaluated as being highest risk revealed several potential causes. The two highest risk trade flows for logs, Hong Kong to China and New Zealand to Hong Kong, were found to be linked by a triangular trade pattern prone to misreporting of the trade partner that was not associated with illegal trade. Trade of logs and lumber from Ghana to India was linked with illegal trade, as Ghanaian exporters of logs were likely to misreport to avoid log export restrictions and Indian importers were likely to misreport timber products as logs to take advantage of India’s low log tariffs. Indonesian reported plywood exports were higher than the imports reported by China, while the imports of logs reported by China were higher than exports reported by Indonesia. This pattern suggests product type misreporting to conceal illegal trade but the method of reporting logs as plywood is uncertain.