ASEAN: Regional Trends in Economic Integration, Export ... - USITC

some cases, on the export of sawnwood (i.e. lumber) as well, both to encourage
manufacturing of more highly processed products and to protect diminishing forest
resources. 8 These restrictions affect intraregional trade as well as the overall supply of
raw materials available for the region. In general, a variable wood supply and
competition for exports between the member countries tend to hinder economic
integration in hardwood plywood and flooring.
Two other elements—the ability to satisfy international consumers’ concerns about the
legality and sustainability of raw materials, and the elimination of tariffs—are also
critical to achieving regional economic integration in the ASEAN hardwood plywood
and flooring industry. 9 Although considerable progress has been made in lowering tariffs
within ASEAN, policies in major export markets compelling ASEAN producers to assure
that wood products are from legal, if not demonstrably sustainable, sources remain a
major obstacle to the competitiveness of ASEAN hardwood plywood and flooring.
Initiatives to collaborate on issues relating to deforestation and illegal logging are
emphasized in the Roadmap, but progress has been complicated by the fact that ASEAN
members are involved in various other simultaneous national, bilateral, and international
processes aimed at achieving similar objectives. 10
The reduction in tariffs put into effect with the ASEAN Free Trade Area (AFTA), along
with implementation of other ASEAN measures for economic integration, could
potentially induce greater intra-ASEAN investment and trade at a time when wood
supply in the region is tightening. Historically, tariffs on hardwood plywood and flooring
in ASEAN countries were very high—as high as 40 percent in many cases. As of
January 1, 2010, intra-ASEAN tariffs on hardwood plywood and flooring are mostly zero
or less than 5 percent. Lower tariffs might allow more flexibility in sourcing materials
and producing different varieties of hardwood plywood and flooring, but tariff reduction
by itself has not yet triggered increased intra-ASEAN trade in this sector.
Economic integration and intra-ASEAN trade could benefit the hardwood plywood and
flooring industry as the region becomes more dependent on plantation-grown trees and
imported raw materials, and as the region develops its downstream manufacturing
capacity for wood products such as flooring, furniture, and millwork. However, plywood
production in the region is declining. Suitable raw material is becoming scarcer and
China has become a formidable competitor taking away global market share. While
plywood, engineered wood flooring, and wood laminate flooring offer opportunities for
cross-border investment, there has been relatively little intra-ASEAN investment in this
sector. ASEAN institutions have had some positive effects on the hardwood plywood and
flooring industry in terms of lower tariffs and increased dialogue on sector-specific
competitiveness issues, but the industry itself has not experienced measurable regional
economic integration.
8 Resosudarmo and Yusuf, “Is the Log Export Ban Effective?” June, 2006, 1.
9 Although unprocessed wood products (timber, roundwood, posts, etc.) are not included within the trade
liberalization scope of the ASEAN Sectoral Integration Protocol for Wood-based Products, the Roadmap
addresses illegal logging and related perceptions about the region’s wood products.
10 Some of the programs and processes to address legal trade and forest sustainability are discussed in the
regional integration subsection. See also table 5.3.
5-3