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	In Pursuit of a Sustainable Green West Newsletter of the CCICED Western China Forest Grasslands Task Force Issue 5: August 2002 Introduction to the Fifth Issue of the Newsletter During the previous months, the focus of the Task Force has been to finalize and consolidate field research findings, to strengthen input into the forest strategy review process currently led by the State Forest Administration (SFA), and to prepare key policy recommendations to be presented at the upcoming CCICED Meeting in November 2002. The first key event organized by the Task Force during the reporting period was the “International Workshop on Payment Schemes for Environmental Services” (April, 2002) with the objective of informing the Government of options to improve the Land Conversion Program (LCP) and the Ecological Compensation Fund, as well as to explore other financial instruments such as markets for carbon sequestration. The second key event was the “International Forum on Chinese Forestry Policy”, which focused on policy issues identified during the first phase of the Task Force. The overall goal of the Forum was to elaborate on a broader policy framework for China’s sustainable forestry development (SFD) and to identify reform actions and future research tasks in forest policy. Co-organizers of the above events were the Department of Policy and Legislation of SFA and the Center for Agricultural Policy Research (CCAP) of the Chinese Academy of Sciences (CAS). For both events, the Task Force has received generous financial support from the Ford Foundation, the World Bank, the Canadian International Development Agency (CIDA), and the Australia Center for International Agricultural Research (ACIAR). Technical support was provided by the Washington-based NGO Forest Trends as well as the World Bank and Ford Foundation. Finally, the Task Force held its third and final annual meeting in June in Beijing. Major purposes of this meeting were to elaborate on specific Task Force recommendations to be presented during the CCICED Meeting in November 2002, to review Task Force impact and evaluate the work of the previous two years, and to discuss how to sustain the forestry policy agenda after the Task Force formally concludes end of 2002. Information on each of these events is provided in separate sections below. Workshop on Payment Schemes for Environmental Services On April 22nd and 23rd, 2002, the Task Force held the “Workshop on Payment Schemes for Environmental Services. The workshop had been prepared in response to findings of case studies on the Land Conversion Program (LCP) and the Natural Forest Protection Program (NFPP) conducted by the Task Force in 2001. These studies had identified a number of design and implementation issues that merited further analysis, including the targeting and focus of land conversion, appropriate levels of compensation payments, monitoring and evaluation of program impacts, as well as the sustainability of government subsidies and financing. The Task Force studies had also raised the question of the relationship between LCP and NFPP and the Forest Ecological Compensation Fund, which was established in 2000 and is currently implemented by SFA on a pilot scale. The purposes then of the workshop were to: (1) inform the leadership of SFA and related researchers of international experiences in designing and implementing public payment schemes for ecological services; (2) introduce public and private approaches to achieve conservation goals, such as carbon sequestration and trading schemes, and to generate recommendations for improving public payment schemes in China. The workshop was co-sponsored by the Department of Policy and Legislation of SFA. Workshop presentations and key recommendations are briefly summarized in Annex 1. The full workshop proceedings including a CD ROM with full research papers and presentations are currently under preparation and expected to be published end of October 2002. International Forum On Chinese Forestry Policy On June 13th and 14th, 2002, the Task Force co-sponsored the International Forum on Chinese Forestry Policy in Beijing together with the Department of Policy and Legislation of SFA. The high level of interest in this subject was reflected by the participation of SFA Administrator of SFA, Mr. Zhou Shengxian, and SFA Vice Administrator, Mr. Zhu Lieke. The overall goal of the Forum was to formulate a forestry policy research agenda and to elaborate on the institutional and policy elements of a framework for sustainable forestry development (SFD) in China. The Forum focused on the following six themes of concern to the forestry sector and the reform and restructuring processes in China: (1) forest policy in transition; (2) taxation and fiscal policies; (3) forest land tenure and ownership; (4) forest harvesting regulation; (5) forest governance and administration, and (6) forestry and trade liberalization. Ongoing analytical and consultative work of the Task Force on the NFPP and LCP, a draft of the new National Forestry Strategy currently under review by SFA as well as a variety of national and international expertise served as the basis to deliberate on the policy research agenda and to discuss the transition to a modern forest sector in China’s socialist market-economy. The Forum developed a set of specific recommendations, which were presented to SFA Administrator Zhou Shengxian during the final session of the Forum. These recommendations will also provide one major input into the Task Force’s final report to CCICED in November 2002. The proceedings of the Forum are currently under preparation and will be published in October 2002. Annex 2 summarizes the presentations and briefly reviews key recommendations of the Forum. Final Task Force Meeting and Report to the CCICED The Task Force Co-Chairs Prof. Shen Guofang (CAE) and Dr. Uma Lele (World Bank) welcomed all Task Force Members and Advisors to the final Task Force meeting held from June 15 to 16, 2002 in Beijing. Prof. Shen informed the Task Force Members that CCICED has forwarded Task Force recommendations to SFA as input into the internal discussions on the National Forestry Strategy. The finalized strategy will be presented to the Government in October 2002, partly drawing on recommendations of the Task Force. For its Final Report to CCICED, the Task Force will ensure that the Final Report will complement the National Strategy and provide further meaningful input in the fields the Task Force was focusing on. Progress Review – Task Force Work in 2002 The Task Force viewed the recent events and activities, namely the Workshop on Payment Schemes for Environmental Services (April, 2002) and the International Forum on Chinese Forestry Policy (June 2002) as good successes underlining the professional and efficient work of the Task Force. Both events have been characterized by active participation, especially from the side of the Department of Policy and Legislation of SFA, but also from many other participants. The Policy Forum had even attracted highest level attention from SFA Administrator Zhou Shengxian and Vice Administrator Zhu Lieke. Task Force Publications and Commissioned Papers on NFPP and LCP The Task Force is currently preparing three sets of outputs for public dissemination. These publications will summarize and synthesize the work of the Task Force of the last two years and will include: (1) A book on the Land Conversion Program (LCP) and Natural Forest Protection Program (NFPP) (2) Proceedings and background papers of the Workshop on Payment Schemes for Environmental Services (3) Proceedings and background papers of the International Forum on Chinese Forest Policy The publications are planned to be bilingual (in English and Chinese) with a detailed documentation on CD ROM. The Task Force Secretariat will inform the public in its next newsletter in November where these publications will be made available. Requests for further information can also be sent in by email to the Task Force Secretariat. Evaluation of Task Force Outputs and Impacts The Task Force has been successful because it followed a case study-approach, which was implemented by Chinese institutions and provided a robust analytical and credible framework. A second factor of success was that recommendations and findings were quickly disseminated in workshops and conferences. Case studies have provided detailed data and information and helped to understand why there are regional differences in planning and implementation of LCP and NFPP. Case studies have also provided great training value to institutions involved in the research on how to conduct and improve such work in the future. However, a more rigorous analysis of the collected data is still needed; and the Task Force feels that environmental impacts of the two programs should be researched in more detail. The case studies, for example, do not adequately address the issues of environmentally critical plantations, e.g. on the Loess Plateau, as well as the implications of natural re-vegetation, e.g. mountain closures. In this context, Prof. Li Rui (CAS) mentioned that he had informed Chairman Jiang Zemin during a recent visit to Yangling (Shaanxi) of the major importance of natural vegetation recovery and the risk that current efforts of ecological rehabilitation might be reverted if the underlying socio-economic conditions change. Case studies have mainly provided suggestions for improved implementation but did not fully answer the question of how study findings could feed into policy formulation and adjustment. The Task Force also recognized that its case studies did not adequately address the importance of grassland issues. Recently, grassland degradation has received great public and political attention because of the recent sand storms and reports on accelerated desertification. It was proposed to further discuss how the Task Force could best address grassland issues. For its final recommendations to CCICED, the Task Force will be more precise on the implementation arrangements for its recommendations and stress the importance of independent M&E. Mr. Falkenberg also informed the Task Force of a new German Forestry Program, which is to develop an internal monitoring system for SFA. In order to identify the impacts of the Task Force more systematically, Dr. Susan Shen of the World Bank proposed a final evaluation of the Task Force according to methodologies of the Operations Evaluation Department of the World Bank (OED). This proposal includes to identify and train a local team of evaluators (possibly within the CCICED Secretariat), who have previously not been involved in the work of the Task Force. The evaluation process has been initiated already and the identification of appropriate people is underway, e.g. from existing forestry policy networks or other organizations in forestry. An evaluation report is planned to be released shortly after the Task Force will have concluded its work end of 2002. Such a formal evaluation of the Forest and Grasslands Task Force is thought to be an useful demonstration to CCICED on how to evaluate work of appointed task forces in general. Sustaining the Forest Policy Research Agenda in China Prior to the discussion on how to sustain policy research in China after the Task Force formally concludes end of 2002, Dr. Hein Mallee (Ford Foundation) provided an overview over the forest networking activities funded by the Ford Foundation in China. In contrast to the much broader objectives of the International Policy Forum, the objectives of the Ford Foundation have been for a long time to encourage local research on community forestry issues and to support a low-key informal exchange process mainly focused on Yunnan Province. The Ford Foundation is providing small grants mainly to local researchers, farmers and communities outside the formal state forest authorities to generate new ideas in the field of community forestry and explore the linkages between forestry and poverty. The Task Force is also likely to influence the agenda of research institutes and other agencies represented in China towards a more policy and research oriented approach to forestry. There are several institutions in China involved in forest policy research, which could continue the work of the Task Force in the future. Among them are: (1) Chinese Academy of Forestry (CAF) (2) National Forestry Economics and Development Research Center (FEDRC), (3) Chinese Academy of Social Sciences (CASS) (4) Chinese Center for Agricultural Policy (CCAP) (5) Chinese Research Center of Ecological and Environmental Economics (RCEEE) The Task Force could possibly assist this policy research community and will report to CCICED about emerging these policy research capacities in academic institutions and universities. The work of the Task Force will conclude in November 2002 with submission of the Final Report to CCICED. It was stressed by the Co-Chairs that the Task Force had been created to serve CCICED for the specific purpose of assessing the implications of the LCP and NFPP and to recommend on related policy issues. The Task Force has achieved these objectives. For the remaining time, the Task Force Secretariat will focus on three tasks, namely to: (1) strengthen the flow of information to research organizations and potential donors (2) support the existing forest policy community (3) review of Task Force impacts based on the OED methodology. With regard to (2), the Task Force welcomes suggestions form the community of practice. News from the Task Force Secretariat End of June 2002, Jeannie Katsigris has concluded her assignment with the Task Force. The Task Force and the Task Force Secretariat are very grateful for the invaluable services to the Secretariat and her contributions to the work and success of the Task Force during the last two years. Dr. Brian Belcher of CIFOR attended the Task Force Meeting in Beijing and provided a draft book synthesizing the results of the CIFOR Meeting held in Sichuan in June 2001. The focus of this meeting had been on experiences of Chinese forest policy during the Reform Era. In June 2002, Ulrich Schmitt has joined the Task Force Secretariat. Until end of this year, he will be working on the publication and dissemination of Task Force outputs and will also assist in reporting and in the evaluation of the Task Force work. Annex 1: Workshop on Payment Schemes for Environmental - Services - Summary of Presentations China’s Forest Ecological Compensation Fund: History and Local Experiences The inspiration for China's Ecological Compensation Scheme originates from Qingcheng Mountain in Sichuan. Forest degradation in the 1970s had resulted in a crisis for this famous tourist site; and the local government decided to allocate revenues from entrance fees to forest restoration and protection. In 1996, a first proposal for a national scheme was issued by the Ministry of Finance to collect a total of 600 million RMB from various users of ecological services but this proposal did not receive approval from the State Council. The decisive factor in moving the scheme forward on a national scale was its incorporation into the Forest Law in 1998, when a clause was added calling for the provision of public ecological benefits through forests. In May 2000, the State Council finally decided that funding for ecological services compensation would directly be allocated from the fiscal budget. With this proposal in place, the Forest Ecological Compensation Fund finally had a formal source of funding. In preparation for implementation, most provinces have now completed zoning for protection and special-use forests and signing compensation agreements with forest users. On the basis of this work, the ecological compensation is now implemented with funding from the Ministry of Finance in ten pilot provinces. There are three additional channels of fiscal investments available to develop public ecological benefits forests in China. These are: (1) reforestation and protection payments associated with the NFPP (2) grain, seedling, and cash subsidies provided to farmers as a part of the LCP and (3) payments for afforestation associated with the Sand Control Program. In addition to the aforementioned central government funds, provincial governments have allocated similar funding and have also initiated implementation of ecological service compensation schemes. In Guangdong Province, for example, the Forest Ecological Compensation Fund was established by the provincial government in 1998. In 1999, compensation was first implemented and targeted 51 million mu of public benefits forest. The compensation standard is currently set at 4.0 RMB per mu. Over the three years from 1999 to 2001, the total amount of compensation delivered was 532 million RMB. Provincial regulations state that afforestation, protection, and management of ecological forests qualify for compensation payments. Fiscal funding is provided from four sources: (1) ca. 30% of the total annual fiscal funding for forestry from all levels of government; (2) ca. 25% of the funds annually allocated for biological control of soil erosion in the watersheds of the Dong, Bei, and Han Rivers; (3) 10 million Yuan from water fees from the Dongshen Water Supply Plant; (4) funds for afforestation work in the watersheds of the Dong, Xi, Bei, and Han Rivers. In 1999, public benefit forests covered 19% of the total area of Guangdong and about 32% of its total forest land. Guangzhou Municipality has supplemented the provincial funding in key areas and provides a standard of 12 RMB per mu. Other locales have also taken a variety of measures to supplement funding levels. Major problems encountered during implementation include the difficulty to quantify ecological benefits and in compensating different forest areas according to different ecological priority, and the low compensation level. Although compensation has recently been raised to 4 Yuan per mu, the current level is still insufficient and should be in the range of 30 RMB per mu for ecological forests. Anhui Province also belongs to the selected provinces for pilot implementation of the Ecological Compensation Fund. After over one year of work, in July 2001, the entire province's forests have been classified and zoned according to forest type and ecological priority. As a result about 27 million mu (42% of forest land) were designated as commercial forest and about 37 million mu (53% of forest land) were designated as public benefits forest, of which ca. 21 million mu were designated as national-level public benefits forest. Anhui Province was the first in the nation to complete its forest designation work. In terms of implementation, pilot implementation in Anhui in 2001 reached 12 million mu with a total compensation payment of 60 million RMB. Anhui required that special accounts at provincial, municipal, and county levels be set up for compensation payments to ensure that funds are used only for the designated purpose. A dual supervision method was put in place, with reporting up to both the provincial forestry bureau and the provincial bureau of finance, to ensure that funds were appropriately distributed. Problems encountered include low compensation standards, management costs, and negative impacts on state-owned forest enterprises. Currently, experts are carrying out work on assessing more realistic values of forest ecological benefits and have proposed new methods and standards for compensation. Work still needs to be done in developing an effective management and supervision system for the program. Finally, the designation of large parts of the land under the control of state-owned forestry enterprises as public benefits forest will have a negative impact on these units, which mostly depend on timber production for income. With preferential policies, these enterprises could be supported in developing lines of business in other sectors or encouraging staff to enter new specialties themselves. International Experiences with Market-Based Instruments for Environmental Services An overview of the range of instruments available to promote environmental forest services was given by Dr. Sara Scherr of Forest Trends. Historically, most instruments involve direct government intervention as public control and management of resources or public regulation of private resource management. Approaches that are more flexible for individuals, but still involve the government, include pollution permit markets and pricing to "internalize" environmental costs and benefits (e.g. tax benefits for afforestation). Additional instruments are public subsidies to producers of ecological services and the support of self-regulation and innovation in resource management by local communities. Finally, private arrangements for environmental services compensation (e.g. upstream are landowners paid by downstream enterprises) and eco-labeling of products are two other instruments, in which the government plays only a secondary role. A review of advantages and disadvantages of the various instruments indicates that two good opportunities for China in coming years would be to support: (1) self-regulation and innovation by communities and (2) self-organized private deals. The latter may require an appropriate legal systems for enforcement, but could also be achieved through informal arrangements. As experienced with the development of China's Ecological Compensation Fund, eco-tourists and other users of environmental services are not willing to contribute to general funds but, however, have been found to be willing to pay specific producers for services that benefit them directly. It has even been found that downstream farming communities are in some cases willing to pay upstream farming communities. In general, the choice of instrument often depends on the local situation, including the capacity of both the public and private sectors. A second presentation given by Andy White of Forest Trends focused on experiences with market instruments in the Brazilian Amazon, home to the largest intact forest in the world. While the government has tried to reverse deforestation by laws and regulations, these measures have not been effective. As a result, there has been a shift from command and control measures to market-based initiatives. One such initiative is the Private Natural Heritage Reserve (RPPN). This program was initiated in 1996 and allows for privately owned land, based on the willingness of the owner, to become permanent national heritage areas. The landowner agrees to maintain the environmental attributes on his land and then benefits from (1) tax exemption, (2) financial subsidies through a national-level environmental initiative; and (3) preferential access to credit for agricultural activities. To date, over 100 private National Heritage Reserves have been created covering 250,000 ha of land. A second initiative in Brazil is the Ecological Value Added Tax (ICMS Ecologico) by which 25% of the tax on sale of goods and services is reallocated to local governments for environmental achievements such as the establishment of protected areas. The program is now operative in six Brazilian states. When municipalities receive these funds, they do not have to spend the money on conservation, but rather, as the program operates as a reward system, can use the funding on their most urgent priorities. Aside from the two initiatives discussed above, there are also some non-governmental initiatives active in Brazil. "Pro-Ambiente," for example, is a private environmental fund financed by large corporations and environmental groups that compensates landholders for provision of environmental services. Through another initiative, which was organized by the NGO Friends of Earth, buyers groups have committed to buying only FSC certified wood products. Finally, private watershed consortiums are emerging in which downstream users (such as water bottling plants and breweries) finance forest conservation upstream. In a third presentation, Luis Gamez of the Ministry of Environment of Costa Rica reviewed experiences with environmental compensation in Costa Rica. After periods of serious deforestation during the previous decades, Costa Rica has now devoted almost one quarter of its area to national conservation areas. While Costa Rica has done well from the perspective of public lands, the real worry at present is conservation on privately owned land. To reverse deforestation on private lands, the nation's new Forest Law has called for economic compensation for provision of environmental services, recognizing four kinds of such services: water resource conservation, scenic beauty, ecosystem protection, and carbon sequestration. The main source of funding for the government's ecological compensation fund is a tax on fossil fuels, which is mostly devoted to forest conservation. Other sources of funding include payments by hydroelectric companies and voluntary carbon emissions mitigation purchases by countries such as Norway and the Netherlands. Levels of payment are determined based on the opportunity costs for land use. Given that the main competition of forest conservation is cattle raising, the compensation must generally be greater than the cost of renting the land for grazing. During the five years from 1997 to 2001, there were a total of 4,461 contracts, covering over 283,000 ha and a total of over US$1 billion of payments to forest conservation, sustainable forest management and reforestation. In terms of results, deforestation has been reduced and forest cover on private land has increased. The program has also encountered some obstacles, including financial bottlenecks, evaluation and targeting problems, and understaffing for monitoring. In terms of financial bottlenecks, only one third of the dedicated fuel tax revenues are allocated each year. In terms of evaluation and targeting, there has been competition between conservation and forestry sector goals. In addition to the government compensation program, there are some private schemes that are partly complementary. Such schemes are mainly applied to watershed management, providing compensation for people in the upper parts of watersheds. A final presentation on this topic was given by Herman Rosa of PRISMA, an NGO based in El Salvador who provided several case studies for environmental services payments to rural communities. In Acre, Brazil, rubber-tappers have long resisted pressure on the forest from cattle ranchers and loggers and today are paid for their role as forest stewards and for guaranteeing the provision of environmental forest services. Rubber-tappers receive a subsidy equivalent to US$0.20 per kilogram of rubber collected. In 2001, 3,000 tons of rubber were produced in the reserve by 4,000 families who received a total of US$600,000 in payments. Because more of the rubber went through legal channels, the state also benefited, with 70% of the subsidy being returned through taxes. In 1981 in Uzachi, Oaxaca, Mexico, communities regained control of their own collective forests from a paper company that had been granted a 25-year concession by the government. The communities initiated a process of strengthening community forestry, so that forestry has become a main source of income. In 1989, communities formed a union and developed agricultural activities, certified forest management, and environmental services provision (conservation, carbon sequestration etc.) In 1995, under a bioprospecting contract with Sandoz-Novartis, the union obtained a microbiology laboratory and payments for services promoting the development of new medicinal products. Traditional agro-ecosystem practices in El Salvador suggest the multiple species forestry and related land use systems. In the case of coffee plantations in El Salvador, it has been found that small producers tend to have more trees and greater tree diversity per ha than larger farms, because they seek other benefits (e.g. fuel wood, fruits, etc.). In Austria, mountain farming represents 36% of agricultural and forestry holdings. Cultivated landscapes are vital to the nation's tourism industry and also for preventing erosion, avalanches, and mudslides. Over 20 years ago, the Mountain Farmers Special Program was established to encourage continuation of mountain farming through direct income payments to farmers. Several lessons emerge from the above presentations and cases. First, the access and use of natural resources by communities can be an important means of insuring provision of environmental services. Second, sustainable agro-ecosystem practices should be rewarded, as complex small-scale agro-ecosystems can be a more important source of environmental services than large-scale monocultures. Third, the social organization of communities should be strengthened. Other lessons include the need to develop supporting institutions, such research, training, technical assistance, monitoring, certification, etc, which are sensitive to the knowledge and preferences of the community. Payment schemes designed through participation may be more successful in achieving both environmental and social goals than those schemes designed without such participation. International Experiences with Land Retirement Programs Dr. Heimlich of the U.S. Department of Agriculture introduced the background of U.S. land retirement programs and discussed lessons learned and costs and benefits. The motivation behind the U.S. programs has certain parallels with the situation in China. In the 1920s and 1930s, there were catastrophic floods in the U.S. and dust storms in the Great Plains. In contrast to China, however, private property rights in the U.S. are very strong. The Government cannot require conversion to trees or other changes in land use. For these reasons, all programs must be voluntary, and the Government must provide compensation to farmers for land use changes. Land retirement programs have been in place since the 1930s and in general, tended to grow during periods of low agricultural prices. There are five different land retirement programs, which have certain eligibility requirements, such as environmental requirements, e.g. high erosion indices, being cropped wetland, or being located in a state conservation priority area. The Conservation Reserve Program (CRP), for example, currently has 13.6 million hectares, or 10% of the nation's cropland base, enrolled. It is a large program with over 560,000 contracts and over 370,000 farmers (about 18% of all farmers) involved. The average amount paid annually by the government for land retired in this program is US$1.5 billion, with an average rental cost of US$116 per hectare. In terms of cover, 60% of CRP acreage is planted with grasses, 16% is planted with trees or woody vegetation for wildlife, and 5% is wetland restoration. Four major lessons learned during implementation have to do with (1) targeting, (2) choosing the appropriate rent, (3) setting the contract term, and (4) slippage. Land to be included in the program is chosen based on an "Environmental Benefits Index," which gives points for various factors ranging from erosion and water quality to costs. In terms of rent, an important lesson learned is that setting a single rental rate will result in those with less valuable land get excessive benefits and those with more valuable land being unwilling to participate. Thus, rental rates are now adjusted from a median based on compensating farmers on the basis of opportunity cost calculations. "Slippage" refers to the problem of a farmer retiring some land as a part of the program but bringing new land into production. Thus, the CRP has special provisions to keep participants from bringing new land into production. Overall, it is believed that the program has a positive cost-benefit ratio; and program implementers focus their efforts on choosing the right parcels of land to achieve the greatest benefits. Landowners benefit mainly through rents. Aside from achieving the desired environmental improvements, the government benefits through not having to pay crop subsidies on the retired land. The CRP also causes the prices of crops to go up, so that subsidies go down. Non-farm consumers benefit in areas such as wildlife preservation, but must pay higher prices for food. Developing of Markets for Carbon Sequestration A final focus of the workshop has been on the emergence of carbon markets and their potential for environmental services compensation. Here, the workshop provided two key presentations: Professor Bull of the University of British Columbia described the various institutions and implementation steps that are required to establish a national carbon trading framework. The potential buyers of carbon credits are utility companies, oil and gas companies, and any other firms involved in fossil fuel related businesses. The potential sellers of carbon credits include forest growers, who would be responsible for implementing and managing forest carbon sink projects. While the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC) has not yet been ratified, market players are already entering the market and financing forest carbon projects, and governments are beginning to meet its many institutional requirements. One particular requirement is to establish a national carbon accounting system and a registry. For example, a "national carbon office" would have responsibility for conducting a forest carbon inventories and maintaining the national carbon registry for the reporting of emissions reductions. Other entities in such a framework would be risk management agencies, verification agents, and an emissions clearinghouse. Risk management agencies would be responsible for assessing the risks of the projects and providing protection against fire, insects, disease, and other risks. Currently, insurance companies have shown substantial interest in playing this role. The verification agent would have the function of conducting independent audits of projects. Finally, a clearinghouse would interface with registry data, tracking carbon transactions and conducting on-line trade of carbon. Although the institutional framework described above is not yet in place in most countries, there are many carbon sequestration projects underway in the world. These projects allow all parties (private sector buyers, forest owners, and governments) to gain experience in the market while they are developing the institutional framework. After this general introduction, Dr. Scherr discussed opportunities for rural people to benefit from carbon trading. The Clean Development Mechanism (CDM) under the UNFCCC's Kyoto Protocol provides an opportunity for payment for sequestered carbon that would have otherwise been released. Developed countries may be interested in buying carbon offsets from developing countries. China could potentially be selling carbon offsets to international markets for the 2008-2012 period, which is designated as the first commitment period for emissions reductions by the developed countries. As China has undertaken large-scale afforestation since 1990, the base year to be used in calculating offsets, the benefits could be substantial. Possible types of CDM forest projects include reforestation through: (1) large-scale industrial pulp or timber plantations, (2) forest regeneration and rehabilitation, (3) agro-forests and improved forest fallows, and (4) agro-forestry and community forest plantations. Averted deforestation, such as natural forest protection, is another potential type of CDM project, though this has not yet been approved. Carbon trading could be a source of both benefits and risks for local people. It could serve both to increase income and to rehabilitate degraded land and forest. Improved environmental services might be provided and local skills and institutions enhanced. Risks include the loss of rights to use the land and benefit from its products or environmental services. Experience with biodiversity reserves has shown that poor people are often pushed aside by the more powerful once it becomes clear that their resources are of significant financial value. Other risks include loss of land ownership rights, loss of employment, and difficulties competing with projects involving large-scale operators. Sound national policies, however, can enhance livelihood benefits by putting key institutions in place and securing forest ownership and access rights for local people. CDM projects should be designed to enhance local livelihoods in this regard as well. Recommendations for Promoting the Forest Ecological Compensation Schemes in China Discussion groups on the second day of the workshop focused on how to improve the existing Forest Ecological Compensation Scheme and on exploring alternative financing mechanisms. Participants agreed that while the objectives of the Ecological Compensation Fund as originally designed are good the scheme is still in the pilot phase and price and cost problems might result in poor implementation results. It was recognized that there is a need for more experimentation and collection of more data. One key concern of the workshop was that the relationship between the Ecological Compensation Fund and LCP and NFPP needs further clarification and integration. Specific recommendations of the workshop are as follows: (1) Objectives of the Ecological Compensation Fund: During its pilot phase focus should be on innovation development rather than on achieving ecological goals in the first place. Experimentation should be allowed so that broad experience can be gained. Inclusion of grasslands into the Ecological Compensation Scheme should also be considered. (2) Compensation Level: Current compensation levels need to be increased. Whether the standard for compensation should be based on opportunity cost considerations or on environmental benefit valuations requires further research. Regional differences and ecological characteristics should also be taken into account when deciding on compensation levels. Pilot models of competitive bidding could be introduced as well. (3) Sources and Allocation of Funding: Current compensation practices involve several government levels. To avoid loss of resources unnecessary intermediaries should be eliminated and programs should be administered at the local level. Also, a more market-based approach to ecological compensation should be considered instead of current governmental top-down regulations. For example, a national market for trading forest use rights could be established. Alternative channels of funding should also include: (1) preferential policies, (2) upstream-downstream compensation, and (3) tourism resources. (4) M&E: A national and independent monitoring and evaluation system should be set up based on indicators measuring environmental threats and economic impacts. (5) Participation: In order to achieve greater public participation, responsibility for forest protection and management should be assigned to specific organizations and persons. To the greatest extent possible, local people should be employed as forest stewards. Some participants, however, suggested that, for large ecological forest areas, it would be more efficient for the state to purchase the land outright, rather than to compensate private individuals for small-scale management. (6) Commercializing Environmental Services: Forestry departments should be aware of the complexity of this task. To explore promising opportunities, forestry departments should do forward-looking research into new areas such as carbon trading etc. (7) Ecological Rehabilitation and Poverty Alleviation: In contrast to developed countries, subsistence is still a significant problem in China. Thus, ecological improvement efforts should be integrated with poverty alleviation and local development. Local communities should be encouraged to participate in the management of ecological projects. Annex 2 Summary of Presentations - International Forum on Chinese Forest Policy Review of the National Forestry Strategy and Research Program SFA Vice Administrator Dr. Zhu Lieke provided an overview of the major elements of the new National Forestry Strategy of China. The strategy is currently being reviewed by SFA and will be released to the public later in 2002 as part of China’s long-term strategy of sustainable development. Mr. Zhu first introduced the six key research areas, which provide the conceptual basis for China’s strategy of sustainable forestry development (SFD): Positioning of forestry in China’s economic and social development process. Researching interrelations between resource management, environmental conservation, and economic development. Developing a conceptual framework for modern forestry. Exploring opportunities to bridge gaps between development stages in forestry. Developing strategies for China’s sustainable forestry development (SFD). Identifying support measures for SFD: policies, institutions, legislation, mechanisms for resource allocation and industry restructuring. Implementation of China’s SFD will focus on nine elements. Priority of the six key forest construction programs. Development of forestry as part of the agricultural and rural economic restructuring. Continuation of the Cropland Conversion Program. Urban forestry development. Sustainable management of natural forest resources. Desertification combating. Wetland protection. Wildlife protection and nature reserve development. Forest industry development. Following the introduction of the SFA led efforts to develop China’s forestry sector, the following presentations and panel discussions of the Forum offered a variety of issues for further consideration and fine tuning of the research program. Forest Policy in Transition Professor Sten Nilsson of the International Institute for Applied Systems Analysis (IIASA) reviewed international experiences of forest policy reforms and discussed lessons learned in other transition countries. Most of the major policy issues in the forest sector are multi-sectoral and require coordination among sectors. For example, sectors closely connected with forestry are agricultural, rural development, transportation and technology sectors. An important element of a policy framework are the policies themselves. Forestry policies describe the overall societal goals for the forestry sector and its industries. Policies need to be adaptive, consider public expectations on the forestry sector, and should balance conflicting goals. Policy instruments are needed to move the sector towards goals set in the policies. They include legislation, taxes, subsidies and permits etc. as well as international commitments such as C&I for Sustainable Forest Management (SFM). Finally, efficient institutions are another essential element of any policy framework. Institutions can be defined as legal, administrative and customary arrangements and consist of formal and informal rules. Institutions are responsible for tax collection, prevention of corruption, enforcing rights of the actors within the sector etc. Successful economic development and transition is thus also a matter of institutional transformation. A policy framework needs to be adaptive and flexible. Efficient monitoring and reporting systems are part of such adaptation mechanisms and are fundamental for assessing compliance of policies with policy objectives. There is also a need for analytical assessments and independent impact evaluations of policies. Summarizing the experiences from several transition countries, countries have only limited possibilities to achieve SFD without implementing something similar to the proposed concepts of an adaptive policy cycle and a coherent policy framework. Essential recommendations, especially to China, are to formulate a consistent and transparent framework for policies of SFD along the presented concepts, to establish a multi-sectoral task force from public, private and civil societies, to initiate and guide the policy reform process, to develop independent monitoring and certification systems, and to create a strong policy community of experts with deep insights into the Chinese forest sector. Taxation and Fiscal Policy in the Forestry Sector Dr. Sun Changjin of the Research Center for Ecological and Environmental Economics (RCEEE) analyzed current tax distortions and related problems concerning public financial reforms. Forest taxation is an old issue in China, which has not been tackled satisfactorily during the reform period. The forestry sector is characterized by a complex and excessive income tax system, which involves state-level and local-level legal taxes. In addition to taxes, forest producers face an even more complex fee system. They are often confronted with income taxes and fees of up to 50% to 70%. Excessively high tax levels have lead to resources depletion and a forestry sector, where investments are simply not profitable. Understandably, there is no significant commercial interest in forestry investment from domestic investors. Such distortions will inevitably accelerate forest degradation in the long run; and there will be high social costs attached in the form of waste of resources, poverty and unemployment. China’s forest tax problem reflects the lack of coherent taxation and public finance systems where tax revenues and fees serve as sources of salary payments and funding for compulsory tree plantings. Furthermore, the strict economic separation of market-oriented urban economies and systems of economic planning in rural economies has further contributed to the systemic taxation distortions. In addition, the Central Government’s attention to ecological restoration is likely to distract from the economic and structural problems in the commercial forestry sector. The minimum target for reforms must therefore be a fair treatment of forestry in that production taxes and fees should only be levied on the commodities produced; and monitoring and administration fees should be separated from production taxes. The ultimate long-term goal is the implementation of preferential policies, which fully recognize the environmental and social services functions of forestry. A fundamental element of reforming forest taxation is that an integrated public fiscal system is to be established, which encompasses budgetary, non-budgetary and non-institutional (self-funded) funding sources. Administration expenses etc. need to be funded by fiscal transfer payments or other external funding sources. With the current taxation, it is unlikely that a market-based resource allocation will be realized. A closely related question is, how the operation of forestry departments can be secured once forestry sector fees are reduced. In the long-term, the reduction of taxes are likely to strengthen and expand the economic base for forestry taxation and therefore is likely to offset short-term reductions in tax revenue levels. Forest Land Tenure and Ownership Mr. Li Ping of the Rural Development Institute (RDI) reviewed the system of collective forestland ownership in China and provided recommendations for future reform and adjustments. Three major policies currently characterize the collective ownership of forests, namely, the Two-Mountain Policy, the Forest Law of 1998 and the Land Conversion Program. The Two-Mountain Policy distinguishes between “freehold mountains” (chin: ziliu shan), where forestland is contracted out to individual households and private ownership of forest products exists, and “responsibility mountains” (chin: ziren shan), which are managed by households but forest products ownership in general remains with the collective. The Forest Law of 1998 allows for private use rights and ownership of forest products on forestland. In addition, the law also allows for the private transfer of user rights on different forestland categories as timber forests, fuelwood forests and land for agro-forestry. Finally, the Cropland Conversion Program specifies land use rights of 50 years and also allows for private ownership of forest products and the transfer and lease of land use rights. Based on field work findings, it can be said, that the Two-Mountain Policy has largely failed in that it has encouraged uncontrolled cutting and did not lead to sustainable management of allocated forestland. Individual management of forestland appeared to be less efficient than community management, where various and flexible schemes of forest management and administration exist. With respect to the differences between farmland and forestland, farmland is, in general, managed for subsistence needs and characterized by long-term household investments. Farmland is often of minor ecological importance. Forestland, on the other hand, is often managed for a mix of different purposes but does not fulfill important subsistence functions. Depending on the specific tenure arrangements for forestland, economic returns can not necessarily be received by the households in full. Furthermore, while the legal and policy framework for managing farmland is relatively complete, this is not the case for forestland. Forest boundaries are difficult to draw and disputes between household regarding access and utilization of forest resources occur frequently. Farmland is in general allocated to match households available labor force and management capacity, while this is less often the case for forestland allocations. Furthermore, forests are often located far away from villages and need designated personnel for protection. From the field observations, the following recommendations can be formulated: First, arable land and forestland should be treated differently as laid out in the Rural Land Contract Law etc.; and tenure arrangements for both types of land should not be based solely on individual household contracts. Instead, communities should be allowed to individually decide on the tenure arrangement based on specific local characteristics and experiences. Second, policy making concerning forest tenure and management should be decentralized and central intervention be restricted to those cases, where central regulation is absolutely necessary. Third, effective and low-cost dispute resolution mechanisms at the community level are needed including local land monitoring systems, management rules, and penalties. Dispute resolution in the form of mediation and arbitration should be the exclusive responsibility of local communities. In a second presentation in this section, Andy White of Forest Trends, provided an overview of global trends in forest tenure arrangements. In general, four categories of ownership can be distinguished. Public forest ownership includes (1) forests managed by governments and (2) forests reserved for communities and indigenous groups. Private ownership refers to (3) individual property rights or (4) collective private ownership. Though available data is incomplete, about 77% of all forests are administered by governments, 4% are reserved for communities and indigenous groups, 12% are private forest estates and 7% are collectively owned forests. In developing countries the picture is dramatically different, where communities own or administer at least 25% of all forests. Historically, government forest ownership mostly originated from imperial and colonial times and dominated forest ownership until recently. Beginning in the 1980s, a consolidation of forest ownership can be observed with three major characteristic trends: First, indigenous and other community ownership is increasingly being officially recognized and strengthened by governments around the world. Second, communities are increasingly granted access rights to public forest lands, because they can often manage forests better than governments, and third, industrial concessions that have historically been allocated to large industry are being reformed to provide access to local communities and small scale enterprises. During the last ten years, at least ten countries have enacted new legislation to strengthen indigenous and other community ownership and about 60% of community property have been transferred during the last 15 years. There are more than 60 million indigenous forest people and some 500 million people, which are dependent on forests for their livelihoods. Economic development and conservation efforts increasingly recognize that secure property rights are essential for forestry investments of local communities. There is also a growing evidence that communities are often better managers of forests than federal and regional and local governments. Management capacities of governments have often been insufficient to prevent illegal logging and unsustainable harvesting. However, the transition to community-based forest management is still in its initial stages and the recognition of property rights alone is far from sufficient for ensuring that communities can effectively use and conserve their forests. Many, if not the most, governments around the world continue to maintain policies and regulations that discourage community forestry. Forest Harvesting Regulation Altogether, four presentations covered the broad topic of forest harvesting regulation ranging from traditional systems of yield calculation and quota management to approaches of integrated ecosystem management, logging bans as well as international forest certification schemes. The first presentation, given by Professor Gary Bull of the University of British Columbia, reviewed modern forest management approaches of important forestry countries. The Canadian Province of British Columbia, for example, has developed an integrated land use planning and area-driven yield regulation approach. Ecological, social and economic objectives of forestry are formulated in a participatory stakeholder process and are continuously detailed as planning moves from the strategic to the operational level. In general, Canada’s forestry and land use planning today is characterized by more public participation and emphasizes broader social objectives. Canada’s modern forestry is also supported by new technologies as remote sensing and geographical information systems (GIS), which manage data and information on timber flows, carbon, vegetation development, water resources, and wildlife. Beginning in the 1970s, Finland, another important forestry country, has developed a comprehensive approach integrating planning and management of forests with societal objectives. The system developed in Finland allows to deal with forest optimization problems at different spatial scales. Similarly, in Sweden, simulation models have been developed, which allow for forecasting future timber and biomass volumes, calculating costs and revenues from logging, and to monitor environmental impacts of forestry. New approaches to harvest regulation have also emerged in several tropical countries. Previously, yields were often determined by harvesting intensities per logging cycle (m_/hectare/cycle), while modern approaches seek to accommodate to the complex forest ecosystem structure by reduced impact logging. From recent trends, it can be observed that systems based on annual allowable cut calculations are gradually abandoned in many important forest countries. This is mainly because quotas bear only a weak relationship with sustainability concerns. It has been more and more recognized that forests are best regulated by keeping ecosystem processes intact that forest management needs to move towards the multiple functions of forest ecosystems. The second presentation, given by Dr. Xu Jintao of CCAP, discussed Chinese logging quota system and provided some recommendations on how to reform the current system. In China, logging quotas came into effect in the 1980s. With China’s market liberalization the economy grew quickly and demand for timber increased significantly. However, the government has largely been unwilling to give up control over forest resources. This reluctance originates from the government’s perception that returns of previous public investments into the forestry sector should also be received by the public sector. Fieldwork experiences show that local forest departments feel very strongly about the right to receive economic benefits from public investments. Regarding the efficiency of logging quotas, the major objective of protecting China’s ecological forest resources has by far not been achieved. Although the government has heavily invested in forest planting, forest cover has steadily decreased during the last decades. Furthermore, actual harvest levels have long exceeded logging quotas. Now, it is hoped that the imposition of the Natural Forest Protection Program (NFPP) can reduce further forest degradation. The NFPP can actually be interpreted as a response to the failure of the logging quota system. From an economic point of view, logging quotas, in general, are very insensitive to market signals and therefore fail to allocate the resources efficiently. The economic maturity of forests, in contrast, is actually dependent on the market price, the opportunity cost of alternative land uses, the market interest rate and the investment risk. Considering China’s current economic situation, it would now be a good time to initiate forestry sector reforms. Currently, timber markets seems to be saturated and prices are declining. Thus, reforms could be done at a comparatively lower cost as when prices and demand for timber are high. Similarly, current interest rates are low reducing the cost of reform. And finally, China’s integration into the world market also is providing the necessary downward pressure on timber prices. Professor Thomas Waggener of the University of Washington reviewed experiences of logging bans in the Asia-Pacific Region. Several countries have imposed logging bans in response to rapid forest degradation, loss of biodiversity or to natural disasters such as flooding, etc. Such ad-hoc policies often claimed to resolve mismanagement in the forest sector but failed to define clear policy goals and measurable policy outcomes. Logging bans have produced very mixed results in the Asia-Pacific Region. They did not automatically result in reduced logging. Even if logging was reduced, this did not automatically improve the protection status of natural forests. The serious loss of forests continued in most countries of the region and very often such bans did not adequately consider social, political and economic conditions nor was assessed whether a ban would be the most appropriate instrument for forest conservation. In general, the strategic alternatives to logging bans seem to be the multi-functional sustainable management of forests, reduced impact logging, forest certification schemes, and creating incentives for greater private sector and local community participation in forestry and policy formulation. Dr. Zhu Chunquan of the WWF China Program concluded this section with a brief discussion on forest certification. In modern forestry, the evaluation of environmental impacts of harvesting operations is becoming more and more important. Certification can be an efficient approach to assess and document such environmental impacts. In addition, certification can help forest enterprises to improve their economic performance when consumers demand and pay for timber products harvested from sustainably managed forests. Through labeling certification can help to prevent illegal logging and trading and thus reduce forgone government revenues. An additional important element of certification schemes are their perspective on the multiple functions of forests. While the current ecosystem degradation is partly a result of excessive timber demand, forest certification can serve as a valuable monitoring and evaluation tool. Forest management certification, for example, requires the designation of ecological preservation areas, which are exempted from harvesting, and the definition of sustainable harvest levels for specific types of forests in line with the environmental conditions. Forest Governance and Forest Administration Ms. Zhang Lei of the China National Forest Forestry Economics and Environmental Research Center (FEDRC) outlined the functions of the government in ecological restoration and pointed to critical issues of ecological restoration in China. The environment in China is characterized by severe ecological degradation. Even with a successful transition towards a market economy and increased private investment into the environment, the overwhelming burden of ecological restoration will still remain with the government for the years to come. Future challenges are even larger when problems of regional economic disparities, rural poverty and underdevelopment are included into the picture. The government's major responsibility in ecological restoration should be to ensure that public ecological benefits are produced in sufficient quantities. The six forest ecological construction programs are of crucial importance in this regard as they clearly reflect the paradigm shift from timber production towards ecological forest functions. However, China’s ecological rehabilitation is constrained by several factors: First, the government is still not providing enough leadership in this area and investment levels are still insufficient. Second, reforms of state owned forest enterprises (SOEs) have so far not been successful. SOEs are still burdened with a variety of responsibilities as administration, healthcare, education etc. but lack the sufficient financial resources to meet these responsibilities. Furthermore, there are no independent and reliable monitoring and evaluation systems in place to measure environmental improvements and economic performance in forestry. Overall, the government has also not been active enough in certain regulatory areas and, in addition, many government bodies are not clear about their own responsibilities. Finally, ownership (e.g. collective versus private) remains unsettled in many areas as well. Some suggestions for the future are: The government needs to enhance the efficiency of the bureaucracy based on market-based and private business models. Forest authorities need to be more service oriented and competitive bidding in forestry projects should be implemented where appropriate. Better monitoring and evaluation systems need to be developed; and a broader participation of local communities and NGOs should be encouraged. It is further necessary to secure property rights of collective and private owners and provide better incentives for private investors in forestry and protection, e.g. tax reforms. The following presentation of Douglas MacCleery of the U.S. Department of Agriculture, reviewed the history of institutional development in the environment in the U.S. The U.S. has traditionally had a decentralized forest sector, but the trend since 1900, and especially since 1970, has been towards more centralized U.S. forest policies and institutions. With deteriorating environmental conditions, a first policy framework for conservation was developed in 1900 covering all types of ownership. Two decades later, an overall recovery of environmental conditions could be observed throughout the U.S. Contributing factors to this improvement were the increasing agricultural productivity, the shift to fossil fuels, a stable and well defined land tenure and rights system, stable markets for forest products, and strong sector institutions. After 1970, the enactment of new environmental laws led to further centralization in the management of natural resources. This series of new laws put the federal government in a direct regulatory role over natural resources management and protection. In addition, the laws encouraged citizens and NGOs to file lawsuits against federal agencies if they felt laws were not implemented correctly. Overall, the 1970s Environmental Laws greatly improved environmental conditions throughout the country. However, centralization trends did not necessarily improve the inter agency coordination. What lessons can be learned from experiences and development of U.S. forest policy? Technological advances, such as improved agricultural productivity and conversion from wood to fossil fuels, took substantial pressure off from the forests. Forest protection, research and extension, and forest inventories are essential governmental responsibilities. Stable land tenure and appropriate tax policies are essential to encourage private investment in forests. Decentralization provides the opportunity to test alternative policies and institutions, while centralization does not necessarily mean that natural resources policies are well coordinated. Forestry and Trade Liberalization Dr. Harry Nelson of the University of British Columbia introduced the principles of the World Trade Organization (WTO) and likely implications of trade liberalization on the forestry sector. The main objective of the WTO is to promote international trade through reduced tariffs, the conversion of non-tariff barriers (NTB) into tariffs, and to ensure that there are no disguised protectionist measures. Key WTO principles include the national treatment of imported goods, which implies that domestic goods and imported goods are subject to the same standards and internal taxes. There is also the principle of non-discrimination stating that goods from one country should not be favored over another. In terms of forest products, the first important WTO regulation is the Agreement on Subsidies and Countervailing Measures. This allows governments to engage in subsidies as long as they do not have any adverse impact upon other members. The second important component of WTO rules applying to forest products are the standards of the Agreements on Sanitary and Phyto-sanitary Standards (SPS) and Technical Barriers to Trade (TBT). The third component important to the forest sector is the WTO Dispute Resolution Process. The dispute settlement mechanism is a quasi-legal process that may use previous rulings in reaching decisions and provides the member that has the offending practice three alternatives for resolution: first, to bring practices into compliance, second, offer compensation, or third to allow the prevailing party to establish equivalent measures. WTO membership has some significant implications to a country’s economic policies. It restricts governments to offer assistance to domestic firms and also constrains policies that favor domestic goods and industries over imported goods. Potential issues for future trade disputes might therefore arise in connection with the growing trend in certification of forest products in North America and Europe. Currently existing WTO rules do not allow for distinctions in environmental characteristics in how goods are manufactured although there is a voluntary WTO eco-labeling in place. The general exception with regard to environmental concerns is that countries are permitted to restrict trade if this proves necessary to protect critical natural resources. Regarding Multilateral Environmental Agreements (MEA’s) which can be seen another international process of dealing with environmental issues, it is not clear if WTO or MEA obligations would prevail if conflicts arise between these mechanisms. To summarize its likely implications, WTO membership will help to open new export markets and import opportunities. Tariff reductions imply that some domestic industries may not be competitive, which in return might create political pressure to develop protection measures for domestic industries. On the other hand, new export markets for other domestic industries may open up. For the future, WTO principles can be expected to increasingly focus on environmental aspects of natural resource use and this needs to be taken into account by forest industries and forest policy makers. Following the more general remarks of above, Professor Lu Wenming (Chinese Academy of Forestry, CAF) provided an overview of the current status of liberalization in the forestry sector of China. The most important reason for China’s tariff reduction in timber and forest products has been the opening policy since the 1980s in order to strengthen economic development and to attract foreign direct investment (FDI). The second important reason – which has been dominating trade policy in China since the early 1990’s – has been China’s engagement in the Asia Pacific Economic Cooperation (APEC). The implementation of the Natural Forest Protection Program and especially the imposition of the logging ban have further accelerated the reduction in tariffs for log imports in the late 1990s. It can also be said, that China’s accession to the WTO so far had only minor impacts on China’s tariff policies in the forestry sector. Since joining APEC in 1991, China has reduced its general tariff level from 57% (1992) to 12% (2002). In 1994, the Chinese government had made the additional commitment to further reduce tariffs to 10% by 2010 and has nearly achieved its goal already by today. China has also committed to reduce non-tariff measures (NTM) and to abandon preferential tax policies, which do not conform with WTO principles. The major economic impacts of these tariff reductions, especially zero-tariffs on logs, have been a sharp increase in log imports (mainly from Russia) up from 4.8 million m_ in 1998 to 10.1 million m_ in 1999, to 13.6 million m_ in 2000 and to 16.9 million m_ in 2001. At the same time Chinese furniture exports increased from US$48.5 million in 1990 to as high as US$2.19 billion (1998), US$2.71 billion in 1999, and to US$3.6 billion in 2000. Furthermore, China has committed to eliminate almost all NTM after 2002 including those imposed on forest products. Remaining trade management measures for forest products, which are not counted as NTM, are export and import licenses, export and import commodity inspections and import certificates. Until today, specifically negative impacts to APEC and WTO processes have been observed for China’s plywood industry. Because of strong international price competition, this industry has lost market shares. Similarly, pulp and paper factories face more competitive markets and also experience an increase in foreign direct investments. Impacts on China’s furniture and particleboard industries, so far, have seen only minor impacts. Recommendations of the International Forum on Chinese Forestry Policy During panel discussions and break out sessions the Forum analyzed in great detail key forestry policy issues for China, identified actions for immediate reforms, where knowledge is already sufficient, as well as formulated detailed policy issues where further research is required. In a final presentation to SFA Administrator Zhou Shengxian, Dr. Ian Bevege of ACIAR, summarized these recommendations according to the six key themes of the Forum. In essence, these provide an agenda for immediate reform action and future forestry policy research: I. Forest Policies in Transition / Forestry Governance, Administration Forest Policy Issues Clarify scope of authority of SFA – What to do and what not to do? Clarify roles of bureaucracy levels and private sector in policy formulation. Develop strategy for managing transition (priorities, sequence of steps, cross-sectoral coordination etc.) Provide financial resources for transition process. Stimulate private sector. Reform state-owned forest enterprises (SOEs) Policy Reforms – Immediate Actions Establish independent M&E at different levels. Establish task force to lead reform process of harmonizing bureaucratic structures. Set up pilot approaches to test ideas. Future Policy Research Issues Identify decentralization and devolution approaches. Identify lessons from managing transitions in other countries. Disseminate research results and lessons to strengthen the debate within the levels of policy making bureaucracy. Strengthen public awareness of public choice. Promote forest stratification and resource allocation for multiple use. II. Forest Land Tenure and Ownership / Approaches to Regulate Forest Harvesting Forest Policy Issues Appropriateness of logging ban Potential of annual allowable cut (AAC)/quotas Deregulation and investment in the forest sector Insecurity of private, community forest tenure Institutional framework to secure tenure Overall lack of respect for property rights Policy Reforms – Immediate Actions Remove logging ban and AAC/Quotas from collective and private forests. Limit AAC/Quota system to state forests. Introduce scenario planning in national and public forests. Reconsider logging ban on public forests and develop an exit strategy. Reform legislation to allow for policy consistency. Deregulate the sector. Future Policy Research Issues Investigate ways to set ACCs/Quotas on public forests. Identify exit strategy to abandon logging ban protecting interests of stakeholders. Develop best practices system of internal property rights systems for collective ownership. III. Taxation and Fiscal Policies, Forestry and Trade Liberalization Forest Policy Issues How to reform state-owned forest enterprises (SOEs)? How to maintain required public good services from forests? How to separate and define social functions of government and private corporations in forestry? How to identify what level of government has authority to set taxes? How to prepare for WTO/APEC limits to subsidies? How to remove tax burdens and distortions? Policy reforms – immediate actions Remove disincentives. Rationalize taxes and set ceilings. Identify specific levels within the authorities to set taxes. Future Policy research issues Investigate implications of WTO trade liberalization. Manage tax disincentives to allow for competitive forest industry investment and development.