Lao PDR Continues to Highlight Benefits of FLEGT-VPA – Impacts of New EU Regulation on Deforestation-Free Supply Chains in Lao PDR
The Lao PDR negotiates a FLEGT-VPA (Voluntary Partnership Agreement) with the EU since 2015, whereas communications on a potential engagement started as early as 2012. The negotiation process has initiated important reforms in the forest sector which reach beyond a future partnership agreement. In a multi-stakeholder approach Lao PDR has developed the basis for a Timber Legality Assurance System (TLAS) which represents a key tool for ensuring the legal and transparent supply of timber. The participative nature of the FLEGT-VPA has brought an unprecedented involvement of public and private sector and civil society in forest governance and improves intersectoral cooperation on the development of the legal framework for legal timber supply. Although, the VPA is negotiated between EU and Lao PDR, the TLAS is developed for both domestic and all export markets. The development of the TLAS is mandated by the forestry law of Lao PDR from 2019 for both the domestic and all export markets, which will impact the timber supply for regional and international markets beyond the EU.
Since 2017, four bilateral negotiations between Lao PDR and EU took place. The legality definitions for all timber sources demonstrate the core of the TLAS and constitute the main criteria of what legal timber means for Lao PDR. They have been agreed in principle and set aside by both parties in the third and fourth negotiation round. Since the last negotiation, Lao PDR engaged in a comprehensive consultation on key components of the TLAS regarding certification of legality compliance, supply chain control, licensing, independent evaluation, and transparency. From 2020-2022 a comprehensive pilot has been carried out to test verification procedures for the offices that will be charged with inspection of legality compliance.
In November 2021, the European Commission presented a proposal for a new regulation on deforestation free supply chains, which eventually became the new EU Deforestation Regulation (EUDR) that entered into force on 29 June 2023. Under the EUDR, EU operators that import timber under a FLEGT Licensing scheme do not automatically get access to the market, as the additional requirement for deforestation-free requirements is not part of FLEGT licenses.
Given the new scope and additional deforestation-free due diligence requirements for products entering the EU market, the VPA with a non-operating FLEGT licensing system (all countries except Indonesia) is in question in terms of relevance and feasibility of continuing the VPA towards FLEGT-licensing. In 2022 Lao PDR has communicated the interest to continue the VPA towards FLEGT Licensing and proposed a roadmap for initialing the VPA. In a letter exchange between Directorate General of Environment (DG ENV) of the European Commission and the Ministry of Agriculture and Forestry (MAF) of Lao PDR, DG ENV questioned the continuation of the VPA given the new context. Both sides agreed on an ex-ante impact assessment of the EUDR for Lao PDR to review the VPA and assess potential effects on stakeholders.
While the impact assessment has shown that the EUDR is not expected to have a direct trade impact on value chains and actors, except coffee exports, it could still have indirect trade impacts if third countries import, process and re-export Lao commodities to EU. This would require Lao operators to provide information on origin and deforestation risks of products. The assessment further highlights that Lao stakeholders have benefited from the multi-stakeholder structure of the VPA and agree on its continuation. However, the assessment failed to give a clear recommendation on the future of the VPA negotiations under the EUDR context.
The non-conclusive outcome of the assessment regarding the VPA have been challenged by Lao PDR and in an official letter by the Minister of Agriculture and Forestry to DG ENV in May 2023 the continuation of VPA negotiations has been requested on which a reply by DG ENV is still pending. A meeting in September 2023 is expected to give a clearer picture of the partnership between Lao PDR and the EU.
Lessons Learnt and Recommendations
- The FLEGT-VPA is of high relevance for Lao PDR from a development policy perspective. A signed VPA will not only strengthen the regional and international reputation of Lao PDR, but also demonstrate a symbolic indicator for good forest cooperation between Lao PDR and EU.
- A discontinuation of the VPA will have impacts on the relationship between Lao PDR and EU, and might impact the quality of the Lao-TLAS (esp. regarding independent evaluation and transparency)
- Considering the status of a partnership agreement like the VPA, EU need to clearly communicate with Lao PDR on equal alternatives in the case of not continuing the VPA. Past achievements should be recognized and proactive recommendations for the acknowledgement of those need to be considered in the context of the EUDR.
- The global context and agreement to address deforestation to combat climate change and sustainable forest management is unquestioned. Lao PDR need to consider the adaptation of the national TLAS to integrate deforestation-free requirements and develop traceability systems for other commodities.
- Cooperation between Lao PDR and other VPA and non-VPA countries in multi-national platforms, to achieve a common understanding of the impact of the EUDR on producer countries.
- Support of multilateral approaches for the definition of legal and deforestation-free supply chains in regional markets
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