Impacts of the FLEGT action plan and the EU timber regulation on EU trade in timber product

The EU Timber Regulation (EUTR) is a key element in the efforts of the European Union to curb the trade in illegal timber products. This study help remedy the lack of systematic, statistical analysis of potential impacts of the EUTR on international trade in timber products. Using cointegration intervention — or shock — models we quantify potential shifts in import prices and quantities of tropical hardwood lumber and oak lumber after the entry into effect of the EUTR. We further estimate import demand models to assess the relation between temperate and tropical hardwood products and whether there was a structural change in demand elasticities after the entry into force of the EUTR. The shock model analysis indicates, for most of the bilateral trade flows where we observe cointegration and a significant shock variable, increasing import prices and decreasing import quantities of tropical hardwood lumber following the EUTR start date, consistent with a contraction of the supply of tropical timber. The results of the import demand models do not give a clear indication as to whether oak lumber is a complementary or substitute product for tropical hardwood lumber, and there are no clear signs of structural changes in demand elasticities. Besides the analysis per se, an important contribution of the paper is the procedure for building as long and homogeneous time series of tropical hardwood lumber as possible.