Illegal logging and coercion of the state

It is now well known that the Renewable Energy Target is a dead weight on industry and households thanks to its escalation of electricity prices. Not so well known is the Illegal Logging Prohibition Act, which is set to increase the price of imported timber and paper products. In the grand tradition of all bad regulation, it achieves this by imposing additional costs for negligible benefit.

Although introduced by the Gillard government, the present government has so far shown little inclination to fix the problem, despite railing against it in opposition. It ignores internal advice that the regulations under the Act conflict badly with its own Australian Government Guide to Regulation, the blueprint for better governance, as well as advice from a former solicitor-general who described the Act as "fractured to the point of incongruity."

At least the government has ordered a Regulatory Impact Statement and review of the impacts of the Act – something the industry has sought for the last two years. This is welcome, but it will be meaningless unless the government is prepared to act on its findings.

The purpose of the Act – to eliminate imports of illegally harvested timber and furniture constructed using illegal timber – is not in dispute. Its flaw is that it places the onus for identifying overseas illegal logging on Australian importers.

There is no presumption of innocence; importers must prove their timber is legal. Australian small business owners could become criminals because of illegal timber harvesting in other countries by other people.

Among many problems is the fact that timber is often traded between different countries before being imported into Australia. Yet importers must provide documentation, issued by foreign officials, proving the timber was harvested according to the laws of the country in which it originated. For plywood, which contains components from multiple sources, that means proof as to the origin and legality of each individual component.

Given the quasi-official sanction some illegal timber harvesting enjoys, that is obviously problematic. And yet it is the Australian importer who is liable, not the illegal harvester or trader. Simply failing to comply with customs compliance declarations, for example, incurs a $17,000 fine.

Desperate to deal with this new regulatory minefield, over 16,000 Australian timber importers are scrambling to avoid falling foul of the government's timber police. The timber industry estimates the annual compliance cost will be $341 million. Depending on frequency of imports, each business will spend thousands of dollars to comply with 102 pages of regulations.

The Centre for International Economics – commissioned by the Gillard government to investigate the costs and benefits of enacting the legislation – recommended against its implementation. The report noted that "this reflects the inherent difficulty of constructing measures within Australia to affect behaviour in other countries."

It also highlighted a key point overlooked by those determined to stamp out illegal logging: 85 per cent of timber harvested globally is consumed in the country in which it is harvested. Of the 15 per cent traded internationally, Australia imports just 2.5 per cent, of which it is estimated around 10 per cent may include illegal imports.

As it says, "Thus Australia's imports account for about 0.034 per cent of global timber production, and 0.34 per cent of products incorporating illegally logged timber."

Eliminating this tiny portion of global illegal timber harvesting is typical 'peeing in a wetsuit' politics: it feels warm and comfortable, but nobody notices or benefits.