PERU-US FTA Environmental Issues Factsheet* BACKGROUND • Peru is one of the most biologically and geographically diverse countries in the world. It ranks 11th worldwide in terms of the number of plant and animal species within its territory.1 • Cognizant of this rich heritage, Peru has taken a number of actions to protect is biodiversity including the establishment of a series of national parks, reserves, and protected areas. These protected areas cover 32% of Peru’s territory (see Figure 1). By comparison, the U.S. has set aside 26% of its territory for protection.2 • Peru is a signatory to a number of international conventions such as the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), the Montreal Protocol (ozone), and the Rio Declaration on Environment and Development which are intended to protect its environment and biodiversity. • The United States-Peru Trade Promotion Agreement (FTA) which was adopted by the U.S. Congress in December of 2007 and entered into force on February 1, 2009, includes specific and enforceable environmental provisions. Figure 1: Protected Natural Areas in Peru
*Prepared by the Embassy of Peru and DTB Associates, LLP - www.dtbassociates.com 1
Source: World Conservation Monitoring Centre of the United Nations Environment Program (UNEP-‐WCMC), 2004. Species Data (unpublished, September 2004). 2 ProtectedPlanet.net, the online interface for the World Conservation Monitoring Centre of the United Nations Environment Program (UNEP-‐WCMC). Data as of 2014. See: http://www.protectedplanet.net/country/PE/compare/US
• Chapter 21 of the FTA, for example, states that labor and environmental commitments are subject to the same dispute resolution and compliance mechanisms, as trade and investment commitments. • The FTA also contains an Annex on Forest Sector Governance. Paragraph 6(a) of the Annex stipulates that periodic audits shall be conducted in Peru to verify that timber products exported by Peru to the U.S. comply with all applicable laws.3 • Overall exports of timber products from Peru to the U.S. have dropped since the adoption of the FTA (see Figure 2) with the U.S. sourcing approximately 0.16% of its imports from Peru (see Figure 3). Exports of Timber Products from Peru to the United States (2002-‐2011) (US$ million) 80 70 60 50
71.8 61 49.4
53.1
57
55.1
37.2
40 30
19.9
20
21.5
22.6
10 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Figure 2
Source: Ministry of Trade and Tourism of Peru (MINCETUR) 3
“Audits of Producers and Exporters -‐ 6. (a) Peru shall conduct periodic audits [Such audits shall be conducted at least every five years and may be conducted by a mutually agreed third party] of producers and exporters in its territory of timber products exported to the United States, and verify that exports of those products to the United States comply with all applicable laws, regulations, and other measures of Peru governing the harvest of, and trade in, timber products including, in the case of tree species listed in CITES Appendix II, relevant chain of custody requirements.” (Chapter 18. Environment, Annex 18.3.4 Annex on Forest Sector Governance -‐ Verification and Enforcement Measures)
Imports of Timber Products by the United States (2011) Indonesia 2% Chile 4%
Others 13%
Peru 0.16%
Brazil 10%
Canada 52% China 19%
Figure 3
Source: United States International Trade Commission
RECENT ISSUES • U.S. environmental groups have complained that Peru has “rolled back” its environmental laws in violation of the FTA to promote trade and investment. From Peru’s perspective, reforms contained in the July 2014 law, which are the subject of these complaints, were designed to create a predictable legal framework and streamline investment procedures, as well as formalize business activities and discourage illicit trafficking. The Ministry of Environment retains its authority to establish “reserve zones” and set quality standards, while improving consultations and input from other stakeholders. • More recently, members of the U.S. Congress are demanding that the US Trade Representative (USTR) request an audit report on Peru’s compliance with applicable laws and are seeking enforcement of Paragraph 6(a) of the US-Peru FTA Annex on Forest Sector Governance. • Their request rests on a June 4th 2015 briefing paper by the Environmental Investigation Agency (EIA) that concluded that “failure to enforce these obligations undermines the effectiveness of these measures.” Allegations have also been made that “illegal logging, destruction of rain forests, and export of endangered tree species remains rampant in Peru.” The EIA review further alleged that “at least one-third of trade in CITES4 species, cedar and mahogany, have continued to be laundered since the trade agreement came into force.” 4
Convention on Trade in Endangered Species of Flora and Fauna (CITES)
ACTIONS TAKEN Peru is fully committed to the full implementation and enforcement of the environmental provisions of its bilateral FTA with the United States. Concerning the Forest Sector Annex, the following actions have been taken: • On June 9th 2015, the Peruvian ministers of Trade, Magali Silva, and Environment, Manuel Pulgar Vidal, and the US ambassador to Peru, Brian A. Nichols, signed an agreement for the implementation of a Secretariat to respond to submissions on environmental enforcement matters under the FTA (see photo below). • The Secretariat will be housed at the Department of Sustainable Development of the General Secretariat of the Organization of American States (OAS) headquarters in Washington, DC. It will function independently under the supervision of the Environmental Affairs Council established under the FTA. • Peru has also designed a National Anticorruption Plan for the Forestry and Wild Fauna sector approved in 2011 by executive decree (D.S. N° 009-2011-AG) which is currently under implementation. • Peru adopted Law N° 29263 which modifies a number of articles of its Penal Code and of its General Environmental Law in order to increase penalties for environmental violations (including offences pertaining to forestry and wild fauna resources). • By executive decree D.S. 019-2010-AG of 2010 Peru has specified the actions and strengthened the mechanisms for coordination on flora and fauna species between its CITES Administrative Authority and its CITES Scientific Authority, in order to determine and implement the appropriate limits for exports of mahogany listed in Appendix II of the CITES Convention. • In this way an orderly and institutionalized process has been established for CITES species which includes: o The CITES administrative authority in Peru is the “National Forestry and Wild Fauna Service – SERFOR”, which verifies the annual operative plans (POA) of forestry concessions that involve mahogany, before these are approved, in order to include them in the national export limit (quota) for the mentioned specie.
o The specific CITES scientific authority in Peru is the “Ministry of the Environment – MINAM”. It has to issue a Report that this Extraction is Non-Detrimental, which guarantees the sustainable use of mahogany. o Only with this Report can the CITES administrative authority, SERFOR, establish the appropriate national export limit, adhering to what is established under the CITES Convention (see Figure 4). o Furthermore, a separate and autonomous auditing body, the “Supervisory Agency of Forestry and Wild Fauna Resources – OSINFOR” supervises 100% of the licenses granted for forestry concessions to participate in the export quota for the CITES covered mahogany specie. Quantity of CITES permits issued to Cedar and Mahogany 2008-‐2011 350 300 250 200
Cedar
150
Mahogany
100 50 0 2008
2009
2010
2011
Figure 4
Source: Ministry of Agriculture of Peru (MINAG)
• Regarding OSINFOR, the auditing body, the EIA briefing paper itself explicitly recognizes that “Peru has established a legitimately independent agency that not only effectively monitors and attempts to sanction illegal logging but is making its information public for companies, government officials and communities to access.” • In addition, it must be noted that the volumes of actual Peruvian mahogany exports are less than the volumes authorized by SERFOR for mahogany exports under the national quota. Overall, exports of mahogany, cedar, and other timber products have dropped considerably since the implementation of the FTA (see Figures 5 and 6).
Exports of Mahogany (Swietenia macrophylla) Volume and FOB Value 60,000 50,000 40,000 30,000
Volume (m3)
20,000
FOB US$ (thousand)
10,000
Volume (m3) FOB US$ (thousand)
2000 51,260 46,760
2001 32,840 32,300
2002 52,130 55,190
2003 42,400 46,850
2004 30,780 39,460
2005 23,580 35,470
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
2006 22,560 37,450
2007 3,951 5,020
2008 3,057 5,260
2009 2,577 4,744
2010 837.1 1,383
Figure 5
2011 157.5 245
Source: MINAG Exports of Cedar (Cedrela odorata) Volume and FOB Value 60,000 50,000 40,000 30,000
Volume (m3)
20,000
FOB US$ (thousand)
10,000 2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
Volume (m3) FOB US$ (thousand)
2000 5,550.1 3,539
2001 2,988.8 1,847
2002 8,760.9 5,638
2003 11,588.0 6,865
2004 29,390.0 19,339
2005 29,163.0 18,825
2006 44,117.0 37,507
Figure 6
2007 2008 54,151.0 11,858.4 50,718 12,000
2009 6,497.4 6,599
2010 4,405.1 521.03
2011 1,303.3 913.77
Source: MINAG
• In conclusion, the following enhancements to Peru’s forestry monitoring mechanisms must be highlighted:
o Development of Peru’s National Forestry and Wildlife Information System (SNIFF), an electronic system to verify and track the legal origin and proper chain of custody of timber harvested from Peru’s forests, from stump to port; o Development of an app in SERFOR’s web page where information regarding the export permits granted for CITES timber species is available in detail: http://cites.serfor.gob.pe/ o Advances in the development of a National Forestry and Wild Fauna Inventory, which includes CITES species. o Surveys that have been conducted on the number of trees for mahogany species (Swietenia macrophylla) as well as cedar species (Cedrela odorata). CONCLUDING REMARKS • Peru is fully committed to upholding its environmental commitments under the PeruU.S FTA, as well as under the relevant international agreements to which it is party. • Peru’s environmental commitments stem not only from such agreements but from the priority that the Peruvian Government itself attributes to the protection of its environment and of its rich biodiversity, an issue which it continues to promote in new agreements including the Trans Pacific Partnership (TPP). • More specifically, proof of the success of joint U.S.-Peruvian efforts to protect forest resources, is that exports of mahogany and cedar have dropped considerably since the negotiation and implementation of the FTA.