LIAM COCHRANE, REPORTER: Illegal logging - it destroys forest, it enriches criminal syndicates and Australia does play a role as a consumer.
KELVIN THOMSON, AUSTRALIAN MP: Australia is the largest importer of processed timber from Papua New Guinea where the World Bank estimates 70 per cent of the logging is illegally conducted. Indonesia is losing more than 2 million hectares of forest per year to logging and burning.
LIAM COCHRANE: Environmentalists have long pushed the Australian Government to toughen laws that control the timber trade. Imports, though, are only a small part of the picture. About 90 per cent of the timber used to build houses and other wooden products in Australia is grown domestically. But an estimated 5 per cent of solid wood products is imported from high risk countries, such as Indonesia, PNG, Malaysia and China.
Last month, Australia's lower house of Parliament passed the Illegal Logging Prevention Bill. The law will require that any building timber, wooden products, paper or packaging, has been sourced legally, whether from Australia or elsewhere. The legislation has support from both major parties, the Greens, unions and major timber sellers.
JOHN GILLAM, MANAGING DIRECTOR, BUNNINGS: Most simply it's because it's the right thing to do. Australia should not be allowed the importation of or trading in illegally logged timber.
LIAM COCHRANE: But for some Asian exporters it's different story.
BOB TATE, PNG FOREST INDUSTRIES ASSOCIATION: We would prefer that the law not be passed.
LIAM COCHRANE: While Papua New Guinea only sends a small amount of timber to Australia, Bob Tate says the impact on the tray Industry will be devastating.
BOB TATE: For our smaller exporters we expect the market to virtually dry up overnight.
LIAM COCHRANE: Bob Tate says it's a question of timber traders being able to absorb the extra costs involved in proving logs are legal. The bigger companies will probably survive but others will be forced out.
BOB TATE: It basically comes down to a question of, can they afford to implement these very complex and very expensive schemes to prove legal compliance?
LIAM COCHRANE: Indonesia is another key timber exporter to Australia. The Indonesian government made a submission to one of three Senate inquiries into the new law, urging more consultation and suggesting the bill should be delayed.
DENNY LESMANA, FIRST SECRETARY FOR ECONOMIC AFFAIRS, EMBASSY OF INDONESIA: There are logging concerns expressed by Indonesians. They told us THAT the implementation of the regulation may be not in line with the WTO (World Trade Organisation).
LIAM COCHRANE: Indonesia says it's committed to tackling illegal logging and wants to work with Australia on its new law. In particular, Indonesia wants Australia to recognise its relatively new timber verification system, known as SVLK (Timber Legality Verification System), which is accepted by the European Union.
DENNY LESMANA: If it is not recognised I think we will take some action. But, again, until this time, we are still sure that it will be recognised.
LIAM COCHRANE: If the law does pass, Australia's upper house, the Senate, a two year transition period will begin and in that time many of the detail s will be hammered out.
The big questions are: which of the 30,000 timber products would be covered by the law? And what verification systems will be recognised by Australia?
JOHN HALKETT, AUSTRALIAN TIMBER IMPORTERS FEDERATION: Those are still issues that need to be worked through with the industry, with the government and with supplier countries sump as Indonesia and Papua New Guinea.
LIAM COCHRANE: Bob Tate says in effect the rule book won't be available for two years, if and when the law passes.
BOB TATE: That we believe is totally impractical and again will only add to market uncertainty over what is legal and what is not legal.
JOHN HALKETT: My understanding, certainly of Bob's position, is he supports the principle but he is concerned about the detail, about the procedures that are yet to be developed, about the lack of consultation that's occurred with countries like Papua New Guinea. I think they are legitimate concerns, and they are concerns which the Australian timber industry shares and we want to work those issues through.
LIAM COCHRANE: But the major timber sellers are embracing the change.
JOHN GILLAM: We don't have any concerns whatsoever. We've been through the transition 10 or so years ago of making sure that what we were procuring was legally sourced. And we've achieved the outcomes that I think can give all the regulators a great deal of confidence that consumers will be better off, and that concerns for the environment will be better looked after.
LIAM COCHRANE: The legislation is expected to be debated in the Senate this month.