The Economics of the Tropical Timber Trade

Edward B Barbier, Joanne C. Burgess Barbier, Joshua Bishop, Bruce Aylward

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000709070
• Edition: 1
• Topic: Business
• Subtopic: Natural Resource Extraction Industry
• Index: Business

Originally published in 1994, The Economics of the Tropical Timber Trade provides a detailed analysis of the economic linkages between the trade and forest degradation. Based on a report prepared for the ITTO, it looks current and future market conditions at the time of publication, and assesses the impacts on current and future market conditions, and assesses the impacts on tropical forests of both the international timber trade and domestic demand. The authors examine the causes of deforestation and compare the environmental impacts of the timber trade with other factors, such as the conversion of the forests to agriculture. Finally, they assess the national and international trade policy options, and discuss the potential role of interventions in the international timber trade in promoting efficient and sustainable use of forest resources. The book will be of interest to those concerned with forest management and policy, trade and environment, and with the economics of conversation and resource use.

1

INTRODUCTION

Concerns about tropical deforestation have led to an increased focus on the role of the timber trade in promoting forest depletion and degradation. Recent reports suggest a marked increased in tropical deforestation in the 1980s, with the overall rate doubling from 0.6 per cent in 1980 to 1.2 per cent in 1990 (Dembner 1991). Although the deforestation rate varies across regions, with an estimated annual rate for Latin America of only 0.9 per cent compared with 1.7 per cent for Africa and 1.4 per cent for Asia, the loss of forest area has increased significantly in all tropical regions.

Despite concern over the state of tropical deforestation and its implications for global welfare, several recent studies have indicated that the tropical timber trade is not the major direct cause of the problem compared to conversion of forests for agriculture.¹ Nevertheless, it is clear that current levels of timber extraction in tropical forests – both open and closed – exceed the rate of reforestation (WRI 1992). Less than 1 million hectares, out of an estimated total global area of 828 million hectares of productive tropical forest in 1985, was under sustained-yield management for timber production (Poore et al 1989). Moreover, timber extraction has a major indirect role in promoting tropical deforestation by opening up previously unexploited forest, which then allows other economic uses of the forests such as agricultural conversion to take place (Amelung and Diehl 1992a). For example, in many African producer countries, around half of the area that is initially logged is subsequently deforested, while there is little, if any, deforestation of previously unlogged forested land (Barbier 1994).

Some of the environmental values lost through timber exploitation and depletion, such as watershed protection, non-timber forest products, recreational values, may affect only populations in the countries producing the timber. Concerned domestic policymakers in tropical forest countries should therefore determine whether the benefits of incorporating these environmental values into decisions affecting timber exploitation balance the costs of reduced timber production and trade, as well as the costs of implementing such policies. What economists call the socially ‘optimal’ level of timber exploitation and trade – ie, what is more popularly referred to as ‘sustainable’ timber management – is the level of exploitation that ‘internalizes’, or incorporates, the additional domestic environmental costs of logging the forests, wherever it is feasible to do so. Designing policies to control excessive forest degradation is clearly complex and requires careful attention to harvesting incentives. As recent reviews suggest, many domestic policies in tropical timber producing countries do not even begin to approximate the appropriate incentives required to achieve a socially optimal level of timber harvesting. More often than not, pricing, investment and institutional policies for forestry actually work to create the conditions for short-term harvesting by private concessionaires, and in some instances, even subsidize private harvesting at inefficient levels.² Over the long term, incentive distortions that understate stumpage values and fail to reflect increasing scarcity as old growth forests are depleted can undermine the transition of the forestry sector from dependence on old growth to secondary forests and the coordination of processing capacity with timber stocks (Binkley and Vincent 1991).

Increasingly the world’s tropical forests, including their remaining timber reserves, are also considered to provide important ‘global’ values, such as a major ‘store’ of carbon and as a depository of a large share of the world’s biological diversity (Barbier et al 1994; Pearce 1990; Reid and Miller 1989). Similarly, even some ‘regional’ environmental functions of tropical forests, such as protection of major watersheds, may have transboundary ‘spillover’ effects into more than one country. But precisely because such transboundary and global environmental benefits accrue to individuals outside of the countries exploiting forests for timber, it is unlikely that such countries will have the incentive to incur the additional costs of incorporating the more ‘global’ environmental values in forest management decisions. On the other hand, individuals in the rest of the world who are concerned about the loss of global environmental benefits through tropical deforestation are increasingly demanding that all tropical forests – including those with timber production potential – be managed so that such global benefits can be ‘sustained’. Not surprisingly, sanctions and other interventions in the timber trade are one means by which other countries may seek to coerce timber producing countries into reducing forest exploitation and the subsequent loss of global environmental values. In addition, trade measures are increasingly being explored as part of multilateral negotiations and agreements to control excessive forest depletion, to encourage ‘sustainable’ timber management and to raise compensatory financing for timber producing countries that lose substantial revenues and incur additional costs in changing their forest policy.

However well intentioned they may be, both domestic and international environmental regulations and policies that attempt to ‘correct’ forest management decisions may have high economic, and even ‘second order’ environmental, costs associated with them (Barbier 1994). There is increasing concern that the potential trade impacts of environmental policies that affect forestry and forest-based industries may increase inefficiencies and reduce international competitiveness. Moreover, the trade impacts of domestic environmental regulations may affect industries in other countries and lead to substantial distortions in the international timber trade. The overall effect on the profitability and efficiency of forest industries may be to encourage forest management practices that are far from ‘sustainable’. Careful analysis of both domestic and international environmental policies affecting forest sector production and trade is therefore necessary to determine what the full economic and environmental effects of such policies might be.

The starting point for such an analysis is a better understanding of the economic linkages between the trade in tropical timber products and deforestation in tropical regions. Only through exploring such linkages is it possible to begin unravelling some of the important issues and concerns over the role of timber exploitation and trade in tropical deforestation, and to suggest appropriate policy measures for encouraging sustainable management of production forests. It is this theme that is the underlying rationale of the book.

As a matter of practicability, we concentrate our efforts primarily on the analysis of current trade conditions and policies rather than on forest management practices and the conditions to achieve sustainable management within the timber production sector. Hence, our main concern is with the linkages between the trade in tropical timber products, tropical deforestation and sustainable forest management.

However, as noted above, the latter term – ‘sustainable’ forest management – has been interpreted in different ways by various individuals concerned with the problem of tropical deforestation. We use the term here in a more narrow sense of sustainable production and environmental management of those forests currently or potentially exploitable for timber in tropical regions rather than in the broader sense of the ‘sustainability’ of the entire tropical forest area, or of all the potential ‘values’ generated by this area. Thus our working definition of sustainable forest management is the definition and criteria of sustainability adopted by the International Tropical Timber Organization (ITTO):

Sustainable forest management is the process of managing permanent forest land to achieve one or more clearly specified objectives of management with regard to the production of a continuous flow of desired forest products and services without undue reduction in its inherent values and future productivity and without undue undesirable effects on the physical and social environment.³

Consequently, in this book our primary concern will be with management of the production forests, within the overall permanent forest estate, of producer countries. Similarly, the forest resource base of principal concern is the tropical timber resources of producer countries, ie their standing hardwood resources. Finally, the forest products, or tropical timber products of interest are the industrial wood products generated from these hardwood resources in tropical countries. These include logs, sawnwood, plywood (including veneers) and other wood products.

The book examines the extent to which the tropical timber trade and policies, compared to other factors, affect tropical deforestation and timber-related forest degradation. The book also analyses the potential role that interventions in the international tropical timber trade may have in promoting efficient and sustainable resource use in the forestry sector. The outline of the rest of the book is as follows.

Chapter 2 provides a brief overview of the historic, current and projected status of tropical forest resources and international timber trade flows. Chapter 3 examines in more detail the specific contribution of the tropical timber trade, compared to other causal factors, in tropical deforestation and the wider environmental impacts of tropical forest use. Chapter 4 provides an important insight into the market conditions for timber products in both producer countries and importing countries and a survey of end-users of tropical timber products in the UK. These three chapters raise a number of key policy issues concerning the environmental effects of the tropical timber trade, forestry policy and wider economic policies, which are an important background to the analysis that follows in the remainder of the book and is summarized in Chapter 5.

Chapter 6 discusses domestic market and policy failures, both within the forestry sector and economy-wide, that impact on tropical forest management. The current trade interventions in tropical timber exporting and importing countries are explored in Chapters 7 and 8 respectively, including an examination of the impacts of trade restrictions on tropical forests. Chapter 9 defines the international timber trade policy options, given the current state of forest management and trade interventions; provides a list of criteria for choosing between these options; and discusses the rationale for implementing trade policy options on a multilateral as opposed to a unilateral basis. Chapter 10 assesses each of the proposed trade policy options to determine which are more likely to provide trade-related incentives for sustainable management of tropical forests in producer countries. Finally, Chapter 11 provides an overall conclusion to the analysis and findings of the book, and looks to the prospects in the future of implementing sustainable timber management.

1  See, for example, Amelung and Diehl (1992); Barbier (1994); Barbier et al (1991); Vincent and Binkley (1991); Hyde, Newman and Sedjo (1991); Repetto (1990); and Repetto and Gillis (1988).

2  For example, see Barbier (1994); Barbier et al (1991); Vincent and Binkley (1991); Gillis (1990); Hyde, Newman and Sedjo (1991); Repetto (1990); and Repetto and Gillis (1988).

3  From the ITTC Decision 6(XI), Quito, 8th Session, May, 1991. See also ITTO (1990).

2

TROPICAL FOREST RESOURCES AND INTERNATIONAL TRADE

This chapter consists of a synthesis of existing data and studies to provide a statistical review of tropical forest resources and the international tropical timber trade. This brief overview provides a background for the rest of the book, especially the formulation and analysis of policy options for the international tropical timber trade to encourage sustainable forest management.¹

THE STATUS OF FOREST RESOURCES

Table 2.1 depicts the status and changes of natural tropical forest resources across ecological zones, regions and selecte...