Essays on International Timber Products Trade

Abstract

During the last decade, the production and trade of timber products have gone through rapid change due to the implementation of several new policies and regulations. Specifically, one of the world’s largest exporters of coniferous logs, Russia, increased its restrictions on log exports to stimulate domestic lumber production since 2007. European Union (EU) has implemented the Forest Law Enforcement, Governance, and Trade (FLEGT) Action Plan that is aimed at combating illegal logging and improving forest governance from both demand and supply sides. Understanding the effectiveness of these measures is critical for policy assessment and instructive for policy improvements. In the first study, we use a Muth-type equilibrium displacement model to investigate the market and welfare impacts of a Russian log export tax, utilizing a vertical linkage between log and lumber markets and considering factor substitution. Our theoretical analysis indicates that the negative effects of log export tax on equilibrium price for log producers would be underestimated when input factors are gross substitutes. Empirical simulations show that the burden of Russian log export tax is shared almost equally between foreign log buyers and domestic log producers and that the tax induces an increase in domestic lumber production in Russia. The sum of the welfare gains for Russian lumber consumers and lumber producers and the export tax revenue exceeds the welfare losses experienced in the Russian logging sector. In the second study, we use quarterly trade data to quantify the impacts of the demand side measure, the EU Timber Regulation (EUTR), on import quantities by EU Member State and by product. Our results show that most north and central European countries significantly decreased their imports of tropical and temperate timber products. Furthermore, the United Kingdom and some southeast and south-central European countries significantly reduced their imports of tropical timber products but increased their imports of temperate plywood. However, significant increases in the imports of tropical logs have been observed in western and north-central European countries. In the third study, we take Ghana as a study case to analyze the impact of a Voluntary Partnership Agreement (VPA) on exports to the EU and other importer countries separately. Our gravity model estimation results show that Ghana increased its exports of roundwood to both the EU and the other countries. Furthermore, its exports of sawnwood, plywood, and veneer sheets decreased significantly to the EU. However, there were no significant effects on Ghana’s exports of these processed timber products to the non-EU destinations.