Second thoughts about free trade


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Some economists say free trade in forestry products is good for forests. But M. Shimamoto, F. Ubukata, and Y. Seki are not so sure. They share their doubts in an Ecological Economics piece called ’Forest Sustainability and the Free Trade of Forest Products: Cases from Southeast Asia’. They look at the effects of lowering tariffs on forestry imports in the Philippines and Thailand and making it easier to export logs from Indonesia.

In the 1960s and 1970s the Philippines exported a lot of logs. However, they depleted their resources. By the 1990s they were actually importing logs instead.

As high value wood from natural forests became scarce, Filipino plywood producers turned to lower quality wood from trees planted by local farmers. It wasn’t good enough for the plywood’s outside coating, for which import logs were used, but it worked ok for the inner core. The trees planted to meet this demand benefited the environment.

Then, in response to international pressure, the Philippine government reduced its tariffs on plywood imports from 50% in 1995 to 20% in 1997. That made it hard for domestic plywood producers to compete with foreign imports, which, in turn, reduced local farmers’ incentive to plant trees to sell to plywood producers.

The Thai story is similar. Between 1960 and 1995 Thailand lost more than half of its forest and went from exporting timber to importing it. In the 1990s, the government wanted to restore some forest by subsidizing farmers to plant indigenous tree species, without much success. That was partly due to the fact that several years earlier it had lowered tariffs on timber imports, which tripled in just two years. Domestic sawnwood and plywood producers preferred buying cheap imports, rather than the trees farmers planted.

Indonesia still has natural forests and still exports billions of dollars worth of forest products each year. Nevertheless, its forests are disappearing fast. During the late 1990s, the government lowered taxes on log exports, which may have stimulated greater logging.

The authors believe governments should be able and willing to use trade measures as well as other forestry policies to encourage reforestation and avoid destroying natural forests. For that the World Trade Organization would have to treat forestry products different from industrial or agricultural products. For most free trade advocates, such an idea is tantamount to heresy, but it is worth a second thought.

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Further reading

To request a free electronic copy of this article or send comments and queries to the authors, you can write Mihoko Shimamoto at:

The full reference for the paper is: M. Shimamotoi, F. Ubukata, and Y. Seki. 2004 “Forest Sustainability and the Free Trade of Forest Products: Cases from Southeast Asia”, Ecological Economics, 50: 23-34.