Discussion Paper

Toward Globalization of the Forest Products Industry: Some Trends

Aug 16, 2006 | David Bael, Roger A. Sedjo

Abstract

This paper examines the hypothesis that changes have been brought about in the forest industry that allow it to participate fully in globalization. The forest industry has undergone profound changes in recent years in large part by new technologies. Whereas traditionally it was primarily an extractive industry that relied on local sources for its basic resource—raw, industrial wood—today, intensively managed planted forests are replacing natural forests as the basic source of the wood resource, and modern biotechnology is being applied to create trees that both grow rapidly and have traits desired in industrial wood. These changes eliminate the traditional ties between forest processing and locations with abundant natural forests. Today, globalization allows investments, capital flows, and emerging technologies to move easily into regions where they are expected to be particularly productive. It also provides for the ready utilization of the human resources of foreign countries. Thus, offshore outsourcing is closely associated with globalization. The easy flow of productive factors results in the production of goods and services based on a mix of in-country and external contributions to production. In forestry, this process takes on an additional dimension in which the basic resource itself, the forest, can be relocated to capitalize on the cost advantages of particular regions. Additional changes have been driven by modern biotechnology, which has dramatically increased the variety of areas where productive forests can be grown, as well as overall forest productivity. We find that there is substantial evidence in this country-level forestry data to support our hypotheses of how globalization has begun to reshape the forest products industry. However, the evidence suggests that the changes have been more prominent in the pulp industry than in the structural wood sector.