Academic journal article Journal of Business Administration

Comparative Advantage in Timber Supply: Lessons from History and the Timber Supply Model

Academic journal article Journal of Business Administration

Comparative Advantage in Timber Supply: Lessons from History and the Timber Supply Model

Article excerpt

The discussion of comparative advantage is a discussion of the costs of production relative to market price. The countries, firms, or individuals with a comparative advantage are those with the production costs less than or equal to the market price at the given exchange rate. In addition, to use resources where they have a comparative advantage is to utilize them at their most highly valued use. The study of past timber harvests, which is a study of past comparative advantage in timber production, is useful because it provides insight into the future and it identifies the economic principles involved. The process of generating forecasts of future timber harvests uses these principles and generates predictions of future comparative advantage. In addition, this study of anticipated comparative advantage contains information about the role of the various regions in this supply process.

The paper is divided into three sections and a final summary. We first state some episodes from history that display the characteristics of comparative advantage in timber supply. In the second section we interpret these episodes to identify the economic principles involved. The third section contains our predictions for future comparative advantage. These are derived using our Timber Supply Model (Sedjo and Lyon 1990).

EPISODES FROM HISTORY

Historically, forest resources have been largely obtained by drawing down the naturally generated old-growth forest. The Mediterranean basin was once occupied by large forests. The cedars of Lebanon were renowned in the ancient world for their size and utility for construction. Over the millennia the forest resource of the Mediterranean region was gradually mined as, first, the accessible low-lying forests were removed and, later, those less accessible forests were removed (Thirgood 1981). Simultaneously, many of these forestlands were converted to other and uses, such as pasture and cropping. The experience of other regions is similar in the sense that cutting progressed from more to less accessible sites and many forestlands were converted to other uses. For example, in the U.S., first the accessible forest of New England and the mid-Atlantic states were cut, then the Lake States and the pineries of the South, and, finally, the Pacific Coast were the target of logging to meet the industrial wood needs of the nation (Clawson 1979). These historical examples demonstrate the process of utilizing existing accessible stands and then obtaining additional wood by moving to new, typically less accessible forests, which may be in a more remote location or in more difficult terrain. In recent years, Canada has experienced a similar shift, as the focus of logging shifted from the maritime provinces in the east to the accessible parts of the coastal forest of British Columbia and then to the less accessible forests of the interior of British Columbia and Alberta.

Some of these logged-over areas were converted to agricultural or urban uses. However, at most times and places forests will regenerate naturally if the process is left undisturbed. Examples of massive natural regeneration abound. The denuded forests of New England and the Lake States have gradually been largely replaced by naturally regenerated second-growth forests. New England, which was less than 25 per cent forested at the time of the Civil War, is now over 80 per cent forested. In the U.S. South, vigorous forests now grow where cotton and tobacco fields flourished for decades. A similar process of return to forest has occurred in many places in Europe and the Nordic countries, and the total forest area of Europe has expanded over the past several decades as forests reclaim lands no longer useful in agriculture.

Associated with this natural regeneration of forests is the resurrection of industrial wood production in previously depleted regions. In the U.S., for example, the centre of the industrial wood production is shifting from the West back to the South. …

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