Impacts of Illegal Logging Restrictions on China’s Forest Products Trade

Illegal timber harvesting is unsustainable and takes place around the world and in virtually every country that engages in forest harvesting. However, while the extent of these activities may be quite limited or negligible in some countries, in others they can lead to significant forest depletion, and subsequent biological and economic losses. China’s wood products industry has become reliant on imports of logs to fuel its growth. Its rise as the predominant wood manufacturing center in the world raises an interesting question regarding the role illegal logging has had in developing the sector in China and how policies that might limit the level of illegal logging activity may affect its future development. The objective of this study was to examine the effects of the removal of illegally-logged resources from China’s imports originating in five of China’s primary source countries for logs on China’s domestic production, consumption and trade flows, and the producing countries surplus measures. This was performed by first applying a graduated tariff to coniferous imports from China’s largest supplier. Second, changes in the supply curves were applied to production in China’s largest sources for non-coniferous logs. Effects depended on how restricted China’s own domestic supply might be in the future. Under a tariff scenario, when China’s timber equation was set to mimic the current harvest quota, China had little flexibility in terms of shifting from relying on imports to increasing production. Shifting to a more self-sufficient production system resulted in the decline in the volume of imports. When shifting the supply curves in among non-coniferous supply countries, it was demonstrated that given a highly inelastic supply in China, it would continue to import large volumes from these countries, but prices increased significantly. In these case, some countries increased their exports over a no-restriction scenario and China became increasingly reliant on an even fewer number of sources. A more elastic supply in China dramatically increased production there and reduced the need for imports. The study concludes that China may have the ability to respond positively to policies that are aimed at reducing illegal logging activities by developing internal policies to become more selfsustaining and importing from regions that have greater levels of forest management in place as long as cost increases due to the reduction in illegal activity lead to higher domestic prices and China’s policies adapt to these market signals. Illegal Logging in the Asia-Pacific region As China’s wood products industry has expanded, it has become reliant on imports of logs to fuel its growth. Between 2003 and 2009, China depended on imports to supply an average 33% of its total consumption of logs (SFA 2010). Many of these imports came from resource-rich countries with low incomes and poor records of environmental regulatory enforcement and high levels of