3. International Trade

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We have already introduced the possibility of international trade and the concept of substitute. Let us now study, what kind of implications international trade has on regional environmental policy measures as illustrated in Figure E15. International trade of timber and wood products basically links regional timber markets together. Substitution and complementarity markets are interconnected: where initial change in one market tends to spread out as changes in other markets as well. Therefore, we again have an example of general principle in economy, namely "everything affects everything."

In the case of regional forest conservation we can see that regional forest protection causes a rightward shift in demand for substitute-imported timber (Figure E16). The regional conservation policy resulted in a price increase, which in turn increased the demand for substitutes. Therefore, due to the links between different markets, a part of the "conserved" timber is replaced by timber from other regions (as well as by other materials, i.e., by bricks and increased utilization of waste paper). Sedjo (1993) claimed that in past attempts to determine, quantitatively, the consequences of forest conservation, a major element has gone missing:  global environmental consequences. He continued by stating: "In fact, few people understand that in a global economy linked by international trade, a significant reduction in timber harvests in one region will most probably precipitate actions in other regions that may be detrimental to the global environment".

Figure E16: Global consequences of regional forest protection: A. Leftward shift in regional timber supply. B. Rightward shift in demand for substitutes (imported timber from other regions)

More recently, Perez-Garcia (1995) estimated that large-scale forest conservation in the western parts of the United States and Canada have increased timber demand in Europe by several millions of m3. Thus, by increasing regional forest conservation without simultaneously decreasing demand for wood (products), will necessitate an increase in foreign imports, introducing a negative impact on forest biodiversity elsewhere (i.e., export of ecological impact) (Mayer et al. 2006). In conclusion, by formulating national (forest) policies, policy makers in general, have to be aware of such leakage possibilities generated by international trade.

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