Substitution Between Tropical and Temperate Sawlogs

Abstract

Abstract Japan is the world's most important log importer. This paper develops a multi-output profit function framework to quantify the impacts of economic factors on Japan's imports of sawlogs from two temperate regions, North America and the Soviet Union, and one tropical region, the South Seas. Econometric results indicate that sawlogs from the three regions were substitutes for each other during 1970-87. Imports from each region were significantly affected by relative net prices (lumber price minus log input cost per unit of lumber), with cross-net-price elasticities between temperate and tropical categories increasing over time. Technical change (the residual trend after controlling for price effects) was significant and biased against imports from the South Seas. These findings suggest that scarcity of tropical hardwood sawlogs induced by deforestation or restrictive trade policies will lead to increased demand for temperate softwood sawlogs. Current forest-sector models, which do not treat hardwoods as substitutes for softwoods, fail to capture this emerging feature of global trade in forest products. For. Sci. 37(5):1484-1491.