The Effectiveness of an Export Restriction on Logs

Abstract

Although others have discussed the U.S. federal log export restriction initiated in 1968 and 1974 (relevant discussions and studies include Hamilton, Weiner, Stanford Research Institute, Darr, Haynes, and Wiseman and Sedjo), no theoretical or empirical studies have been done on the impact of past or current restrictions on log exports. The major objectives sought by advocates of export restrictions-lower domestic lumber prices, a larger processing industry in general, and higher employment-can occur only if total log exports are reduced. The analysis here concerns the effectiveness of federal log export controls in achieving these objectives. First, we briefly review log trade flows and the nature of the export restrictions. Lindell's discussion contains detailed information on the history and nature of the restrictions. Wiseman and Sedjo provide more detailed information on log and lumber trade flows. Next, a market model is developed to examine conditions for, and predicted market price effects of, log export restrictions. Then log price data are used to test the hypothesis that the restrictions actually have reduced log exports. Our general conclusion is that, for major grades that constitute most exports, we are unable to find evidence that past and present U.S. log export restrictions are effective. However, the evidence suggests that the restrictions on higher grades are effective. Virtually all U.S. softwood log exports come from Washington, Oregon, California, and Alaska. Washington is the dominant exporter, accounting for about two-thirds of the total. Oregon exports the bulk of the remainder, with California and Alaska together accounting for less than one-tenth of all exports. The major species exported are Douglas fir and hemlock. Some varieties of cedar, spruce, and fir also are exported. Almost half of the world's international softwood log trade consists of exports from the Pacific coast states, of which about 90%0 goes to Japan. In the 1970s, exports fluctuated between 1,700 and 3,000 million board feet, averaging about 15% of the annual harvest. The first major official action on log exports was a joint determination by the secretaries of agriculture and interior in 1968.1 Stating that a log export restriction was necessary to maintain a viable domestic wood-processing industry, the determination limited log exports from federal lands-under U.S. Forest Service and Bureau of Land Management (BLM) administration-in western Washington and western Oregon to 350 million board feet annually. This was superseded in the same year by the socalled Morse Amendment to the Foreign Assistance Act which maintained the 350 million board feet quota and extended the control area to the entire western half of the United States. The restriction now in effect began as a rider to the Department of the Interior and Related Agencies Appropriation Act of that year. This rider, which has been attached to all subsequent annual appropriations bills, results in a complete prohibition on log exports from federal lands in the western United States. To implement the rider, both the Forest Service and the BLM adopted regulations intended to prevent the substitution of federal timber in domestic use for nonfederal timber which is exported. Details of these regulations are not discussed here, except to note that they neither prohibit existing firms from increasing their exports of nonfederal logs nor prohibit new firms from making nonfederal log exports. Such firms are merely constrained in their purchases of federal logs.