are log export restrictions on private forestland good public policy? an analysis of the situation...

Are Log Export Restrictions on Private Forestland Good Public Policy?

An analysis of the situation in British Columbia

by

David Haley, Ph.D., RPFProfessor, Faculty of Forestry

University of British Columbia

Vancouver, British Columbia, December 2002

Report commissionedby the Private ForestLandowners Association

www.pfla.bc.ca

ARE LOG EXPORT RESTRICTIONS ON PRIVATE FORESTLAND GOOD PUBLIC POLICY?

Contents

List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ii

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iii

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iv

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1General Context and Purpose of Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1Organization of Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

The Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2Profile of the Private Land Forestry Sector in British Columbia . . . . . . . . . . . .2Administration of Private Forestland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Assessment Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3Private Land Forest Practices Regulation . . . . . . . . . . . . . . . . . . . . . . . .3

Log Export Restrictions on Private Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3Federal/provincial jurisdiction over log exports . . . . . . . . . . . . . . . . . . . .4Federal regulations controlling log exports from British Columbia . . . . . . .4Differences between federal and provincial regulations . . . . . . . . . . . . . . .5Additional compliance costs faced by private forestland owners . . . . . . . . .6

Characteristics of Log Exports from Private Lands . . . . . . . . . . . . . . . . . . . . .7Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Species . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Domestic/export price differentials . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Net benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Who bears the costs and who benefits from current regulationscontrolling exports of logs from private forestland in British Columbia? . . . .9How would the costs and benefits of removing restrictions on log exports from private land be distributed among various segmentsof British Columbia society? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10The impact on employment of lifting federal log export restrictionson private land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Discrimination by the Canadian government against private forestland owners in British Columbia . . . . . . . . . . . . . . . . . . . . . . . . .11

Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12Strengthening title to private forestland . . . . . . . . . . . . . . . . . . . . . . . .12Diversification of the province’s tenure system . . . . . . . . . . . . . . . . . . . .12The softwood lumber trade dispute . . . . . . . . . . . . . . . . . . . . . . . . . . .13Promoting increased efficiency in the forest products processing sector . . . .13Facilitating improved environmental protection . . . . . . . . . . . . . . . . . .14

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

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List of Figures

Figure 1. Forestland Ownership in British Columbia . . . . . . . . . . . . . . . . . . . . . . . . .2

2. Productive Private Forestland as a Percentage of TotalProductive Forestland by Province . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

3. Log Exports from British Columbia: 1992-2001 . . . . . . . . . . . . . . . . . . . . .7

4. Benefits and Costs to the British Columbia Economy of Providing Unrestricted Access to Japanese and United States Log Marketsto Private Forestland Owners (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

5. Canadian Log Imports and Exports: 1991-2001 . . . . . . . . . . . . . . . . . . . .14

6. British Columbia Log Imports and Exports: 1991-2001 . . . . . . . . . . . . . . .14

7. British Columbia Net Log Exports: 1991-2001 . . . . . . . . . . . . . . . . . . . . .14

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AN ANALYSIS OF THE SITUATION IN BRITISH COLUMBIA

iii

• If federal log export restrictions on private forestlandare lifted:- Incentives will be created to invest more in timber

production on private forestlands. More capital,both domestic and foreign, will flow into BritishColumbia’s timber growing sector, resulting inincreased employment and timber supplies.

- Domestic log prices will move closer to internationalmarket levels, encouraging the wood processingindustry to be more innovative, efficient andglobally competitive.

- Total employment in the forest sector may increaseover the longer term as forestland, both private andpublic, is more intensively managed and a moreefficient, globally competitive wood processingindustry creates more full-time, well-paying jobs.

- Greater employment stability will be brought tothe forest sector as log exports help maintain jobsduring cyclical downturns in forest products markets.

- “Value added” wood processing in BritishColumbia will be stimulated as globally determinedlog prices encourage firms to economize on the useof wood by using logs to produce those productsthat maximize their net value.

- Log export policies in British Columbia will bebrought in line with those in other Canadianprovinces and the United States. A major irritant inthe US/Canada softwood lumber trade dispute willthus be removed, increasing the probability of asolution that will benefit all Canadians.

- Environmental quality and standards of forestmanagement will be enhanced as higher log prices,by increasing the net revenues of timber growers,both private and public, stimulate more investment in silviculture, reforestation and environmental protection.

- Improved silvicultural management of private landswill lead to increased productivity, higher allowableharvests and an enhanced flow of logs to competitive,regional log markets.

• Log export restrictions on private forestland inBritish Columbia is poor public policy. It is inefficient,inequitable and is not founded on legitimate economic,social or environmental arguments.

• The Government of Canada should eliminaterestrictions on the export of logs from privateforestland in British Columbia. To do so requires nolegislative amendments. A simple administrativedecision would ensure that British Columbia’s privateforestland owners are treated identically to theircounterparts in other provinces.

Highlights

• There are approximately 2.1 million hectares ofprivate forestland in British Columbia (4.1% ofthe productive forestland base) held by more than20,000 landowners.

• Private forestlands contribute about 11% of thetotal provincial harvest; their long-term sustainabletimber harvest is, conservatively, 7.3 million m3

per annum and they currently provide directemployment for about 9000 people.

• Private forestlands are a source of innovativemanagement practices; they attract more investmentin timber management than public lands andprovide a supply of logs to competitive, regionaltimber markets.

• Log exports from provincial Crown land inCanada are controlled by the provinces. Log exportsfrom federal land, Indian reserves and private landare controlled by the federal government.

• British Columbia is the only province in Canadawhere the Government of Canada chooses toexercise its authority to control the export of logsfrom private land.

• British Columbia is the only jurisdiction amongindustrialized western countries where privateforestland owners are not free to sell logs – theirfinal product – into the market of their choice,either domestic or foreign.

• Canada is a net importer of logs. Between 1991 and2001, for every cubic metre of logs exported, 4 cubicmetres were imported. In three of the last sevenyears British Columbia was a net importer of logs.

• Federal policies that restrict exports of logs fromprivate land in British Columbia impose highcosts on British Columbia’s landowners that arenot borne by their counterparts in other parts ofthe country.

• Policies that restrict log exports from privateforestland create more costs for British Columbiathan benefits. They reduce private forestland owners’revenues and land values and, in so doing, reducefederal and provincial income taxes, provincialsales taxes, GST, and provincial and municipalproperty taxes. By depressing domestic log pricesthey very significantly reduce the returns to BritishColumbians from the sale of trees on public land.

• Log export restrictions transfer wealth from timberowners, both the Crown and private sector, toprivate forest products manufacturing companies,which enjoy lower raw material costs than theywould experience in the absence of such restrictions.


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Executive Summary

Purpose of StudyBritish Columbia is the only province in Canada wherethe federal government exercises its constitutional andstatutory authority to control the export of logs fromprivate forestlands. This policy discriminates againstprivate forestland owners in British Columbia by significantly reducing their net incomes, the returnsthey realize on investments in timber production andthe market value of their lands. The purpose of thispaper is to analyze this situation in terms of its economicefficiency, equity or fairness, and policy implications.

The Facts• There are approximately 2.1 million hectares of

private forestland in British Columbia held by morethan 20,000 owners ranging from large corporationsto small firms and individuals. Although privateland comprises only 4.1% of the total provincialforestland base, it plays a significant role in BritishColumbia’s economy.

• Only in Newfoundland and Saskatchewan do productive private forestlands comprise a smallerproportion of the provincial forestland base than inBritish Columbia.

• Control over log exports from Canada is shared byprovincial and federal governments. Generally, logexports from provincial Crown land are dealt withby the provinces while those from federal land,Indian reserves and private land are administeredunder federal statutes. All provinces, exceptSaskatchewan, control log exports from provinciallyowned land. However, only in British Columbiadoes the federal government choose to exercise itsauthority to restrict log exports from private lands.

• In British Columbia, all logs produced from Crownland, from private land granted after March 12,1906, and from all private land within tree farmlicence areas must be manufactured in BritishColumbia unless the landowner receives an exemption.Logs from private lands that do not come underprovincial jurisdiction must receive a federal permitbefore they can leave the country. In essence, logexports from all private land in British Columbiaare restricted.

• Canada is a net importer of logs. Between 1991 and2001, Canada’s log exports amounted to 17.3 millionm3 compared to imports of 69.7 million m3. In threeof the last seven years British Columbia was a netimporter of logs.

• In order to obtain a federal log export permit, itmust be demonstrated that the logs in question aresurplus to the needs of the province. To accomplishthis, the timber concerned is advertised by theBritish Columbia Ministry of Forests. Export applications and offers received are then reviewed bythe Federal Timber Export Advisory Committee(FTEAC). If an offer is received that, in the opinionof the committee, is at fair market value, a recommendation is made to the Department ofForeign Affairs and International Trade that a permitto export be withheld. Before logs are advertised onthe Coast, they must be harvested, scaled and sortedto conform to conventional domestic log marketingpractices. In the Interior, applications to export canbe made for standing timber. Application requirementsand the considerable delays in processing and issuingpermits give rise to considerable compliance coststhat reduce private landowners’ effectiveness inmarketing logs internationally and create additionalbarriers to trade.

• Between 1992 and 2001, the volume of logs exportedfrom British Columbia amounted to only 3% of thetotal provincial harvest. Exports from private landscoming exclusively under federal jurisdictionaccounted for 33% of total log exports.

• For certain species and grades of log, internationalprices are considerably higher than domestic prices.For example, current prices for coastal hemlock logsin the Japanese market, net of additional handlingcosts, are 65% above domestic prices. Hemlock logs from the southeastern Interior fetch a price atmills in the United States that is 100% above thedelivered price at domestic mills within a similarhauling distance.


AnalysisEfficiency• Policies that restrict log exports from private land

create more costs for British Columbians than benefits.Forest landowners receive lower revenues from thesale of logs, their returns on investment in timberproduction are reduced and the market price of theirland is depressed. By lowering domestic log prices,restrictions on log exports reduce the revenue flowingto British Columbians from stumpage sales on publicforestland and also returns to those who harvest timberon public land and sell their logs in domestic markets.The people of British Columbia forgo further revenues in the form of income taxes, sales taxes andproperty taxes on private forestland. The benefits oflog export restrictions on private land accrue to thetimber products processing sector, which enjoyslower raw material costs than it would experience inthe absence of such restrictions.

• A recent analysis showed that in 1997 log exportrestrictions on private land cost British Columbiaat least $295 million dollars over the short run inforgone net benefits. Losses in the provincial government’s stumpage revenues alone were estimatedat $173 million: a significant amount of income fora government striving to maintain public serviceswhile holding budgetary deficits in check.

Equity• Lifting log export restrictions on private forestland

in British Columbia would not create serious equityproblems. The benefits of abolishing these restrictionswould be distributed broadly among private forestlandowners, the British Columbia government, andoperators logging Crown timber and selling logs indomestic markets. Short-term costs would be borneby firms manufacturing forest products. However,over the longer term, as domestic log prices rosetowards international levels, this would stimulategreater efficiency in wood products manufacturingin ways that would benefit both the industry andthe province.

• Removing federal export restrictions on logs fromprivate lands might temporarily decrease employmentin the forest products manufacturing sector.However, employment in logging would rise substantially, and new and expanded employmentopportunities would emerge in processing logs forexport (bucking, trimming, sorting), transportationto quayside, loading, marketing and managing privateforestland. Over time, as the manufacturing sectoradjusts to world market log prices, it will becomemore efficient, innovative and globally competitive.Higher raw material prices will provide strongincentives to produce the greatest value from eachlog processed, and the resulting structural changeswill likely increase the number of people employedper thousand cubic metres of logs harvested. Theresult of all these adjustments on employment aredifficult to forecast but the available evidence,including the situation in other jurisdictions wherelog export restrictions are absent, suggests that thenet result of lifting log export restrictions on privateland could be more full-time, well-paying jobs in theforest sector rather than fewer.

• Log exports perform a valuable social and economicfunction by cushioning the impact on the labourforce of cyclical downturns in markets for manufactured forest products and bringing greateremployment stability to the notoriously cyclicalcommodity-based forest products industry. Whenthe processing sector faces economic downturns andmills reduce output or close down, log exportsensure that a significant portion of the workforceremains employed and continues to contribute toprovincial and local economies.

• The most significant inequity associated with logexport controls is that imposed on private forestlandowners in British Columbia by the Governmentof Canada. - British Columbia is the only province in Canada

where the federal government wields its constitutional and statutory authority to restrictthe export of logs from private land.

- Furthermore, British Columbia is the only jurisdiction among industrialized western nationswhere private forestland owners are not free to selllogs – their final product – into the markets oftheir choice.

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Policy implications• Removal of federal log export restrictions would

create incentives to invest in timber production onprivate lands and increase the flow of capital intoBritish Columbia’s timber growing sector from bothdomestic and international sources. This wouldresult in more jobs and increased supplies of industrialwood in the future.

• Practically the only elements of diversity in BritishColumbia’s forest tenure system are those forestlandsheld by private owners. The role of private lands asa counterbalance to British Columbia’s highly concentrated and uniform Crown forest tenure systemis invaluable. Private owners, who manage theirlands to achieve a broad spectrum of managementobjectives using a range of traditional and innovativetechniques, add variety and resilience to an otherwisehomogenous, bureaucratically run system. Removalof log export restrictions on private forestlandswould greatly strengthen the private forestry sectorand ensure that private lands achieve their fullpotential within the provincial economy.

• Eliminating federal log export restrictions on privateland in British Columbia would bring log exportpolicies in Canada in line with those in the UnitedStates and, in so doing, would remove a major irritant in the Canada/US softwood lumber tradedispute, thus increasing the probability of a solutionthat would benefit all Canadians.

• Removal of private log export restrictions wouldmove domestic log prices closer to those prevailingin international markets. Rising domestic priceswould provide manufacturers with incentives toeconomize on the use of wood by seeking andintroducing innovative technology and ensuring thatlogs were sorted and used to produce those productsthat maximize their net value. The net result, overthe longer term, would be a more efficient, resilientindustry better equipped to compete in global markets.

• The view that lifting log export controls on privateland would impede the growth of the “value added”wood products industry is unfounded. Experiencesuggests that rising wood costs provide incentives toget the highest value from each log. In other words,allowing private log exports is more likely to stimulatethe growth of the “value added” sector than hinder it.

• There is no evidence to suggest that lifting federallog export restrictions on private forestland willhave negative environmental consequences. On thecontrary, increased returns to private timber growingcould improve forest management and stewardshipand could well enhance the quality of forest environments. Most of British Columbia’s forestlandscome under federal and provincial regulatory regimesdesigned to protect forest ecosystems and ensure thesustained production of both timber and non-timberforest products. The owners of all private landsclassed as Managed Forest Land under theAssessment Act must comply with the Private LandForest Practices Regulation, which sets out specificforest practices standards relating to soil conservation,fish habitat, water quality, critical wildlife habitat andreforestation. Performance is monitored by means ofthird party independent audits, and non-complianceattracts substantial penalties. British Columbia’senvironmental protection legislation and regulations,for both public and private lands, are more rigorousand stringently enforced than in any other Canadianprovince, where private log exports are not constrainedby either federal or provincial governments.

Conclusions• This review and analysis of federally imposed export

restrictions on private forestland in British Columbialeads inescapably to the conclusion that they shouldbe removed. The policy is inefficient, inequitable andhas serious negative consequences for the structure,efficiency and competitiveness of the forest productsmanufacturing sector. Its reversal would benefit amajority of Canadians and correct a blatant andunwarranted inequity.

• Removal of restrictions on the export of logs fromprivate land in British Columbia requires no legislativeamendments. The federal government simply has tomake an administrative decision that, under theExport and Import Permit Act, treatment of privateforestland owners in British Columbia will be identical to the treatment received by their counterparts in other provinces.

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1


Are Log Export Restrictions on Private Forestland Good Public Policy? An analysis of the situation in British Columbia

by David Haley, Ph.D., RPF

Introduction

General Context and Purpose of StudyAlthough forests in British Columbia are predominantlypublicly owned (Figure 1), privately owned forestlandsplay a very significant role in the province’s economy.Private forests are not only an important source ofindustrial timber, revenue and jobs, but introducediversity of management objectives and practices to anotherwise monolithic, centrally administered system.Private forestland attracts more investment in intensivetimber management than public land,1 it is a source ofinnovative management practices and it provides a supply of logs to competitive regional markets – theexpansion of which has become an important objectiveof public policy.

The economic health and resilience of BritishColumbia’s forest sector, which remains the province’sprincipal engine of economic prosperity, would clearlybe best served by public policies that encourage owners

to manage their lands efficiently and maintain theirproductivity over the long term. Regulation of private landto protect forest environments and ensure the sustainedproduction of public goods and services, such as high-quality water, wildlife habitat and erosion control, arenow widely recognized as sound public policy. However,regulations that control the production and marketingof private goods, beyond the demands of necessaryenvironmental protection, are counterproductivemeasures that undermine market incentives for efficient,socially responsible forest management and weaken theeconomy. Restrictions on the export of logs producedon private land in British Columbia, the focus of thisstudy, is an important example of such a policy.

In this paper it will be shown that log exportrestrictions on private forestland in British Columbiaare ill conceived. They reflect the objectives of specialinterest groups promoted at the public’s expense, andare not founded on legitimate economic, ethical orenvironmental arguments. The costs of log exportrestrictions to the provincial economy far exceed theireconomic benefits. They unfairly discriminate againstprivate forestland owners, help promote inefficiency inthe forest products manufacturing sector and, ratherthan contributing to the maintenance of environmentalquality, are likely to result in accelerated environmentaldegradation.

Organization of PaperThe paper will be presented in three sections: Facts,Analysis and Conclusions.

The first section will describe British Columbia’sprivate forestland base, the administration of this land,the regulation of log exports and the characteristics ofthe trade in logs from private land.

In the second section, the implications of logexport controls on private forestland in BritishColumbia will be analyzed from efficiency, equity andpublic policy perspectives.

The concluding section will draw together the evidence presented in sections one and two in order toaddress the question posed by the title of the paper –are log export restrictions on private forestland inBritish Columbia good public policy? Based on thisdiscussion, recommendations for policy amendmentswill be made.

1 See Zhang, D. 1996. “Forest Tenures and Land Value in British Columbia,” Journal of Forest Economics 2(1).

Excerpt from Royal Commission Report

The official rationale for restrictions on exports oflogs and pulp chips appears to be the promotion ofdomestic secondary manufacturing, an aim thatundoubtedly has wide support. However, my evidence and analysis of this issue lead me to theinescapable conclusion that, whatever the benefitsof increased manufacturing in the province,encouragement of it by means of restrictions onexports of logs and chips reflects a misunderstandingof the full impacts of such policies in the context ofthe provincial economy.

Report of the Royal Commission on Forest Resources.Peter H. Pearse, Commissioner. (1976)

There are approximately 2.1 million hectares ofprivate forestland in British Columbia held by morethan 20,000 owners. Ownerships range from just a fewhectares in the smallest family and individual holdingsto several hundred thousand hectares in the larger corporate holdings. The contributions of these landsto the provincial economy significantly exceed theirproportional representation in the provincial forestlandbase. Between 1992 and 2001, timber from privatelands accounted for almost 11% of the total provincialharvest. On the Coast during this period, approximately24% of timber harvested originated from private holdingsand in the Interior 6%. The Private Forest LandownersAssociation (PFLA) has estimated, conservatively, thatthe long-term sustainable timber harvest from privateforestlands in the province is about 7.3 million m3 perannum, or about 10% of the current annual allowablecut (AAC) from provincial Crown lands.

Specific management objectives vary among privateforestland owners, and core values and objectives arewidespread. In 1994, a study by Baskerville found thesecore values to include the protection of private propertyrights and values and landowners’ freedom to manage.2

The management objectives of most private forestlandowners in British Columbia, as in other jurisdictions,are to cover land carrying charges and production costsand, ideally, generate sufficient revenues to provideacceptable rates of return to capital investments. Toachieve these goals, the most successful strategy is toinvest in the establishment and tending of commerciallyvaluable tree crops, and harvest such crops at intervals thatmaximize their net worth given growing site characteristics,market conditions and specific management objectives.Like all forestland, private holdings generate many othervalues, such as non-timber botanical products, fish,wildlife, recreational opportunities and high-quality water.

The final, finished products of forestland owners’substantial and risky long-term capital investments inland and trees are logs. Consequently, their financialreturns and, ultimately, the viability of their enterprisesdepend upon the prices they can obtain for their logs inthe markets that are available to them.

Managing private forestlands and tending and harvesting the timber they produce provide substantialemployment opportunites and support a broad range ofsuppliers and services, often in remote rural areas of the


The Facts

Profile of the Private Land Forestry Sector in British Columbia Ninety-six percent of Canada’s forests are publicly owned.British Columbia follows the national pattern of forestlandownership, with 4% owned privately and 96% publicly.Only 1% of public forestland, including Indianreserves, comes under federal ownership (Figure 1).

Figure 1. Forestland Ownership in British Columbia

Source: Canadian Council of Resource Ministers: National Forestry Database

Productive forestland in British Columbia is 95.1%provincially owned, 4.1% private and less than 1%federal. Only in Newfoundland and Saskatchewan areproductive private forestlands a lesser proportion of thetotal provincial forestland base than in British Columbia(Figure 2).

Figure 2. Productive Private Forestland as a Percentage of Total Productive Forestland by Province

Source: Canadian Council of Resource Ministers: National Forestry Database

Federal 1%

Private 4%

Provincial 95%

BC

Alta

Sask

Man

Ont

Que

NB

NS

PEI

Nfld

0 10 20 30 40 50 60 70 80 90 100Percent

2

4.1

5.4

3.2

7.2

13.2

14.5

50.9

71.8

92.8

1.7

2 Baskerville, G.L. 1994. Forest Practices Code and Land ReserveForest Act. Report prepared by Dr. Gordon L. Baskerville for theBritish Columbia Ministry of Forests.

province where opportunities are otherwise limited. Ithas been estimated that about 9,000 people areemployed directly in the private land forestry sector andthat total employment attributable to the sector couldbe in excess of 24,000.

Administration of Private ForestlandSince the 1950s, successive governments in BritishColumbia have viewed the regulation of private forestlands as an important component of public policy.The objectives have been to protect the land base andensure that it produces sustainable timber harvests overthe long term.

Today, two important statutes regulate the use and management of private forestlands in the province– the Assessment Act and the Private Land ForestPractices Regulation.

Assessment Act Under the British Columbia Assessment Act, forestland isdefined as land that has its highest and best use in theproduction and harvesting of timber. For taxation purposes forestland is classified as “Managed ForestLand” or “Unmanaged Forest Land.”

Managed Forest Land refers to privately ownedforestland that is being used for the commercial production and harvesting of timber. To be eligible forthis classification the owner must, first, successfullyapply to have the land put into the Forest Land Reserve(see below) and have made an acceptable written commitment to manage the land. Unmanaged ForestLand is simply forestland that has not been assigned“Managed” status.

The valuation of both managed and unmanagedforestland is similar. The value of the land itself isappraised with no consideration for the trees on theland. The basis for valuation of the land is its potentialfor growing and harvesting trees taking into accountsoil productivity, location, topography, accessibility andarea. Only when the trees are harvested is their assessedvalue added to the value of the land. Managed ForestLand is taxed at a lower rate on its assessed value thanUnmanaged Forest Land.

Approximately 45% of British Columbia’s privateforestland is classified as “Managed” for propertyassessment and taxation purposes. Three percent isUnmanaged Forest Land and the balance is in forestedresidential land and forested farmland categories

Private Land Forest Practices RegulationThe Private Land Forest Practices Regulation under theForest Land Reserve Act was introduced in 2000.

This regulation applies principally to private landthat is classified as Managed Forest Land under theAssessment Act. Landowners are required to grow andharvest a commercial crop of trees and the right to doso without restriction by local government regulationis protected under this statute. The regulation sets outspecific forest practices standards, that can be varied inappropriate circumstances, relating to soil conservation,fish habitat, water quality, critical wildlife habitat andreforestation. Performance is monitored by means ofthird party independent audits, and non-complianceattracts substantial penalites. The regulation is currentlyadministered by the Agricultural Land Commission(formerly Land Reserve Commission). As a result ofthe provincial government’s core services review, government concluded that the Forest Land Reserve Actwould be phased out and the administration of thePrivate Land Forest Practices Regulation would be transferred to a new agency sometime in 2003.

Log Export Restrictions on Private LandHistoryLog export controls have a long history in BritishColumbia, dating back to 1901 when legislation wasintroduced to restrict the export of unmanufacturedtimber from Crown lands. On March 12, 1906, thisapproach was extended to timber cut from all privatelands that were Crown granted subsequent to that date.These measures were incorporated under Part 10 of thefirst Forest Act in 1912 – where they remain to this day.

Until the Second World War, logs produced fromprivate lands granted on, or prior to, March 12, 1906,were freely exported from the province. During the war,the federal government, in the interests of nationalsecurity, required exporters of unmanufactured logs,from all classes of forestland, to obtain a permit underthe War Measures Act. After the war, authority for federal control over log exports passed to the Exportand Import Permit Act, however, until 1969 permitswere issued without restriction. In that year, the federalauthorities began to restrict log exports from privateland in British Columbia that did not come underprovincial authority. The reasons for this change indirection are not clear, especially since similar changeswere not made in other provinces, where logs produced

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all logs exported from Canada require federal exportpermits for all destinations. In practical terms, controlover log exports from provincial Crown lands isdealt with provincially while log exports from federalCrown land, Indian reserves and private land are dealtwith under federal statutes.

All provinces, with the exception of Saskatchewan,have legislation controlling exports of unmanufacturedforest products from provincial Crown land. But onlyBritish Columbia controls such exports from private land.In each province with log export controls, provisionsare made for ministerial exemptions.

The federal government does not exercise itsauthority to restrict log exports anywhere except forthose private lands in British Columbia that do notcome under provincial jurisdiction. This does not reflectthe unique national importance of private forestland inBritish Columbia. The province has less than 9% ofCanada’s productive private forestland and in all otherprovinces, except Newfoundland and Saskatchewan, pri-vate forestland comprises a higher proportion of thetotal productive forestland base (Figure 2).

The British Columbia Forest Act (see sidebar) provides that timber, including wood residue, producedfrom Crown land, from private land granted afterMarch 12, 1906, and from all private land within treefarm licence areas must be manufactured in BritishColumbia unless it receives an exemption. Timber fromprivate lands Crown granted on or before March 12,1906, except such lands within tree farm licences, mustreceive a federal permit before it can leave the country.In essence log exports from all private land in BritishColumbia are restricted.

Federal regulations controlling log exports from British ColumbiaIn order to obtain a federal log export permit, it mustbe demonstrated that the timber is surplus to the needsof the province. This criterion is identical to one of thegrounds for exemption provided for under section 128 (3)of the British Columbia Forest Act and, in fact, federalauthorities rely upon the province to implement thenecessary inspection, enforcement and advertising procedures. Before permission to advertise logs is grantedon the Coast they must be harvested, scaled, sorted,and boomed or decked to conform to conventionaldomestic log marketing practices. Booms or parcelscontaining more than 15 thousand m3 will not beaccepted for export consideration. In the Interior, export

from private land remained unrestricted – a situationthat persists to the present day. In 1998, the CanadianDepartment of Foreign Affairs and International Tradeissued Notice to Exporters No. 102, which is specificallydirected at log exports from British Columbia. Thisdocument, that is currently in force, harmonizesprovincial and federal procedures for obtaining logexport permits.

Federal/provincial jurisdiction over log exportsControl over the export of unmanufactured timberproducts from the Canadian provinces is shared byprovincial and federal governments. Generally speaking,

4


Provincial Log Export Requirements

Excerpts from British Columbia Forest Act

Section 127 Unless exempted under this Part,timber that is harvested from Crown Land, from landgranted by the government after March 12, 1906 orfrom land granted by the government on or beforeMarch 12, 1906 in a tree farm licence area, andwood residue produced from timber, must be

(a) used in British Columbia; or

(b) manufactured in British Columbia.

Section 128 (1) The Lieutenant Governor inCouncil may exempt from section 127

(a) a species or kind of wood residue and may limitthe volume of a species of timber or kind ofwood residue to which the exemption appliesfor a period or successive period of time, and

(b) a volume of timber, whether or not harvested, or a volume of wood residue, on receiving anapplication in a form required by the minister.

Section 128 (3) An exemption must not be givenunder this section unless the Lieutenant Governor inCouncil or the minister, as the case may be, is satisfied that

(a) the timber or wood residue will be surplus to therequirements of timber processing facilities inBritish Columbia,

(b) the timber or wood residue cannot be processedeconomically in the vicinity of the land from whichit is cut or produced, and cannot be transportedeconomically to a processing facility locatedelsewhere in British Columbia,

(c) the exemption would prevent the waste of orimprove the utilization of timber cut fromCrown land.

permit applications are usually for standing timber,however, exporters can, by choice, apply for permits forfelled, scaled and sorted logs.

Whether in the form of logs or standing trees, thetimber is advertised in a bi-weekly list published by theBritish Columbia Ministry of Forests. After expirationof the advertising period, applications and offersreceived are reviewed by the Federal Timber ExportAdvisory Committee (FTEAC), which meets every 4-6weeks and comprises an ex officio recording secretaryfrom the British Columbia Ministry of Forests, a repre-sentative of the federal Export and Import ControlsBureau and six private members with experience in theBritish Columbia forest industry and drawn fromthroughout the province. Apart from the presence ofthe federal official, the composition of FTEAC is iden-tical to that of the provincial Timber Export AdvisoryCommittee (TEAC), which considers export permitapplications for Crown timber. Generally, if no offersare received, a recommendation that an export permitbe granted is made to the Department of ForeignAffairs and International Trade. If an offer is receivedfrom persons who own or operate a log processingfacility and is considered to be at fair market value,based on the committee’s perception of prevailing mar-ket conditions, the recommendation of the committeeis that a permit to export be withheld.

Applicants are not obliged to sell a parcel of logs tothe bidder at the bid price and, in most cases, they don’t.When an application to export logs from a standingforest is rejected, harvesting does not usually proceed.

Applications to export logs from Indian reserves arenot subject to the domestic surplus criterion and, inmost cases, permits are granted after the applicationformalities have been completed.

Differences between federal and provincial regulationsIn some ways, federal log export regulations are morestringent than those administered by the province.

Under provincial statutes, not all export applicationsare subjected to the “surplus” criterion. In fact, in 2001only about half the logs exported from provincialCrown land had to meet this test.

Section 128 (3) of the British Columbia Forest Act(see sidebar page 4), in addition to providing exemptionsfor timber that is surplus to domestic requirements,allows exemptions to be made for timber that “cannotbe processed economically in the vicinity of the landfrom which it is cut or produced, and cannot be

transported economically to a processing facility locatedelsewhere in British Columbia” or in cases whereexemption “would prevent the waste of or improve theutilization of timber cut from Crown land.” Suchexemptions, unlike those made on “surplus” grounds,require an Order-in-Council (OIC) to be issued. Theymay take the form of exemptions granted to individualoperators or be what the Ministry of Forests refers toas a “blanket exemption.”

Exemptions granted to individual operators are verycommon and generally provide a named company orindividual with permission to export logs of certainspecies of timber for a specific time period, frequentlyone year (see sidebar this page).

Blanket exemptions are more general in nature anddesigned to address regional objectives. They usuallyspecify the volume, species and grades of timber eligiblefor export from within a geographical area of the provincebut are not specific to named applicants. For example,in 2001 an OIC provided a three-year exemption fromlog export restrictions for 35% of the volume harvested,with the exception of cedar and cypress, from all landsubject to provincial log export regulations within threeForest Districts in the Prince Rupert Forest Region.

Logs exported from provincial Crown land aresubject to a fee in lieu of manufacture in the provincebased upon the difference between the export marketvalue and the domestic value. For those exports that must meet the surplus criterion this fee is 100% forconiferous sawlogs. However, for logs that are exportedunder the authority of OICs based on economic and/or

5


Orders-in-Council

Examples of individual exemptions (2002) for log exports

Order-in-Council 149

CRB Logging Co. Ltd. to export hemlock and balsamtimber for a one-year period.


McMahon Logging Ltd. to export timber excludingcedar and cypress for a one-year period.


Squamish Mills Ltd. to export hemlock and balsamtimber for a one-year period.

utilization criteria, the fee in lieu is set on a case by casebasis and may be as low as one dollar per cubic metre.

An important advantage log exporters on provincialCrown land have over private landowners on the Coastis that under individual or blanket OIC exemptions,export applications are made for “standing green”timber. That is, export exemptions are approved beforethe trees are harvested. In the Interior, almost all exportpermit applications for logs from both Crown land andprivate land are for standing timber, including thosethat must meet the “surplus” criterion. A “standinggreen” export permit provides the permittee with asubstantial cost advantage, since, unlike exporters whoreceive a permit for harvested logs, they do not have tore-sort and regrade the logs to meet the requirements oftheir international customers.

The “surplus” criterion, by its very nature, alsofacilitates the troublesome practice of “blocking.” Thistakes place when a wood processor who does not “need”the logs being advertised nevertheless puts in a bid forthem simply to prevent, or block, their export. Thispractice is said to be particularly pervasive in theInterior. When logs are advertised for export as “standinggreen,” the bidder is unlikely to be required to takedelivery at the bid price since, in most cases, in theabsence of an export permit, the stand in question issimply not harvested. Under these circumstances, frivolous bids bear no consequences and are difficult todetect. The motive for “blocking” exports, of course, isto ensure that the domestic price of logs remainsdepressed. In the southern Interior, many mills relyheavily on market logs to feed their plants. In someareas, such as the Kootenays, where about 25% of thewood used is purchased on the open market, a highproportion of the log market is supplied by privatelandowners. Thus, if exports reduce the market supply,the resulting price increases have a substantial impacton local processors’ raw material costs. Blocking evenoccurs where the volume of timber harvested fromCrown land falls well below the annual allowable cutin the region concerned, simply because it is moreprofitable to maintain a supply of low-cost private woodthan assume the higher costs of accessing Crown timber.

Additional compliance costs faced by private forestland ownersIn addition to the explicit costs of applying for a federallog export permit, private forestland owners face a numberof additional expenses arising from the procedures used

to administer permit applications. These added costsof complying with the federal regulations reduce private landowners’ effectiveness in marketing logs internationally and create additional barriers to international trade.

First, as is the case with most purchasers of commodities, log buyers in Japan and the United Statesseek continuity of supply. If exporters are able to enterinto medium-term supply contracts it allows them tohedge against market fluctuations and receive higheraverage prices for their product. While selling on the“spot” market may result in acceptable terms and priceswhen markets are good, the “spot” suppliers are the firstto suffer price decreases and be forced out of the marketwhen market downturns occur. To further aggravate thisproblem, operators exporting logs from Crown landunder either individual or blanket OICs have certainty that necessary export permits will be suppliedand can, therefore, enter into contractual supplyarrangements, giving them a distinct advantage overprivate forestland owners.

Next, federal regulations require that all logsadvertised be sorted to domestic market specificationsin terms of diameter and quality. This prevents privatelandowners from putting together particular sorts oflogs for specific customers in the most cost-effectivemanner. For example, if a customer wanted hemlock logswith a range of 8" to 18" top diameter, such a sortwould be disqualified for export since the domesticcriterion for a gang saw log sort is 8" to 14" top diameterand for a standard saw log sort is 15" minimum topdiameter. The only solution in this example, of whichthere are many, would be to make two sorts, advertisethem separately and, if export permits are issued, putthem together for shipping. Of course, if only one parcelis approved for export, then customer specifications cannot be met and a new customer, possibly in a differentmarket, would have to be found. Such situations, whichare common, add considerably to exporters’ costs.

Finally, time delays associated with the exportapplication process are in the order of six weeks to two months. This ties up large amounts of workingcapital and adds substantially to log handling costs.On the Coast, the longer the period that booms of logsremain in salt water, the greater the chance of seriousdegrade caused by teredo, a marine borer. Thus, logswaiting for permission to export must be towed to safefreshwater storage – usually in an estuary where thewood is dry at low tide. Not only is the added towing

6


cost substantial, but additional towing plus the timedelay significantly increase the risk of log deteriorationand loss. In the Interior, where logs awaiting export aredecked in dryland sorts, delay means that in the summerthe logs lose moisture and, hence, have reduced weightsand value when weigh-scaled.

Characteristics of Log Exports from Private LandsVolumeOver the ten-year period 1992 to 2001, the total volumeof logs exported from British Columbia to all destinationsamounted to 3% of the total provincial harvest. Exportsfrom private land Crown granted prior to March 12,1906, that is, timber coming exclusively under federaljurisdiction, accounted for 33%, about one-third, oftotal exports. As can be seen in Figure 3, volumes oflogs exported annually varied substantially during thisperiod, reflecting conditions prevailing in domesticmarkets. In 1997, total exports dropped to a low of269 thousand m3 (0.3% of the total provincial harvest)but in 2001 were 2938 thousand m3 (3.3% of the totalprovincial harvest. Since 1997 the proportion of logexports falling under federal jurisdiction has increasedand in 2001 stood at 60% of total provincial exports.

Figure 3. Log Exports from British Columbia: 1992-2001

Source: BC Ministry of Forests

SpeciesA wide variety of species are exported from BritishColumbia as logs. This mix is dominated by westernhemlock, which accounts for more than 65% of totallog exports, followed by Douglas-fir, about 20%. Thebalance includes mainly western red cedar, spruce andhardwoods. A majority of logs exported from private

land on the Coast are second-growth Douglas-fir ofsmaller diameter that would typically be manufacturedinto construction grade dimension lumber.

MarketsThe main destinations for British Columbian logs arethe United States and Japan, with limited shipments toKorea, China and Taiwan. The United States is themajor market for Douglas-fir. Both Japan and theUnited States import substantial volumes of westernhemlock. Exports of hardwoods are almost entirely tothe United States and mainly originate from theInterior. Japan provides the most attractive log pricesbut also has the highest quality requirements. The majormarket for lower quality logs is the United States. Inrecent years, shipments to the United States have grownrelative to Japan. This trend reflects a stagnant Japaneseeconomy, mounting timber shortages in the UnitedStates Pacific Northwest, and an increasing proportionof lower quality, exportable logs in British Columbia.

Domestic/export price differentialsDomestic/export log price differentials vary considerablyfrom month to month and year to year with marketconditions. For example, over the period 1991 to 2000,the average price for hemlock-balsam logs in theUnited States market was approximately 62% higherthan their price on the Vancouver log market, however,price premiums ranged from a high of 120% in 1999to as low as 5% in mid 1995.

Currently (fall 2002), Douglas-fir second-growthsawlogs (8"-14" top diameter) sell for $85/m3 on theBritish Columbia Coast and $95/m3 in the UnitedStates market, net of transportation and handling costs.

Hemlock in the West Kootenays, which realizes only$50/m3 delivered to local mills, commands a deliveredprice of $100/m3 to mills in the United States withina similar hauling distance. Similarly, lodgepole pine thatrealizes $57/m3 at local mills will fetch $110/m3 at millsin the United States. For some Kootenay landowners,mills in the United States not only offer much higherprices but have locational advantages over theirCanadian counterparts.

On the Coast, the 20% to 30% of hemlock logs thatcome up to the required quality standards realize about$140/m3, net of additional handling and scaling costs,in the Japanese market compared to $85/m3 in the localVancouver market. A large old-growth western redcedar sawlog currently commands a price of about

7


3000

2500

2000

1500

1000

500

01992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Year

Thousand m3

FederalJurisdiction

ProvincialJurisdiction

$195/m3 in the domestic market compared to $250/m3,net of additional handling costs, in Taiwan.

Analysis

In this section, the implications of log export controlson private forestland in British Columbia will be analyzedfrom efficiency, equity and public policy perspectives.The results of these analyses will be used to drawinferences concerning the impacts of eliminating controlson the export of private logs.

EfficiencyEfficiency is concerned with the net benefits, that is,benefits less costs, accruing to a society as a result of aneconomic activity or, as in the case of this study, a changein public policy. If the net benefits of implementing apolicy change – removing controls on log exports, forexample – are positive there is said to be a gain in efficiency and members of the society concerned arebetter off. Conversely, negative net benefits are indicative of a decline in social well-being. Efficiencyis concerned with the aggregate well-being of society; itis not concerned with how the benefits and costs of aneconomic activity or policy change are distributedamong societal members.

The major benefit to the British Columbia economyof removing log export restrictions on private landwould be an increase in the value of logs harvested fromboth private and public lands. The costs of such a policychange would include the incremental expendituresassociated with increased timber harvests on public andprivate lands and increased costs of manufacturing forestproducts as a result of higher domestic log prices.

BenefitsAs pointed out in an earlier section of this report, certainspecies and grades of logs are more highly priced ininternational markets than in domestic markets.Allowing private landowners to take advantage of theseprice premiums would increase the overall value of theirlog shipments. However, an increase in log exports fromBritish Columbia would, itself, have an impact oninternational log prices. The factors affecting the magnitude of these adjustments are complex.

If British Columbia’s log exports – say, to Japan –increased, then this increased supply in the Japanesemarket would cause log prices there to decline. Theextent of this decline would depend upon a number ofcomplex interactions. Initially, the fall in prices woulddepend on the sensitivity of consumer demand in theJapanese log market to changes in market price. If consumer demand is insensitive to price changes, that is,the price elasticity of demand is low, then an increasedsupply will lower the market price further than if consumer demand is more sensitive to price changes.

As Japanese log prices decline in response toincreased log imports, the supply of domestic logs tothe Japanese market would decrease as some stands oftrees became uneconomic to log at the lower prices andfewer logs could be profitably recovered and transportedto market. The actual decline in the log supply woulddepend upon the sensitivity of the Japanese domesticsupply of logs to price changes – that is, the price elasticityof log supply. The decrease in supply would createupward pressure on market prices, offsetting, to someextent, the price decreases experienced as a result ofincreased imports. The net effect of these Japanesemarket adjustments would determine the log pricesavailable to British Columbia exporters.

In British Columbia, decreased log supplies due toincreased exports from private land would raise domesticlog prices, the actual impact being dependent upon theshift in domestic supply and the price elasticity of thedemand for logs in the British Columbia market. Asdomestic prices increased, more logs would be delivered tothe market from both public and private lands as previouslysub-marginal stands became operable and smaller sizedlogs could be profitably recovered. For example, experiencesuggests that, on average, when a stand is felled forexport only about one-third of the volume meets exportspecifications; the balance is supplied to domestic markets.Such stands could not be harvested given currentdomestic cost structures and log prices and, consequently,

8


The Effect of Sales Barriers on Log Prices

Certain species and grades of logs often fetchconsiderably higher prices in foreign markets.Artificial barriers to such sales have the same effectof lowering the return on our forest resources as thebarriers foreign governments put on imports ofCanadian forest products.

Peter H. Pearse (2001) in Ready for Change: Crisisand Opportunity in the Coast Forest Industry

in the absence of log exports would not be harvested atall. The actual increase in the volume made availableand the resulting price change would depend upon theprice sensitivity of British Columbia’s log supply.

Adjustments in log prices following the removal oflog export restrictions would provide benefits to BritishColumbia’s economy in two ways. First, log exports fromprivate land would generate more revenue than wouldhave been the case had they been sold domestically. Thisincremental benefit would be equal to the additionalvolume exported multiplied by its export value less itsvalue in domestic markets prior to the removal of exportcontrols. Second, since domestic log prices would risefollowing the lifting of log export controls on privateland, revenues received for all logs sold domestically,from both public and private lands, would increase.Consequently, stumpage prices for all Crown timbersold within the area affected by increased log exportswould rise.

CostsThe costs to British Columbia’s economy of lifting logexport restrictions on private land are of two types.First, there are the costs of harvesting and transportingto market the additional timber volumes that would beproduced in response to domestic log price increasesfollowing the removal of log export restrictions.

Second, higher domestic log prices would increasethe costs of manufacturing lumber and chips and,consequently, reduce shipments of these products. Theresulting reduction in net revenues to the manufacturingsector is a cost to the provincial economy. It should bepointed out, however, that economists regard this costas a short-run phenomenon. Over the long term, muchof the labour and capital displaced from the forestproducts manufacturing sector as a result of log priceincreases will be productively employed elsewhere in theeconomy, thus offsetting the cost of reduced forestproducts production.

Net benefitsThe net benefits to the provincial economy of removinglog export restrictions on private land can be found bysubtracting costs from benefits. Although estimating

these values empirically is challenging, two studies inrecent years have undertaken this difficult task.Margolick and Uhler3 used 1983 data to examine theeconomic impact on British Columbia of removing alllog export restrictions on public and private land.Uhler4 used 1997 data to examine the economic impactsof unrestricted access to international log markets toBritish Columbia’s private landowners. Both studiesshowed a positive net benefit, that is, an increase ineconomic efficiency, of lifting restrictions on logexports. However, Uhler’s results for 1997 are the mostrelevant to this analysis.

Uhler estimated that if owners of private forestland,Crown granted on or before March 12, 1906, had hadunrestricted access to the Japanese and United States logmarkets in 1997, the net gain to the provincial economywould have been $295 million. That is, there wouldhave been a substantial gain in economic efficiency(Figure 4).

EquityEfficiency is concerned with the net benefits to theeconomy as a whole of an economic activity or publicpolicy. Equity, or fairness, is concerned with the distribution, or incidence, of benefits and costs. Severalequity questions will be addressed: who bears the costsand who benefits from current regulations controllingexports of logs from private forestland? who would gainand who would lose if log export restrictions on privateforestland were lifted? and, finally, how do federal logexport restrictions discriminate against private forestlandowners in British Columbia?

Who bears the costs and who benefits from currentregulations controlling exports of logs from privateforestland in British Columbia?Log export restrictions on private forestland constrainthe marketing opportunities available to private landowners. Since export markets offer higher prices forcertain species and grades of logs, landowners’ cashflows, rates of return on their investments in timberproduction, and the value of the capital assets representedby their lands and timber inventories are all reduced.Furthermore, the province collects less stumpage revenue

9


3 Margolick, Michael and Russell S. Uhler. 1992. “The Economic Impact on British Columbia of Removing Log Export Restrictions,” Journalof Business Administration 20(1&2):273-296.4 Uhler, Russell S. 2000. “The Economic Impact on British Columbia of Providing Unrestricted Access to International Markets to BritishColumbia’s Private Forestland Owners.” Paper prepared for the Private Forest Landowners Association (unpublished), 46 pp.

for Crown timber than it would if exports of privatetimber were not restricted.

On the other hand, since log export restrictionsincrease the supply and, thus, reduce the prices of logsin domestic markets, firms manufacturing forest products pay less for their principal raw material thanthey would in the absence of export restrictions.

Thus, there is a transfer of wealth from timberowners, both the Crown and the private sector, to forest products manufacturing companies. In otherwords, manufacturers receive a subsidy at the expense oftimber growers.

How would the costs and benefits of removing restrictionson log exports from private land be distributed amongvarious segments of British Columbia society?Freedom to sell logs into those markets offering thehighest prices would significantly increase net returns tothose private forestland owners coming under federaljurisdiction. For 1997, Uhler estimated this increase tobe $163 million per annum for coastal landowners,assuming exports would be shipped to Japan and theUnited States Pacific Northwest. For the same year, netreturns to Interior forestland owners shipping to theUnited States were estimated to increase by $5.6 million.

Private owners holding forestlands Crown grantedafter March 12, 1906, that are regulated by the provinceand those operators logging Crown lands would alsobenefit from the removal of federal regulations becausedomestic log prices would rise in response to reducedsupply and higher log prices would increase the area

that could be logged profitably. Uhler estimated that theincrease in revenue to post-1906 landowners and operatorslogging Crown land on the Coast would have been$14.6 million and $19 million, respectively, in 1997

Higher values for logs harvested from Crown landresult in higher returns to the provincial government inthe form of increased stumpage payments. The magnitudeof this increase is difficult to estimate and depends onthe method used to determine stumpage values. Uhler’sestimate for 1997 was $173 million.

In fact, government’s share of the increased revenuesfollowing the removal of restrictions on log exportsfrom private lands would be considerably more than theadditional amounts collected in stumpage. Both levelsof government, provincial and federal, would share inthe increased revenues accruing to private landownersand loggers operating on public lands through incomeand capital gains taxes. Other sources of public revenuewould include increased GST and provincial sales taxesand increased provincial property taxes on all privateforestland, both pre- and post-1906.

In summary, the total benefits of lifting federalrestrictions on log exports from private land in BritishColumbia amounted to $375.2 million in 1997, ofwhich $183.2 million (49%) accrued to private forestlandowners, $173 million (46%) to the provincial governmentand $19 million (5%) to operators logging public lands(Figure 4).

The cost of removing federal restrictions on logexports would be borne by the forest products processingsector as increased raw material costs reduced net revenuesand caused production to decline. Uhler estimated thisnet loss for 1997 at $80 million – about 21% of thegains experienced by other sectors of the economy or abenefit/cost ratio of 4.69. Government tax revenueswould also decline as a result of reduced net revenues inthe manufacturing sector. However, this amount wouldbe much less than the positive impact on public revenuesof lifting federal log export restrictions.

The impact on employment of lifting federal log exportrestrictions on private landAn important equity issue accompanying any change inpublic policy is its impact on employment. If the numberof people employed declines as a result of the change, thenthis may represent a shift in economic benefits fromlabour to capital, resource owners and government. Adecline in employment in one sector of the economy thatis wholly or partially offset by an increase in employment

10


200

150

100

50

0

-50

-100

PrivateLandowners

GovernmentStumpage

LoggingOperators onPublic Land

ProcessingSector

183 173

19

-80

Net Benefit: $295 million

Mill

ion

Can

adia

n $

Source: Russell S. Uhler, unpublished paper, 2000

Figure 4. Benefits and Costs to the British ColumbiaEconomy of Providing Unrestricted Access

to Japanese and United States Log Markets to Private Forestland Owners (1997)

in other sectors suggests a redistribution of wealth fromone group of workers to another. Of course, if labour ismobile the displaced workers may simply move to thosesectors now offering higher employment.

Removing federal export restrictions on logs fromprivate lands might temporarily decrease employmentin the forest products manufacturing sector. However,employment in logging would rise substantially sincemany stands that are rendered inoperable by exportrestrictions would be harvested if a portion of the volumerecovered could be exported. Also, increased domesticlog prices would allow many currently sub-marginalstands yielding no exportable logs to be profitably harvested. Furthermore, new and expanded employmentopportunities would emerge in processing logs for export(bucking, trimming, sorting), transportation to quayside,loading, marketing and managing private forestland.

Over time, as the manufacturing sector adjusts toworld market log prices, it will become more efficient,innovative and globally competitive. Higher raw materialprices will provide strong incentives to produce thegreatest value from each log processed, and the resultingstructural changes will likely increase the number ofpeople employed per thousand cubic metres of logsharvested. The result of all these adjustments onemployment are difficult to forecast but the availableevidence, including the situation in other jurisdictionswhere log export restrictions are absent, suggests thatthe net result of lifting log export restrictions on privateland could be more full-time, well-paying jobs in theforest sector rather than fewer.

It should also be noted that log exports help tocushion the impact on the labour force and local communities of cyclical downturns in markets formanufactured forest products. As prices for wood andpulp and paper products fall, the domestic demand forlogs decreases and export markets may become moreattractive. Log production is maintained as mills reduceoutput or close down and a significant portion of theworkforce remains employed and continues to contributeto local economies. Current conditions in the coastalforest sector provide a good illustration of this phenomenon. If the substantial volume of logs currentlybeing exported from the Coast was reduced, domesticprocessing would not increase and unemploymentwould be much more severe.

Discrimination by the Canadian government againstprivate forestland owners in British ColumbiaBritish Columbia is the only jurisdiction in Canadawhere the federal government chooses to exercise itsconstitutional, statutory authority to control the exportof logs. Also, while other provincial governments controllog exports from Crown land, only in British Columbiadoes a provincial government exercise such controls overprivate timber. This is not indicative of the importanceof private forestland in British Columbia’s productiveforestland base compared to other Canadian provinces.In fact, British Columbia has a lower proportion of itsforestlands in private ownership than every otherprovince except Newfoundland and Saskatchewan(Figure 2). The 4.1% of British Columbia’s productiveforestland base in private hands is very modest comparedto Nova Scotia (72%), New Brunswick (51%), Quebec(15%) and Ontario (13%). British Columbia has lessthan 9% of Canada’s 24 million hectares of productiveprivate forestland.

In the Maritime provinces, where private land is avery significant proportion of the forest resource base,private owners are free to export logs, as indeed many do. Yet these provinces would not appear to have sufferedeconomically from such policies and continue tomaintain viable, competitive forest products manufacturing sectors. Likewise, private forest ownerswho control a significant part of the forestland base insouthern Ontario and Quebec are not constrained inseeking the highest value markets for their products.The federal government clearly discriminates againstprivate forestland owners in British Columbia, reducingtheir net incomes and significantly lowering the value oftheir assets.

It is also important to note that in other timberproducing countries such as the United States, Sweden,Finland and New Zealand, with which BritishColumbia competes in global forest products markets,the majority of industrial forestland is privately owned,yet there are no controls over log exports from privateholdings. In recent years both Sweden and Finlandhave increased their log exports very substantially yetthey have dynamic and highly competitive forest products industries.

11


PolicyThe elimination of log export restrictions on privatelyowned forestland has a number of important implications for public forest policy. These include thebeneficial impacts of strengthening private forestlandtitle; advancing the diversification of the province’stenure system; removing an important source of contention in the softwood trade dispute with theUnited States; promoting increased efficiency in theforest products processing sector; and facilitating environmental protection.

Strengthening title to private forestlandLog export restrictions, by limiting marketing opportunities, seriously undermine title to privateforestlands. Title holders’ options are constrained in manyways, cash flows are reduced, land values are significantlydepressed and disincentives to invest in improvementsare created. Private forest landowners are in the businessof growing wood – logs are their final product. InBritish Columbia, even on the better sites, rates ofreturn to investments in reforestation and silviculturaloperations designed to increase the values of foreststands are both modest and risky. Reducing the marketvalue of logs by controlling exports lowers these rates ofreturn even further, reducing landowners’ incentives toinvest, depressing employment and lowering production.Furthermore, capital flows into British Columbia’s forestsector are reduced as potential investors in forestland,including major institutional investors, are discouragedby intrusive regulations and the prospect of low returns.

Removal of federal log export restrictions wouldcreate incentives to invest in timber production andincrease the flow of capital into British Columbia’stimber growing sector from both domestic and international sources.

Diversification of the province’s tenure systemFor many years, forest policy analysts in British Columbiahave recognized the many economic and social benefitsto the province of a more diverse forest tenure system.Pearse, in his Royal Commission report of 1976, recognized the importance of a diverse system of Crowntenures to the efficiency and competitiveness of theforest sector. Pearse’s views on diversification wereechoed by the Forest Resources Commission (the PeelCommission) in 1991, which proposed tenure reformsthat would have granted licences to as much as one-thirdof managed Crown forestland to individuals, small

companies, cooperatives, communities and First Nationsbands. However, these pleas failed to sway the province’spolicy makers and in 2000/2001 two major tenures –tree farm licences and forest licences – which are almostentirely held by relatively large integrated forest productscompanies, accounted for 81% of the province’s allocatedAAC. Woodlot licences, the only form of tenure designedto encourage small-scale, sustainable forest managementby individual citizens and small firms on Crown land,accounted for only 1.7% of the AAC and communityforest agreements less than one-tenth of one percent.

Practically the only elements of diversity in BritishColumbia’s forest tenure system are those forestlands heldby private owners. While private forestlands are relativelymodest in area, they make significant contributions tothe provincial economy in terms of jobs, investment,timber supplies and public revenues.

The role of private lands as a counterbalance toBritish Columbia’s highly concentrated and uniformCrown forest tenure system is invaluable. Privateforestland ownershipin British Columbia is relativelystable, with the majority of owners holding land forextended periods of time, sometimes multiple generations.Perpetual, fee simple land title makes investments ininfrastructure, silviculture and the improvement ofgrowing capacity more attractive than is the case ontemporary and highly restrictive Crown forest tenures.Private owners, who manage their lands to achieve a

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Limited Opportunity for Small-scale Forestry

I have already remarked on the conspicuous trendtowards larger and fewer enterprises in the forestindustry of the province and the concomitant consolidation of rights to timber. ---- This situationstands in marked contrast to that observed in manyother major wood producing jurisdictions. InScandinavia, a large and vigorous industry dependssubstantially upon tens of thousands of small forestholdings; and the same is true of many other western countries. ---- The scope for small-scaleforestry (in British Columbia) is now limited tooperations on modest parcels of Crown-grantedland, and on Crown land licensed as Farm Wood-lots.---- There are several explanations for the absenceof small-scale forestry in the province, having to dowith patterns of land ownership and deficiencies inpublic programmes.

Report of the Royal Commission on Forest Resources.Peter H. Pearse, Commissioner. (1976)

broad spectrum of management objectives using a vari-ety of traditional and innovative techniques, add varietyand resilience to an otherwise homogenous, bureaucrat-ically run system.

Because of its important role in the structure of theprovincial forest sector, private forestland deserves muchmore attention at the political level than its relativelysmall area might suggest. Log export restrictions preventprivate forestlands from achieving their full potentialwithin the provincial economy.

The softwood lumber trade disputeSince 1982, Canada and the United States have beeninvolved in a series of trade disputes. The United Statescase for the imposition of countervailing duties istwofold. First, it is claimed that methods of calculatingstumpages for public timber in several Canadianprovinces, including British Columbia, result in belowmarket prices and provide a subsidy to lumber producers.

Second, log export restrictions on private land inBritish Columbia have been cited as further justificationfor the imposition of countervailing duties. The USDepartment of Commerce in its final determination ofMay 1992 set a countervailing duty rate of 6.51%,comprising 2.91% for stumpage programs in BritishColumbia, Alberta, Ontario and Quebec plus 3.6% forBritish Columbia’s log export restrictions. In fact, thistariff was ultimately revoked and in 1996 the twocountries entered into the five-year Softwood LumberAgreement, which imposed a limit on the amount ofCanadian lumber that could be shipped to the UnitedStates duty free, with a system of escalating fees to bepaid on shipments above this volume.

Following the expiration of the Softwood LumberAgreement in 2001, the US Coalition for Fair LumberImports launched a new countervailing duty petition plusan anti-dumping petition against Canadian softwoodlumber. In April 2002, the US Department of Commercebrought down a final determination that imposed acountervailing duty of 18.79% plus anti-dumpinglevies against individual companies averaging 8.64%.

While, in September 2002, the World TradeOrganization ruled in Canada’s favour that the UnitedStates’ preliminary subsidy determination in 2001 wasflawed, the matter is far from being settled. Althoughthe Canadian government continues to challenge thefinal US determination before the WTO and, togetherwith the provinces and the industry, has initiated reviewsby NAFTA, there is recognition on the part of many

players, including the British Columbia government,that a final solution can only be found in policy changesthat undermine the United States’ reasons for claimingthat lumber manufacturing in Canada is subsidized. Tothis end, in December 2001, the British Columbiagovernment put before the Americans a negotiatingposition that called for sweeping policy changes intimber pricing and the forest tenure system andmandatory requirements such as cut control, utilizationstandards and mill appurtenance. No mention was madeof log export restrictions on private land. Nevertheless,it would clearly be prudent, given the history of thesoftwood lumber dispute, for the Government ofCanada to lift their export restrictions in BritishColumbia and bring log export policies in the provincein line with those in other Canadian provinces and theUnited States.

Promoting increased efficiency in the forest productsprocessing sectorIt has been shown that lifting restrictions on log exportsfrom private land in British Columbia would decreasethe supply of logs entering domestic markets and, on theCoast, increase the price of all logs sold. While, initially,increased log prices would undoubtedly reduce theproduction of forest products, they would createincentives for greater efficiency in the processing sector.As log prices moved closer to those prevailing in international markets, manufacturers would haveincentives to economize on the use of wood by seekingand introducing innovative technology and ensuring thatlogs were sorted and used to produce those productsthat maximize their net value. The net result, over thelonger term, could well be higher, not lower, net returnsfrom an industry better equipped to compete in globalmarkets. If our competitors can survive and prosper inan unprotected environment in which internationalprices for wood prevail, why not British Columbia?

Canada is a trading nation; our economic successdepends on the existence of free and open markets forour exports. Few countries have a greater stake in freetrade within a global economy. In view of this, it seemsunlikely that the Canadian government would want,unilaterally, to take any restrictive trade measures thatmight damage our reputation as a trading nation andattract retaliatory measures from our trading partners.Yet this is exactly what they are doing in placingrestrictions on log exports from private land in BritishColumbia. The policy seems particularly unjustifiable

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Figure 6. British Columbia Log Imports and Exports:1991-2001

Source: Statistics Canada

from a federal perspective when it is considered thatCanada is a net importer of logs, not an exporter.Between 1991 and 2001, Canada’s log exports amountedto 17.3 million m3 while imports for the same period

totalled 69.7 million m3 (Figure 5). That is a negativetrade balance for the period of 52.4 million m3. Eachyear British Columbia imports substantial volumes oflogs. Between 1991 and 2001, log exports averaged1.1 million m3 per annum and imports 540 thousandm3 per annum (Figure 6). From 1995 to 1997 BritishColumbia’s log imports exceeded exports by a considerablemargin (Figures 6 and 7).

Facilitating improved environmental protectionThe belief is strongly held among certain segments ofBritish Columbia’s population that any relaxation in logexport restrictions will lead to increased logging andaccelerated environmental degradation. However, thisinterpretation is seriously flawed.

It is true, as pointed out earlier, that removing logexport restrictions on private land will result in someincreased logging activity as it becomes economicallyfeasible to log hitherto sub-marginal land. However, mostof British Columbia’s forestlands come under federaland provincial regulatory regimes designed to protectforest environments and ensure the sustained productionof both timber and non-timber forest products. There isno reason to believe that the environmental impact ofextended logging will be any more serious than currentlogging activities.

Federal regulations include the Federal Fisheries Act,and when the proposed Species at Risk Act is passed bythe Canadian Parliament, it will protect designatedwildlife and its habitat on all lands in the countryregardless of ownership. At the provincial level, allforestlands – public and private – come under thejurisdiction of a number of statutes including the water,wildlife, waste management and pesticide use Acts.Forest practices on public land are regulated by theForest Practices Code of British Columbia Act4 and itsnumerous regulations and guidelines that comprise theprovince’s Forest Practices Code. The owners of all privatelands classed as Managed Forest Land under theAssessment Act must, in addition to complying with therequirements of more than 30 federal and provincial Actsand regulations designed to protect forest environments,act in accordance with the terms of the Private LandForest Practices Regulation described earlier in this report.

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Figure 5. Canadian Log Imports and Exports: 1991-2001


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Figure 7. British Columbia Net Log Exports:1991-2001


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4 As this paper is being written, the provincial government is in theprocess of replacing the Forest Practices Code of British ColumbiaAct with the new Forest and Range Practices Act.

While some may argue that current environmentalprotection statutes and regulations for forestland do notgo far enough, it should be pointed out that relaxinglog export restrictions will improve the status quo intwo ways.

First, private owners’ net revenue streams frommanaging their forestlands will rise and increase economicincentives to practise “better” forest managementincluding environmental protection, silviculture andreforestation. Also, small owners, particularly, will haveless incentive to overcut marketable stands in order tofinance ongoing operations or meet personal financialcontingencies. Government stumpage revenues will alsorise, creating a fiscal environment that will favour puttingmore public funds into the management and protectionof the forest resource.

Second, improved silvicultural management ofprivate lands will lead to increased productivity andhigher allowable harvests. Some of this increased woodsupply will, no doubt, be exported, however, much willbe sold on domestic markets, enhancing the provincialwood supply, increasing the volume of logs sold incompetitive markets and, by taking the harvestingpressure off public lands, allowing more areas to be setaside to meet increasing demands for environmentalprotection and recreation.

ConclusionsThe title of this paper poses the question “Are logexport restrictions on private forestland good publicpolicy?” On the basis of all the available evidence, theanswer to this question must be “No they are not.”

What are “good” public policies? A reasonable answer,which, I suspect, few would wish to dispute, is that “good”public policies increase the welfare, or well-being, of allmembers of society within the jurisdiction of the policymakers and are fair in that they don’t unnecessarilydiscriminate against one group in society at the expenseof others. In other words, a “good” policy must be ableto successfully pass efficiency and equity tests. As hasbeen demonstrated in this paper, the policy thatrestricts exports of logs from private forestland inBritish Columbia is neither efficient nor equitable.

Policies that restrict exports of logs from privateland create more costs for society than benefits. Theyimpose costs on private forestland owners by reducingthe revenue they receive from the sale of logs – theirfinal product. In so doing they reduce private forestlandowners’ returns on investment in reforestation and the

management of timber crops and significantly depressthe market value of private forestland. By loweringdomestic log prices, restrictions on log exports reducethe revenue flowing to British Columbians fromstumpage sales on public forestland and also the returnsto those who harvest timber on public land and selltheir logs in domestic markets. The people of BritishColumbia forgo further revenues in the form of incometaxes, sales taxes and provincial and municipal propertytaxes on private forestland. The benefits of log exportrestrictions on private land are reaped by the timberproducts processing sector, which enjoys lower rawmaterial costs than it would experience in the absenceof such restrictions.

Two studies have shown that the costs of restrictinglog exports from British Columbia greatly exceed thebenefits. The first, by Margolick and Uhler, publishedin 1992 using 1983 data, examined the impact of liftinglog export restrictions in British Columbia on bothCrown and private land. The second, carried out by Uhlerin 2000 using 1997 data, dealt solely with private forestland restrictions. Uhler’s analysis showed that in1997, log export restrictions on private land cost theprovince at least $295 million dollars over the short runin forgone net benefits. Or, in other words, BritishColumbians were made worse off because federal regulations restricting log exports from private landwere in place. Clearly, the policy is inefficient. Losses inthe provincial government’s stumpage revenues alone in1997 were estimated at $173 million – almost 13% ofthe stumpage actually collected during that year and asignificant loss for any government striving to maintainpublic services while holding budgetary deficits in check.

Would lifting export restrictions on private forestland in British Columbia create serious equityproblems? The evidence suggests that it would not.The benefits of abolishing these restrictions wouldaccrue to private forestland owners, the BritishColumbia government and operators logging Crowntimber and selling logs in domestic markets. The costswould be borne by firms manufacturing forest products.However, over the longer term, as domestic log pricesrose towards international levels, this would stimulategreater efficiency in wood products manufacturing in waysthat would benefit both the industry and the province.British Columbia manufacturers would move closer tohaving a resilient, globally competitive industry lessprotected by artificial trade barriers that significantlyreduce raw material prices. Also, eliminating federal log

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export restrictions on private land in British Columbiawould bring log export policies in Canada in line withthose in the United States and, in so doing, wouldremove a major irritant in the Canada/US softwoodlumber trade dispute, thus increasing the probability ofa solution that would benefit all Canadians.

Increasing exports of logs from the province hasbeen opposed for decades by a broad spectrum ofBritish Columbians. Much of this resistance stems fromthe belief that with log exports come reduced domestic,secondary manufacturing and fewer jobs in the forestsector. The popular slogan “exporting logs is exportingjobs” has a ring to it that seems to strike a chord withpoliticians and the general public alike.

It is true that removing log export restrictions onprivate land could result in some temporary job lossesin the manufacturing sector. However, these losses wouldbe offset, to a large degree, by increasing employmentin harvesting on both Crown and private land, the logexport business and the management of private land.Furthermore, over the longer term, when manufacturershave had time to adjust to the new reality of less protectedraw material markets, a more efficient, innovative andglobally competitive wood processing industry willemerge that will provide a sustainable source of full-time,highly paid employment. In the wake of all theseadjustments, the net result of lifting log export restrictionson private land could be more jobs in the forest sectorrather than fewer.

Log exports perform a valuable social and economicfunction by cushioning the impact on the labour forceof cyclical downturns in markets for manufactured forestproducts. Log exports tend to increase when the domesticdemand, and hence price, for logs declines and decreasewhen domestic processors, experiencing rising demandand prices for their products, bid log prices higher ondomestic markets. In fact, as experience demonstrates(Figures 6 and 7) when the demand for BritishColumbia’s manufactured wood products is high, notonly are log exports dramatically reduced but theprovince becomes a net importer of logs. For example,in 1995 and 1996, for every cubic metre of woodexported from British Columbia in log form, two cubicmetres were imported (Figure 6). In 1997, the volumeof logs imported exceeded exports by a factor of almostsix to one and, it should be noted, these imports do notinclude logs that were shipped to British Columbiafrom other Canadian provinces, particularly Alberta.

Clearly, log exports bring greater employment

stability to the notoriously cyclical, commodity-basedforest products industry. When the processing sectorfaces economic downturns and mills reduce output orclose down, log exports ensure that a significant portionof the workforce remains employed and continues tocontribute to provincial and local economies. Yet, whenthe economic fortunes of the processing sector improve,more logs become available as exports decline anddomestic supply is bolstered by log imports. Currently,the “surplus” criterion used for the approval of logexport permits from private land allows greater volumesto be exported when domestic demand is low and curtailsexports as domestic demand rises. However, as we haveseen, this regulatory system is inequitable, administrativelycumbersome and imposes significant compliance andother costs on exporters. If log export restrictions onprivate land were lifted, relative domestic and exportprices, driven by market forces, would continue toensure that log exports fall with rising domestic demandand prices and rise as domestic prices decline. Marketforces would provide employment stability in the forestsector more effectively than current regulations and atmuch lower cost, thus allowing log exports to generatemore wealth for the provincial economy.

The most significant inequity associated with logexport controls is that imposed on private forestlandowners in British Columbia by the Government ofCanada. British Columbia is the only province wherethe federal government wields its constitutional andstatutory authority to restrict the export of logs. In fact,British Columbia is the only jurisdiction amongindustrialized western nations where private forestlandowners are not free to sell logs – their final product –into the market of their choice. It is difficult to rationalizea policy under which small private forestland owners inBritish Columbia’s Gulf Islands or West Kootenays –citizens of Canada – are barred by federal regulationsfrom exporting logs while their counterparts in areas suchas rural Alberta, southern Ontario, the St. Lawrencevalley or New Brunswick are free to ship to any market– domestic or international – that will provide themwith the highest returns.

Other concerns that make British Columbianscautious about public policies that could increase logexports include the perceived environmental impact andthe notion that there is a connection between theexport of logs and the volume of wood available toproduce further manufactured, or “value added,” wood products.

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The first concern reflects mistrust, among certainsegments of society, in the regulatory framework put inplace by both provincial and federal governments toprotect forest environments. This is an ongoing andfundamental difference of philosophy that has little todo with controlling exports from private forestland.Lifting these controls would do nothing to exacerbatethe situation, and there is no reason to believe that theenvironmental impacts of more extensive logging oneither private or public lands would differ from thoseof current logging activities. Both private and Crownforestlands are subject to a number of provincial andfederal statutes and regulations designed to protectvarious environmental components, and owners offorests classified as Managed Forest Land under BritishColumbia’s Assessment Act must comply with the PrivateLand Forest Practices Regulation. British Columbia’senvironmental protection legislation and regulations forboth public and private lands are more rigorous andstringently enforced than in any of the other Canadianprovinces, where private log exports are not constrainedby either federal or provincial governments.

The argument that lifting log export controls onprivate land would impede the growth of the “valueadded” wood products industry is completely unfounded.For years, many groups in British Columbia haveexpressed concern that too much of the timber harvestis shipped as commodities – lumber, pulp, newsprint –and too little as more highly manufactured woodproducts such as mouldings, furniture components,siding, prefabricated housing and engineered wood.During the late 1980s and early ’90s a number of privately and publicly sponsored studies addressed thisproblem. A consensus was reached that major constraintson further wood manufacturing included labour costs,proximity to markets, market access, scarcity of a skilledlabour force, entrepreneurial inexperience and pooraccess to appropriate volumes and sorts of sawn woodthat met desirable species, size and grade characteristics.Access to unmanufactured logs was rarely, if ever,mentioned as a serious issue.

During the 1990s the “value added” industry inthe province grew rapidly, partly as a result of publicpolicies designed to free the sector of the more importantconstraints, and partly because the rising cost of woodprovided more incentive to get the highest value fromeach log. In other words, rising wood costs stimulatedthe “value added” sector rather than impeded it.Shipments of “value added” wood products from

British Columbia rose by 296% between 1990 and1999 and in that year involved 744 firms, provided20,000 full-time jobs and returned gross sales of $4.68billion. However, during this period the “value added”industry burgeoned throughout the country and shipments from Canada as a whole rose by 584%. In1990, British Columbia was the leading exporter of“value added” wood products in Canada, accounting for33% of the national total. By 1999, British Columbiahad dropped to third position, with only 19% of nationalshipments, behind Quebec (33%) and Ontario (32%) –both provinces with considerable areas of privateforestland and no restrictions on private exports.

This review and analysis of federally imposed exportrestrictions on private forestland in British Columbialeads inescapably to the conclusion that they should beremoved. To do so is a political decision that can onlybenefit a majority of Canadians and correct a blatantand unwarranted inequity.

Removal of restrictions on the export of logs fromprivate land in British Columbia requires no legislativeamendments. The federal government simply has to makean administrative decision that, under the Export andImport Permit Act, it will treat private forestland ownersin British Columbia identically to the way it treats theircounterparts in other provinces.

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are log export restrictions on private forestland good public policy? an analysis of the situation...

Government & Nonprofit

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british columbia log

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