Raw Log Exports: Too High a Price?

©iStockphoto.com/Arpad Radoczy

The meteoric rise of China’s housing market over the past decade has been well documented, as has Canada’s role in fueling the Chinese construction boom by exporting wood. Yet as signs invariably surface that the housing bubble is about to burst, and as “ghost towns” begin to appear across China, perhaps it may be time to reconsider Canada’s reliance on exporting its raw logs to Asia.

An important figure in this story is the BC forestry industry, which has supplied China with increasing amounts of raw unprocessed logs in recent years. To feed China’s voracious appetite for wood, BC increased the number of logs it exported to China from 93,555 cubic metres in 2006 to 1,136,901 cubic metres in 2010. In 2011, the province exported a record 5.5 million cubic metres of raw logs. These statistics should be put into perspective; after all, BC has an abundant supply of timber, larger than other provinces such as Ontario and Quebec. Yet surprisingly, these two interior provinces have stronger employment numbers than BC in forestry, despite having lower logging rates. This is because BC is steadily falling behind in the production of value-added forest products, opting instead to gamble its fortunes on highly volatile commodity markets.

There are sensible reasons why BC is exporting raw logs to China; the only problem is that these reasons are significantly overshadowed by the negative effects such a policy has upon the BC’s local economy and environment. China’s is a low-wage, low-regulation economy, and mill owners there can afford to pay higher for logs than BC buyers. Therefore, more profit is realized on exported logs than on ones which stay at home. After the downturn in the U.S. housing market, it made good economic sense for Canada to diversify its trading partners, and China readily embraced the increase in Canadian commodity exports. Yet recent studies have demonstrated that BC’s heavy reliance on raw log exports has led to domestic mill closures, declining employment numbers, and a shortage of wood available for lumber mills and manufacturers who produce value-added wood products from by-products of lumber making. While logging companies may reap some extra profit by choosing foreign buyers over domestic ones, a policy that favors raw log exports diminishes the profit that could be later realized from value-added manufacturing. Diversifying the types of wood products shipped overseas would also help to reduce BC’s vulnerability to swings in frequently volatile commodity markets.

The province’s dependency on raw logs exports appears as flawed from an environmental standpoint as it does from an economic one. Higher-value wood products are longer-lived and thus store carbon longer than raw logs. Investing in value added manufacturing would reduce the need for fresh supplies of timber. This means that rare stands of old-growth forest are left untouched, as this would transfer work from harvesting trees to turning them into finished products. Although BC is heavily forested, the recent mountain pine beetle infestation, unsustainable logging practices, and rampant wildfires, have all taken their toll on the province’s present and future supply of timber, to the point that the provincial government has alluded to a looming “timber supply crisis”. Shipping exorbitant amounts of raw logs out of the province, and seeking to harvest these logs from rare stands of old-growth timber, will do nothing to ameliorate this crisis; on the contrary, it simply evades the problem and places BC on an unsustainable trajectory.

There are also ethical arguments in favor of reducing raw log exports to China: some Chinese manufacturers to which Canadian raw logs are shipped frequently use illegally harvested timber. Illegal logging inflicts significant damage upon the environment and economy in many parts of the developing world, destroying ecosystems, facilitating tax and royalty evasion, and imposing heavy economic burdens. Continuing to export large volumes of raw logs to these manufacturers amounts to signaling support for this practice. On the other hand, BC wood product manufacturers and sawmills are well positioned to adopt sustainable and socially responsible practices, and use legally sourced timber. In particular, they have the ability to adopt an ‘integrated industry’ model, whereby the wood waste from sawmills is fed into the electricity stream of pulp and paper mills. In the past, this has resulted in impressive gains in energy efficiency and greenhouse gas reductions, and supporting domestic sawmills and value-added manufacturing by reducing raw log exports is one way to ensure this practice continues. Although it may not be possible, nor practical, for BC to completely diminish its reliance upon raw log exports, increased investment in value-added manufacturing would likely result in both environmental and economic payoffs.