Open Collections

UBC Theses and Dissertations

UBC Theses Logo

UBC Theses and Dissertations

The export of British Columbia lumber products to Japan in the coming decade : cracking a hard nut Arbour, Kenneth F. 1980

Your browser doesn't seem to have a PDF viewer, please download the PDF to view this item.

Notice for Google Chrome users:
If you are having trouble viewing or searching the PDF with Google Chrome, please download it here instead.

Item Metadata

Download

Media
831-UBC_1980_A8 A73.pdf [ 6.92MB ]
Metadata
JSON: 831-1.0094680.json
JSON-LD: 831-1.0094680-ld.json
RDF/XML (Pretty): 831-1.0094680-rdf.xml
RDF/JSON: 831-1.0094680-rdf.json
Turtle: 831-1.0094680-turtle.txt
N-Triples: 831-1.0094680-rdf-ntriples.txt
Original Record: 831-1.0094680-source.json
Full Text
831-1.0094680-fulltext.txt
Citation
831-1.0094680.ris

Full Text

THE EXPORT OF BRITISH COLUMBIA LUMBER PRODUCTS TO JAPAN IN THE COMING DECADE: CRACKING A HARD NUT by . KENNETH F„ ARBOUR Bo A., MCGILL UNIVERSITY, MONTREAL , 1974 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF / MASTER OF ARTS i n THE FACULTY OF GRADUATE STUDIES (THE SCHOOL OF COMMUNITY AND REGIONAL PLANNING) We accept t h i s thesis as conforming to the reguired standard -x THE UNIVERSITY OF BRITISH OCTOBER 1980 (c)Kenneth F» Arbour, COLUMBIA 1980 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of Brit ish Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the Head of my Department or by his representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of The University of Brit ish Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5 Date Q c / o l e r n ) IjgQ i i ABSTRACT The recent downturn i n the American lumber market , a market that consumed no l e s s than 60.6% of t o t a l B . C . . l u m b e r p roduct ion i n 1979, has l e d to l a r g e l a y o f f s and p roduc t ion c u r t a i l m e n t i n the B .C . . lumber i n d u s t r y . . As a conseguence, i n c r e a s i n q lumber expor ts overseas has again become a matter of s e r i o u s concern to B.C. lumbermen. Japan i s one country which, because of of i t s s t rong economy and l a r g e p o p u l a t i o n , ho lds the p o t e n t i a l of becoming an i n c r e a s i n g l y l a r g e a l t e r n a t i v e market to the U.S. There i s a l s o the p o s s i b i l i t y t h a t , i f a more s o p h i s t i c a t e d market ing approach can be taken towards Japan, Canada can improve i t s anemic record of e x p o r t i n g manufactured products to tha t country through an expansion of manufactured lumber e x p o r t s , i . e . p r e f a b r i c a t e d houses, k i t c h e n c a b i n e t s e t c . The purpose of t h i s study i s to examine the f a c t o r s which govern the market f o r B.C. lumber i n Japan and make recommendations to b e t t e r e x p l o i t the p o t e n t i a l of the Japanese lumber market . . The f i r s t part of the study e s t i m a t e s J a p a n ' s lumber demand to the year 1990 by p r o j e c t i n g the course of housing s t a r t s - the major determinant of lumber consumpt ion . .Sources of housing f i n a n c e , r a t e of household f o r m a t i o n , d i s p o s a b l e income, as w e l l as the g e n e r a l Japanese economic and p o l i t i c a l s i t u a t i o n were taken i n t o c o n s i d e r a t i o n i n making the p r o j e c t i o n . . T h i s i s f o l l o w e d by an e v a l u a t i o n of Japan 's domest ic and i n t e r n a t i o n a l sources of softwood lumber supp ly . Th is p rov ides the b a s i s - fo r an assessment of B . C . ' s p o s i t i o n as a lumber s u p p l i e r t o Japan from an i n t e r n a t i o n a l p e r s p e c t i v e and thus enables a b e t t e r understanding of the course that B.C. lumber exports t o Japan i i i w i l l take i n the 1 9 8 0 ' s . . An a n a l y s i s of the B.C. supply out look suggests that w h i l e Japan 's demand fo r imported lumber w i l l grow, B.C. w i l l not g r e a t l y expand lumber expor ts t o Japan p r i m a r i l y because of t imber supply sho r tages . I n c r e a s i n g expor ts to Japan would r e g u i r e the s h i f t i n g of export volumes from the U.S. to Japan. This i s u n l i k e l y not only because n e g l e c t i n g American markets i s hazardous , but a l s o because the supply l i m i t a t i o n s make the Japanese uneasy about a l l o w i n g B.C. t o assume a g reater r o l e as lumber s u p p l i e r . The i n t e r n a t i o n a l l y t i g h t lumber supply s i t u a t i o n , however, coupled wi th J a p a n ' s growing lumber demand presents an oppor tun i t y f o r i n c r e a s i n g manufactured lumber product expor ts to J a p a n . . T h i s would enable B.C. t o boost the value of i t s exported lumber, without s h i f t i n g or expanding expor t volumes, by encouraging the t rade of more f u l l y processed lumber p roducts . The i d e n t i f i c a t i o n of these p o s s i b i l i t i e s leads to an examinat ion of p o s s i b l e means of a l l e v i a t i n g the problems of engaging i n the t rade of manufactured products i n Japan . . The o b s t a c l e s to be overcome i n market ing products i n Japan run the gamut from language and c u l t u r a l d i f f i c u l t i e s , t a r i f f b a r r i e r s , l a c k of Canadian market ing e x p e r t i s e to the i n d i f f e r e n c e of the Japanese t r a d i n g f i r m s towards i m p o r t i n g f o r e i g n manufactured goods. I t i s recommended i n t h i s study tha t a permanent market ing s t r u c t u r e be supported i n Japan , under Canadian a u s p i c e s , t o develop the necessary e x p e r t i s e , and i n g e n e r a l , handle the market ing of Canadian manufactured products i n Japan. The manufactured lumber products i n d u s t r y possesses the p o t e n t i a l to expand markets i n Japan i f i t i s p roper l y f o s t e r e d . Th is i n d u s t r y can b e n e f i t from i n t e r n a t i o n a l shor tages of lumber and the h igh q u a l i t y of the raw m a t e r i a l i n B.C. t o produce valued products fo r e x p o r t . Successes have a l r e a d y been r e g i s t e r e d by the p r e f a b i c a t e d housing i n d u s t r y . . F u r t h e r success seems p o s s i b l e i f p roduct ion and marketing a s s i s t a n c e are p r o v i d e d . Product ion a s s i s t a n c e cou ld be i n the form of i n c r e a s e d investment i n R&D to a i d product and t e c h n o l o g i c a l improvements. The estab l i shment of an i n s t i t u t i o n f o r c r e a t i v e wood design should a l s o be i n v e s t i g a t e d . The market ing of manufactured lumber products i n Japan cou ld be improved by the es tab l i shment of a Canadian Trading C o r p o r a t i o n , but t h i s i s not l i k e l y the best course of a c t i o n to f o l l o w . . More f e a s i b l e a l t e r n a t i v e s i n c l u d e p r o v i d i n g a s s i s t a n c e to e x i s t i n g Canadian t r a d i n g agencies o p e r a t i n g i n J a p a n , e s p e c i a l l y those a l r e a d y d e a l i n g with . lumber, to encourage the marketing of more manufactured lumber products i n t h a t count ry . A l s o , the l a r g e Canadian lumber e x p o r t e r s could be induced to expand t h e i r hand l ing of manufactured lumber goods through government s u b s i d i z a t i o n of t h e i r e f f o r t s and/or through government r e g u l a t i o n of the f o r e s t i n d u s t r y ( in a manner s i m i l a r t o that which helped expand B . C . ' s pu lp ing capac i ty ) by t y i n g t imber h a r v e s t i n g r i g h t s t o the export of more manufactured lumber prod uc ts . T A B L E OF CONTENTS Page Chapter 1: I n t r o d u c t i o n 1 1 .1 .0 The Major Issues In The Japanese Lumber Trade 4 1 . 2 . 0 Scope And D e s c r i p t i o n Of Thesis 15 Chapter 2: P r o j e c t i n g Lumber Demand In Japan To 1990 18 2 . 1 . 0 Annual Housing P r o j e c t i o n For The 1980's 18 2 . 1 . 1 P u b l i c l y Funded Housing 21 2 . 1 . 2 The P r i v a t e Housing Market 26 2 . 1 . 3 Wood Based Versus Non-wood Based Housing 29 2 . 2 . 0 Lumber Demand P r o j e c t i o n For The 1980's 31 2 . 3 . 0 Other F a c t o r s A f f e c t i n g Housing And Lumber Demand 38 2 . 3 . 1 The Japanese Economy 38 2 . 3 . 2 D isposab le Income 45 2 . 3 . 3 Household Formation 48 2 . 3 . 4 The P o l i t i c a l C l imate 51 2 . 4 . 0 Conc lus ion 51 Chapter 3: B . C . ' s P o s i t i o n Among J a p a n ' s Domestic And I n t e r n a t i o n a l Sources Of Lumber Supply 53 3 . 1 . 0 J a p a n ' s Domestic Lumber Producing Capac i t y 53 3 . 2 . 0 Where The Compet i t ion Stands 61 3 . 2 . 1 The Uni ted S ta tes 61 3 . 2 . 2 The U . S . S . B . 70 3 . 2 . 3 B r i t i s h Columbia (Canada) 73 3 . 2 . 4 New Zealand 76 3 . 2 . 5 South America 77 3 . 3 . 0 Conc lus ion 78 Chapter 4: The B.C. Lumber Indust ry And The Japanese Market 80 4 . 1 . 0 B u i l d i n g A Lumber Market In Japan 81 . 4 . 2 . 0 The I n t r o d u c t i o n Of CLS Lumber To Japan 85 4 . 3 . 0 The Sogo Shosha And The B.C. .Lumber Indust ry 89 4 . 4 . 0 B.C. Lumber - Supply And Demand 91 4 . 5 . 0 Conc lus ion 94 Chapter 5: B a r r i e r s To Trade Improvement 97 5 . 1 . 0 Genera l Problems In Market ing E f f e c t i v e l y In Japan 97 5 . 2 . 0 The Problems Of Market ing B.C. Lumber In Japan 102 5 . 3 . 0 Problems I n v o l v i n g The Export Of Manufactured Goods To Japan 106 Chapter 6 : Improving Manufactured Lumber Expor ts To Japan 112 6 . 1 . 0 What Needs To Be Done? 112 6 . 2 . 0 What I s Being Done 116 6 . 3 . 0 What Can Be Done 120 6 . 3 . 1 Product Development 120 6 . 3 . 2 Market ing 122 6 . 3 . 3 The Formation Of A Canadian Trading Company 125 6 . 3 . 4 S u b s i d i z i n g E x i s t i n g T rad ing Firms 127 6 . 3 . 5 Government Regu la t ion Of The F o r e s t Indust ry 128 6 . 3 . 6 N a t i o n a l i z a t i o n Of E x i s t i n g Trading Firms 129 6 . 4 . 0 Conc lus ion 130 Chapter 7: Summary Of Conc lus ions And Recommendations 131 BIBLIOGRAPHY 137 v i i LIST OF TABLES Page Table 1: B r i t i s h Columbia Lumber Expor ts : 1973-1979 5 Tabl e 2: 1979 B.C. Lumber Shipments By Markets 6 Table 3 : B.C. Lumber P roduct ion By S p e c i e s : 1979 6 Table 4: Housing S t a r t s In Japan 22 Table 5: P r o j e c t i o n Of P u b l i c l y Funded Housing S t a r t s To 1990 25 Table 6 : P r o j e c t i o n Of Housing S t a r t s To 1990 28 Table 7: Trends In Wood Based And Non-wood Based Housing S t a r t s 30 Tabl e 8 : P r o j e c t i o n Of Wood Based And Non-wood Based Housing S t a r t s To 1990 30 Tabl e 9: Lumber Demand V i s - a - v i s Wood Based Housing S t a r t s 32 Table 10: Trends In Sawn Lumber Shipments In Japan 32 Table 11: Japanese Timber And Lumber Consumption 34 Table 12: Wholesale P r i c e Index Of Wood And Wood Products In Japan 34 Table 13: Average New House S i z e : Wood Based Dwel l ings 36 Table 14: Lumber Demand P r o j e c t i o n To 1990 36 Table 15: Growth Bate Of Japan 's GNP 39 Table 16: Income And P r i c e s 47 Table 17: Rate Of Household Formation 47 Table 18: Marr iages 49 Table 19: Changing Demographic Aspects In Japan 49 Tabl e 20: Trends In Japanese Domestic Product ion And Imports Of Wood: 1965-1980 54 Table 21: Major S u p p l i e r s Of Softwood To Japan: 1979 62 Table 22: 0 . S . . P r o d u c t i o n , Imports , E x p o r t s , And Consumption Of Softwood Lumber To 2030 64 v i i i Table 23: 0 . S . Consumpti on, Imports (from Canada), Exports Rnd Product ion Of Softwood Lumber To 2030 66 Table 24: Exports Of North American Lumber To Japan By Region 84 Table 25: Exports Of B.C. Wood To Japan By Form Of Wood 84 Table 26: Committed Timber Volumes In P u b l i c Sustained Y i e l d U n i t s In B.C. By Fores t Regions 92 ix Cants: CLS: EDP: Heavy squares Lumber: PEHD : PPP: Sawlogs: Seasia: Sogo Shosha: SPF: Timber: OSDA: GLOSSARY OF TERMS Log with 2 edges or sides sawn off. Canadian Lumber Standards, i.e..2x4's and similar Canadian cuts of lumber. Enterprise Development Program.. a log with 4 edges sawn off, generally 14"x14" or 12"x 12" square.. Logs which have been sawn, including cants, heavy squares, baby squares, 2x4's etc.. Program f o r Export Market Development. Promotional Projects Program. Logs that usually are to be sawn into lumber.. Shortened form of Seaboard Lumber and Plywood Sales Asia Ltd. A Japanese trading company. Spruce, pine and f i r . Unprocessed logs. United States Department of Agriculture.. X ACKNOWLEDGEMENTS I would very much l i k e to thank my advisors, Professors Irving Fox and B i l l Thomlinson for their guidance and encouragement in the preparation of t h i s thesis.. My thanks extend also to a l l the people I interviewed for this study, who, without exception, gave generously of the i r time and i n t e r e s t . . ! would also l i k e to thank Sheila Brown and Arvid Thorstensen of the Council Of Forest Industries for their aid i n the gathering of data for t h i s study. F i n a l l y , I would l i k e to thank the Ministry of Labour for the f i n a n c i a l assistance offered to support t h i s study. Thank you a l l . 1 INTRODUCTION The purpose of t h i s study i s to examine and evaluate the factors which govern the market for B r i t i s h Columbia lumber in Japan, so that i t w i l l be possible to plan the best course of action for the future development of t h i s market.. Furthering the lumber trade between B.C and Japan w i l l bring about two major benefits to B r i t i s h Columbia and Canada as a whole.. F i r s t B.C..needs to improve i t s lumber market i n Japan to provide more s t a b i l i t y in the lumber industry which at present i s very vulnerable to demand fluctuations in the United States. Secondly the marketing of lumber and finished lumber products may pave the way for Canada to develop and expand present knowledge and experience with the Japanese market. Japan has long been something of an enigma to Canadians who surround the country with a number of myths and misconceptions. Canadians involved i n p o l i t i c a l or business relations with Japan have seldom been able to overcome t h e i r own f a i l i n g s in t h i s regard. Unfortunately the growth of Japan as an economic power and i t s displacement of the United Kingdom as Canada's second largest trading partner has not led to any comparable improvement i n our a b i l i t y to deal with the Japanese. The development, then, of a more coordinated, indeed a more sophisticated approach to Japan may' not only enable the expansion of Canadian lumber exports to that country and therefore greater employment and production s t a b i l i t y i n the lumber industry, but may also lead to improvements in the 2 balance of trade in manufactured goods, which, at present, so heavily favors the Japanese. The accomplishment of t h i s l a t t e r goal may, in optimal circumstances, involve u t i l i z i n g the expertise gained through the lumber trade to expand trade opportunities i n other commodities.. The need for t h i s kind of marketing strategy i s not d i f f i c u l t to recognize. Canadian businessmen are apprehensive about entering the Japanese market due to language problems, differences in culture and business practises, geographical remoteness etc. etc. In many cases these problems have simply proven to be too great a ba r r i e r . . I t i s quite possible, however, that an increase in the number of Canadians who are knowledgeable, and comfortable i n th e i r dealings with the Japanese market may change a l l t h i s . . To the extent that f a m i l i a r i t y breeds attempts, t h e i r acquaintance with Japan, b u i l t through t h e i r dealings with the lumber market, could well enable many more Canadian manufacturers to penetrate the Japanese market.. Prior to any discussion,however, on the means whereby such a marketing strategy may be developed, i t i s f i r s t necessary to i d e n t i f y the nature of the trade r e l a t i o n s h i p between B.C./Canada and Japan; and since the lumber trade i s presented here as the tool,more or l e s s , for the development of Canadian expertise on Japan, the focus w i l l be on the e x i s t i n g and future prospects for lumber exports from B.C. to Japan. . The study then, w i l l involve f i r s t , estimating the demand for imported lumber i n Japan over the next decade, and secondly, 3 determin ing the p o r t i o n of that demand which may be s u p p l i e d by the B.C. lumber i n d u s t r y . . The former p r o j e c t i o n w i l l be a r r i v e d at mainly as a f u n c t i o n of housing s t a r t s through the 1 9 8 0 ' s . The l a t t e r i n v o l v e s an e v a l u a t i o n of B . C . ' s f u t u r e c o m p e t i t i v e p o s i t i o n v i s - a - v i s the other lumber and log e x p o r t i n g n a t i o n s which supply the Japanese market. The second par t of t h i s study d e a l s wi th the o b s t a c l e s B.C./Canada face i n b u i l d i n g markets i n Japan and the p o s s i b l e means of approach tha t can be undertaken t o he lp overcome these o b s t a c l e s . Again the emphasis w i l l be on the market ing of lumber, or f i n i s h e d lumber p r o d u c t s , i n J a p a n . . •5 4 1.1.0 The Major Issues In The Japanese Lumber Trade During the l a s t two decades the B r i t i s h Columbia lumber industry has enjoyed a r e l a t i v e l y steady, i f unspectacular, increase in the volume of softwood lumber shipments to Japan. Table 1 shows that the only years in which this growth trend was upset were in the mid-19701s.. This was primarily due to the economic recession i n Japan brought on by the OPEC price hike, and to the serious labor problems which struck the B.C. lumber industry i n those years and cut i t s annual production volumes. In r e l a t i o n to the t o t a l B r i t i s h Columbia lumber export picture Japan i s s t i l l a substantially smaller market than the United States.. While the proportional reliance on the U.S. market has been declining slowly i n recent years the 60.6% of the province's t o t a l lumber shipments that were consumed by the United States i n 1979 (Table 2), s t i l l indicates a very heavy dependence on American lumber demand. This inordinate dependence has not been without i t s costs. The recent downturn in the demand for lumber in the United States re s u l t i n g from the current high i n t e r e s t rates and low number of housing s t a r t s has hurt the lumber industry a l l over the P a c i f i c Northwest, especially the smaller m i l l s . Also the lumber m i l l s i n the i n t e r i o r of B r i t i s h Columbia, which export almost exclu s i v e l y to the U.S., have been seriously affected by t h i s slump.(The Vancouver Sun, May 7, 1980, pp.H8) And i t i s becoming very apparent, now that the B.C..lumber industry has raised i t s head Table i B r i t i s h Columbia Lumber Exports: 1 9 7 3 - 1979 ( m i l l i o n board feet) Destination 1 9 7 3 19714- 1975 1 9 7 6 1977 1 9 7 * 1979 U.S.A. 6 , 7 5 9 . 5 5,123 .9 M 3 S . 6 6 , 2 4 4 . 2 7 , 9 9 2 . 2 g, 4-36.2 7 , 7 2 6 . 3 Japan 6 1 7 . 2 5 0 1 . 3 4-07.6 6 3 3 . s 7 0 5 . 7 7 S M 1 , 0 1 3 . 5 U. K. 4-91.2 5 6 0 . 1 2 3 3 . 3 5 3 6 . 6 5 0 7 . 7 4-07.6 5 1 7 . 5 Other E.E.C. " l 5 * . 7 1 0 2 . 1 2 7 1 . 6 2 5 ^ . 9 3 0 7 . 3 3 9 3 . 2 Source: Council of Forest Industries, B.C. Forest Industry S t a t i s t i c a l Tables. A p r i l , 1 9 « 0 6 Table 2 1979 B.C. Lumber Shipments By Markets •Other E.E.C 3 . 1 ^ A u s t r a l i a 1 . A l l Other 1 . 2 # Source: Council of Forest Industries A p r i l 1 9 8 0 , Table 3 B.C. Lumber Production by Speciea: 1979 ( m i l l i o n board feet) Specie8 Coast % I n t e r i o r % Total Douglas F i r 73^.4- 15 726.1+ 9 1 , 4 - 6 0 . 3 12 Hemlock 2 , 6 8 9 . 0 5 * 3 6 2 .g 5 3 , 0 5 1 . 3 Red Cedar ggir . 3 19 2 3 5 . 2 3 1 , 1 1 9 . 6 9 S P F 2 5 5 . 5 5 6 , 1 ^ 9 . 6 g2 6 , 7 1 2 . 1 5 * A l l Other Softwoods 1 2 7 . 2 3 ^ 5 . 9 1 1 7 3 . 1 1 Total ' Softwoods M 5 7 . 1 * 1 0 0 7 , ^ 5 9 . 9 1 0 0 1 2 . 5 1 7 A 1 0 0 Source: S t a t i s t i c a Canada 7 in the hope of finding other markets, that Japan, with i t s limited forest resources, large population and burgeoning economy i s being viewed as having the potential to become a large alternative market for B.C. lumber.. "B.C. Lumberman Hopeful Of Breakthrough In Japan" - a recent headline i n The Vancouver Sun - i s a good example of the strong aspirations the Japanese market usually tends to evoke. (Mike Sasges, The Vancouver Sun, June 2, 1980, pp. B7) Once again the Japanese market i s being presented as the panacea for the lumber industry's present i l l s . The guestion,however, i s whether th i s i s r e a l l y poss ible? There are several important factors which st and i n the way of increased B r i t i s h Columbian lumber sales to Japan. To b egin with the Japanese have a t a r i f f on imported lum ber i n the species spruce, pine and f i r (hereafter c i t e d a s SPF). Thes e species form 54% of the province's t o t a l lumber pro d uction - mo s t l y from the i n t e r i o r . (Table 3) Imported log s i n the spec ies SPF are not subject to the t a r i f f . However, the export of 1 cgs has been r e s t r i c t e d by the B.C. pro v i n c i a l 1 egi slature sine e the early 1900's. The purpose of Japan's SPF import t a r i f f i s to protect the large native sawmilling industry, consisting of s ome 25,000 mi l l s, which r e l i e s to a large extent on the importing o f logs or cants. In regard to softwoods, wood i n the form of logs or cant s comes mainly from the United States, the U.S.S.R • # and to a 1 esser extent. New Zealand and South America. (Japan i n i s t r y of Agriculture and Forestry S t a t i s t i c a l Yearbook 1974-1975, 8 pp.323-325) The sawmillers hold s i g n i f i c a n t sway over the Japanese government and have lobbied e f f e c t i v e l y to maintain the import tax on SPF lumber. The continuing strength of the sawmiller's influence i s evident i n the recent GATT negotiations which saw the t a r i f f reduced, but maintained nevertheless at 6%, against strong pressure from Canada, the United States and Japan's own Ministry of Construction and Ministry of International Trade and Industry (MITI) . In addition to the t a r i f f the difference between the cuts of lumber used in the housing construction industry i n Japan and those used i n North America i s another b a r r i e r that the Canadian lumber industry must overcome in i t s dealings with the Japanese. Much of the lumber exported to Japan from B.C. i s in the form of "baby squares"(approximately 4"x4") or heavy sguares(12"x12", 14"x14") which are resawn i n Japan to s u i t the needs of the native construction industry.. The t r a d i t i o n a l Japanese method of housing construction, the "post and beam" method, i s by far the dominant format for housing construction in Japan and d i f f e r s markedly from the North American "platform frame" method.. As a r e s u l t there i s l i t t l e market i n Japan for 2x4's or similar cuts which the B r i t i s h Columbia sawmilling industry i s , by and large, geared to produce. In turn, lumber that i s "custom cut" in B.C. for s p e c i f i c Japanese buyers i s d i f f i c u l t to s e l l anywhere else in the world. (Laird Wilson Personal Interview, May 1980) As a consequence B.C. lumber exporters generally engage i n cutting lumber to meet Japanese requirements only for s p e c i f i c deals involving a fixed volume of lumber. This practice not only increases the cost of m i l l i n g 9 the lumber since there i s no r e a l i z a t i o n of economies of scale, but also leads to a basic i n h i b i t i o n among lumber exporters preventing them from dealing fr e e l y i n the Japanese market due to the fear that i f the deal somehow f a l l s through with the Japanese there i s nowhere else where the lumber can be marketed. Another factor l i m i t i n g the export of lumber to Japan is that the Japanese greatly prefer lumber produced in t h e i r own country to that produced overseas. (Yoshinobu Ohtsuki* Sumitomo Forestry Co. Personal Interview, May 1980) Japanese m i l l s have a s o l i d reputation in t h e i r country for producing high quality lumber.. Canadian m i l l s are s t i l l unable to match the meticulousness and care which t h e i r Japanese counterparts exercise in the manufacturing of t h e i r product.(Ohtsuki, Personal Interview, May 1980) It has been mentioned to t h i s author during the course of interviewing people.involved i n the lumber trade between Canada and Japan, how the Japanese appreciation of guality wood " i s almost a r e l i g i o n " . . While t h i s i s naturally something of an overstatement i t s t i l l r e f l e c t s i n the Japanese appreciation of wood a greater attention to quality and d e t a i l than i s perhaps the case on th i s side of the P a c i f i c . From t h i s then, i t would appear that unless there are seme major changes in the structure of the lumber trade between B r i t i s h Columbia and Japan, B.C. w i l l continue to hold merely a marginal share of the Japanese market. I t ' i s , however, unlikely, that the Japanese t a r i f f on imported lumber w i l l be reduced any further, at least for "two or three years". (Don Lanskail quoted in Mike Sasges, The Vancouver Sun, June 2,1980, 10 pp.B7) Nor i s i t l i k e l y tha t the Japanese w i l l l o s e t h e i r a p p r e c i a t i o n f o r d o m e s t i c a l l y produced wood; nor tha t Japanese s a w m i l l e r s w i l l l o s e t h e i r a b i l i t y t o produce the g u a l i t y lumber tha t meets the high standards of the Japanese consumer. . Yet the f a i t h i n a growing Japanese market f o r the types of lumber B.C. produces i s f a r from being without f o u n d a t i o n . The b a s i c arguments behind t h i s p o s i t i o n w i l l be o u t l i n e d here , though they w i l l be d i scussed i n more d e t a i l i n the body of t h i s paper. The f i r s t of these i s that Japan , though h e a v i l y f o r e s t e d , i s a s m a l l and very h e a v i l y populated country with a domestic demand f o r wood that w i l l cont inue to o u t s t r i p the n a t i v e i n d u s t r y ' s a b i l i t y to s u p p l y . Japan, t h e n , w i l l con t inue to r e l y on f o r e i g n , i n c l u d i n g Canadian, expor ts f o r wood and lumber. A second content ion i s tha t the world t imber/lumber supply s i t u a t i o n i s becoming t i g h t e r every year . . Only Canada and the O . S . S . E . among Japan 's major s u p p l i e r s have any p o t e n t i a l f o r s u p p l y i n g more wood to J a p a n . . Japan t h e n , w i l l l i k e l y be fo rced to expand i t s lumber impor ts from t h i s c o u n t r y , and more s p e c i f i c a l l y , from B r i t i s h Columbia . A t h i r d i s tha t B . C . . p o s s e s s e s s i g n i f i c a n t r e s e r v e s i n the types of wood tha t a re p r e f e r r e d i n Japan i . e . white woods, hemlock and c y p r e s s . . B r i t i s h Columbia t h e n , i s capable of producing more g u a l i t y wood, and more g u a l i t y lumber, f o r the Japanese market. 11 A fourth argument i s that the trend, at least since 1975, has been for a consistent expansion of lumber exports to Japan and, given the nature of the trade relationships established between Canada and Japan, t h i s i s l i k e l y to continue. The f i f t h , and l a s t , concerns the recent attempts of the B.C. lumber industry to introduce and build a market for Canadian cuts of lumber i n Japan i . e . 2x4's and s i m i l a r cuts sawn to Canadian Lumber Standards (hereafter c i t e d as CLS lumber). This program has involved the tr a i n i n g as well as the "winning over" of Japanese carpenters and builders to the prospectively cheaper and more e f f i c i e n t platform frame method of housing construction. Whether or not this market w i l l continue to develop or develop to an appreciable l e v e l i s yet unknown.. Nevertheless p o s s i b i l i t i e s for expanded lumber exports to Japan through t h i s program d e f i n i t e l y e x i s t . These 5 points form the crux of the position on.which the optimistic forecasts for the Japanese consumption of B r i t i s h Columbia lumber are based. As such an analysis of these points w i l l be the subject of the f i r s t two chapters of t h i s study. . Guaranteeing and expanding a market f o r B.C. lumber i n Japan, however, goes beyond the parameters of the 5 points mentioned above. The problem i s that with the exception of the program to introduce CLS lumber into Japan there i s no consolidated e f f o r t on the part of the B.C. lumber industry to open the doors for more active market expansion i n Japan. . The 1 2 major single factor governing B r i t i s h Columbia lumber exports to Japan at the present time i s the basic lumber demand si t u a t i o n in that country which can be subjected to only very limited B.C. or Canadian influence. At t h i s point i t may be said that Canada i s no more able to influence the Japanese market than Japan i s able to influence ours. I take issue with t h i s statement on three grounds.. 1 ) The d i s t r i b u t i o n of Canadian lumber to Japanese buyers and wholesalers i s primarily handled by the major Japanese trading companies or sogo spsha. The volume of lumber bought every guarter from Canadian lumber producers i s generally fixed by the major sogo shosha except perhaps for a s l i g h t increase (or decrease).. Canadian lumber producers are content with t h i s arrangement because i t spares them the vagaries of dealing with the Japanese market and gives them a steady market that they can count upon.. The result though, i s that i f there i s a surplus of Canadian lumber there are few Canadian marketing mechanisms i n Japan that can work to expand sales. These mechanisms are controlled by the sogo shosha who may, or may not, operate them in the best i n t e r e s t s of the Canadian lumber industry. 2 ) Another factor l i m i t i n g Canada's a b i l i t y to influence the Japanese market i s that the demand for lumber, lik e that of many primary products, may be i n e l a s t i c for price decreases, but in the long run, may be very e l a s t i c for price increases.. As stated by Keith G r i f f i n : "A r i s e in the price of a raw material provides an incentive "to undertake i n d u s t r i a l research (in developed countries) into ways of economizing on the commodity or substituting something else f o r i t or 13 producing i t in the importing country.. A price decline appears to provide no such incentive for investigating new ways of using the commodity. For example, a f a l l in the price of copper may lead to a very small increase i n the guantity demanded, but a r i s e i n the price of copper may result i n permanent substitution by aluminum." (Keith G r i f f i n , 1969, pp.115) In regard to lumber a price increase in Japan would most l i k e l y lead to the substitution effect r e s u l t i n g i n the building of more non-wooden dwellings.. Such dwellings already comprise almost 40% of the Japanese housing market. (Japan Lumber Journal, Feb., 20, 1980, pp. 12) Thus the export of primary products, such as lumber, l i m i t s the a b i l i t y of the exporting nation to affect demand in the receiving nation. 3) The third and c e r t a i n l y not least important factor l i m i t i n g Canadian influence in Japan i s the general inexperience among Canadians in e f f e c t i v e l y working within the confines of the Japanese market. , This factor i s part and parcel of the f i r s t two factors mentioned above, but i t i s also i n d i c a t i v e of a more serious dilemma that effects a l l Canadian industry - lack of salesmanship and marketing know-how i n foreign, and es p e c i a l l y Japanese markets.. These problems and their r e l a t i o n to the lumber industry w i l l be discussed i n more d e t a i l i n Chapters 5 and 6. It i s the b e l i e f of th i s author that most of the problems so far i d e n t i f i e d i n t h i s study affecting Canada/Japan trade - 1) the i n a b i l i t y to influence the Japanese lumber market, 2) the i n a b i l i t y to guarantee and improve the Japanese market f o r B.C. lumber, and 3) the expansion of manufactured 14 goods exported to Japan - can a l l be accomplished by developing an i n d u s t r i a l organ, or a government/industrial organ, that can expand Canadian expertise in the marketing of lumber products i n Japan. It i s the aim of t h i s paper to show why t h i s should be done. 15 1 . 2 . 0 Scope And D e s c r i p t i o n Of Thes is This t h e s i s i s d i v i d e d i n t o two p a r t s . In g e n e r a l the chapters are presented accord ing t o the f o l l o w i n g o u t l i n e . Z § r t I Chapter 2 Th is chapter es t imates the f u t u r e demand f o r lumber i n Japan. To do t h i s i t i s necessary t o : 1) Make a s imple e s t i m a t i o n from e x i s t i n g Japanese Government p r o j e c t i o n s and the a n a l y s i s prov ided from other sources of research what the probable extent of wood-based housing c o n s t r u c t i o n w i l l be i n Japan i n the 1 9 8 0 ' s . . 2) Def ine what t h i s l e v e l of housing c o n s t r u c t i o n w i l l mean i n terms of a c t u a l lumber demand i . e . what p r o p o r t i o n of t o t a l lumber demand f o r which housing accounts and whether there i s any d i s c e r n i b l e c o r r e l a t i o n between lumber demand i n housing and the demand i n other lumber consuming i n d u s t r i e s ( m i l l w o r k , f u r n i t u r e , e t c . ) . 3) Develop an o v e r a l l p r o j e c t i o n f o r lumber consumption i n Japan f o r the next 10 years . 4) Examine what f a c t o r s may upset t h i s p r o j e c t i o n i n c l u d i n g r i s i n g energy cos ts or f a c t o r s a f f e c t i n g household f o r m a t i o n , and l i k e w i s e housing consumption, and make a rough e s t i m a t i o n of t h e i r e f f e c t . 5) Es t imate from the above i n f o r m a t i o n a high and low l e v e l f o r Japanese consumption of lumber over the next 10 y e a r s . Part J Chapter 3 This chapter narrows the est imated lumber demand i n Japan to that amount which may p o s s i b l y be s u p p l i e d by the B.C. lumber i n d u s t r y . . To a r r i v e at t h i s f i g u r e i t w i l l be 16 necessary to: 1) Divide Japanese lumber consumption for the ten year period into that proportion which w i l l be supplied domestically and that proportion which w i l l be supplied from external sources. 2) Define B.C.'s position as a source of softwood lumber v i s - a - v i s the province's major competitors i n the Japanese markets . This w i l l primarily concern the forms of wood the major Japanese lumber suppliers export to Japan, the si z e of their i n d i v i d u a l shares of the Japanese market, as well as an estimation of each countries potential for further expansion of lumber exports. Part J Chapter 4 This Chapter describes the past and present involvement of the B.C. lumber industry i n the Japanese market. Major factors to -be investigated are: 1) the B.C..lumber industry's past and present endeavors to expand exports of lumber to Japan. . 2) The role of the Japanese trading companies in the export of B.C. lumber to Japan. 3) An assessment of the future supply-demand si t u a t i o n . . Part II Chapter 5 In t h i s chapter i s discussed the major obstacles impeding the expansion of B.C. lumber and lumber product exports to Japan. These include: 1) The general problems faced by Canadian businessmen i n dealing with Japan. 2) The problems faced by the B.C. lumber industry in increasing their markets in Japan. 3) The problems of expanding exports of f u l l y manufactured lumber products to Japan. Part II Chapter 6 This chapter deals with the means of overcoming the problems discussed in Chapter 5. The discussion w i l l include those mechanisms already instituted by government or industry to improve Canadian export performance abroad.. Other possible means that may lead to improvements i n the export s i t u a t i o n with Japan w i l l also be discussed.. These include: 1) A description of a proposed model arrangement f o r expanding exports of more f u l l y processed lumber products to Japan. 2) What government and industry are doing to increase exports to Japan, i.e..to expand marketing and improve production c a p a b i l i t i e s . . This also involves a discussion of the role of the Program for Export Market Development and similar programs designed to improve the performance of Canadian exports. . 3) An assessment of the possible policy options for improving the exports of manufactured lumber products to Japan. fa£t II Chapter 7 analysis This Chapter provides a summation of the foregoing and an outline of conclusions and recommendations* 18 CHAPTER 2 PROJECTING LUMBER DEMAND IN JAPAN TO 1990 There are a number of ways of determining a nation's lumber consumption.. The construction industry, as the largest consumer of lumber i s by far the major determinant.. This study then w i l l commence with an estimation of housing s t a r t s to the year 1990.. Other variables, such as trends in housing s i z e and the proportion of wood based housing units w i l l also be taken into consideration.. The actual r e l a t i o n between housing starts and lumber consumption w i l l be determined i n the second section of t h i s chapter. . 2.1.0 Annual Housing Projection For The 1980's There i s a considerable amount of uncertainty regarding the future projection of housing s t a r t s i n Japan. . One industry study performed by a reputable research i n s t i t u t e l a s t year made an error of over 25% i n the f i r s t year of i t s projection period. Generally housing market studies are made according to the rate of household formation which i s usually •1. . E l i Sopow the forest industry analyst for The Vancouver Province has stated simply and without much equivocation that, "demographic studies show that the United States housing market i s going to peak i n about 1985-7." (March 6, 1980 pp.D.5) Such a statement t y p i f i e s the usual importance placed on demographics when projections are made regarding the housing market or housing start s . 19 t i e d d i r e c t l y to demographic s t a t i s t i c s . * Demographics, though, do not prov ide as accurate a b a s i s f o r housing market p r o j e c t i o n s i n Japan as may be the case i n North A m e r i c a . . The recent r a p i d r i s e to a f f l u e n c e of many Japanese households , i n c o n j u n c t i o n with the economic growth of the n a t i o n as a whole, has l e d to the obsolescence of s i g n i f i c a n t p o r t i o n s of the e x i s t i n g housing stock on the s imple grounds t h a t these houses are too s m a l l . Any movement, t h e n , of these households i n t o the housing market i s not a product of demographic change . . A l s o , the ra te of household fo rmat ion i s as much due to the modern breakdown of the extended f a m i l y u n i t as i t i s to the m a t u r a t i o n , marr iage and departure of f a m i l y members. These c i rcumstances seem t o r e q u i r e a d i f f e r e n t approach to the p r o j e c t i o n of housing s t a r t s i n Japan . . For example, the Economic P l a n n i n g Agency (Keikakucho) speaks of a housing stock i n 1978 of 35,700„r000 d w e l l i n g s which exceeds the number of o rd inary households by about 3 , 0 0 0 , 0 0 0 . (Japan, Economic P lann ing Agency, New Economic And S o c i a l 7 Year P l a n : 1978-85 pp.45) The vacancy r a t e i n 1978, t h e n , would have been about 8 % . . Th is leads us to the n a t u r a l e x p e c t a t i o n that the housing market i n Japan i s i n a s e r i o u s s t a t e of oversupp ly . T h i s , however, can be cont ras ted with the example of the Japan Housing C o r p o r a t i o n ' s 206 housing l o t s i n the "Tama New Town" area near Tokyo fo r which no l e s s than 31,872 house-seekers f i l e d a p p l i c a t i o n s . ( O r i e n t a l Economist , D e c . . 1 9 7 9 , pp.6) One l o t a t t r a c t e d as many as 3,430 a p p l i c a n t s . . I t does not seem p l a u s i b l e that a s i t u a t i o n of oversupply would r e s u l t i n such a remarkable p le thora of housing a p p l i c a n t s . 20 Then a g a i n , acco rd ing t o an a r t i c l e by Yozo S h i o t a e t a l . . i n the Fores t Products J o u r n a l the genera l r a t e of new housing c o n s t r u c t i o n to p o p u l a t i o n i n developed c o u n t r i e s i s approx imate ly 10 u n i t s per 1000 p o p u l a t i o n a n n u a l l y . ( Y o z o S h i o t a , June 1980, pp.26) Sh io ta argues tha t s i n c e housing c o n s t r u c t i o n i n Japan has been running at a r a t e of about 13 to 14 u n i t s per 1000 p o p u l a t i o n that "no great i n c r e a s e s i n housing s t a r t s can be e x p e c t e d . " ( S h i o t a , June 1980, pp.26) Compare t h i s with the f a c t t h a t i n the s i n g l e month of September 1979, 7,575 condominium housing u n i t s were put on the market i n the Tokyo area and as much as 83% of them had been s o l d by the end of the month. ( O r i e n t a l Economist , Dec. 1979, pp.6) Again market f o r c e s seem to d i f f e r d r a m a t i c a l l y from the usual popu la t ion t r e n d s . S t i l l f u r t h e r examples of c o n t r a d i c t i n g arguments regard ing the housing s i t u a t i o n i n Japan can be g i v e n . The Japan Lumber J o u r n a l p o i n t s t o the f a c t t h a t s i n c e the present housing stock i s e q u i v a l e n t to 110% of the number of households i n Japan that housing s t a r t s w i l l cont inue t o decrease - perhaps to 1 m i l l i o n u n i t s / y e a r w i t h i n 3 or 4 years from the approx imate ly 1.5 m i l l i o n i n 1979. (Japan Lumber J o u r n a l , May 20, 1980, pp.11) Other f i g u r e s , however, show t h a t 1.3 m i l l i o n of Japan 's households are s t i l l l i v i n g i n " r a b b i t hutches" of only 11 sguare meters , f u l l y 33% of householders were "hard pressed f o r h o u s i n g " , an a d d i t i o n a l 5.5% s t a t e d they "had t o do something about h o u s i n g , " and as much as 44% of a l l Japanese people were d i s s a t i s f i e d with t h e i r present housing c o n d i t i o n s . (The Economist , F e b . 2 , 1980, pp.92 and The O r i e n t a l 21 Economist, Dec.1979, pp .9) Furthermore these figures are about the same as those in 1969 and 1973 before the housing boom of the last 7 to 10 years.. (Oriental Economist, Dec.1979, pp .9) It would appear therefore, that i n t h i s kind of situation where there are questionable indicators of both demand and supply that an accurate projection based s o l e l y on demographics i s not possible. As a r e s u l t , i t i s proposed here that, while rates of household formation or related s t a t i s t i c s should not be ignored, the emphasis be place on the trends and factors affecting the sources of housing finance. 2 . 1 . 1 P u b l i c a l l y Funded Housing Viewed in t h i s manner, the f i r s t aspects to be taken into consideration are the past trends in the financing of new housing. Table 4 gives the yearly number of housing s t a r t s i n Japan throughout the 7 0 ' s and the proportion of either privately or publicly funded units. This year the Housing Problem Investigation Association expects a drop of 8 - 11% to 1 .33 -1.37 million units, mostly as a r e s u l t of a 10 to 15% drop i n pri v a t e l y funded homes. (Japan Lumber Journal, March 2 0 , 1 9 8 0 , pp .15) The large increase i n housing s t a r t s in the l a t t e r 1960's and through the 1970's was largely due to heavy government funding i n the housing sector.. From 1965 to 1977 public funds accounted for almost 25% of t o t a l housing s t a r t s . This figure leaped to almost 40% i n 1978 and 1979 as housing benefited from a large increase i n public investment i n general by the Japanese government. (Keidanren Review, Oct. 1979,pp.7) 22 Table 4- Housing Starts i n Japan ( 1 0 0 0 u n i t s ) Total P r i v a t e l y Funded P u b l i c l y funded 1 9 6 5 626 216 196S 1 , 2 0 2 2 9 9 3 0 3 1970 1 , ^ 9 5 1 , 1 2 2 362 1973 1 , 9 0 5 1 , 5 0 0 4-05 197^ 1 , 3 1 6 919 3 9 * 1 9 7 5 1 , 3 5 6 , 9 5 0 4-07 1976 1,52*1- 1 , 1 2 * 396 1977 1 , 5 0 S 1 , 0 7 9 4-30 1 9 7 * 1 , 5 ^ 9 9^9 6 0 0 1979 1 , ^ 9 2 g * 5 6 o g 19S0 (est.) 1 , 3 5 0 770 5 3 0 Source: Japan M i n i s t r y of Construction i n Japan Lumber Journal Feb20, 19&0, pp . 1 3 . o 23 There does not seem to be any reason to assume a dramatic change in Japanese government policy towards housing investment.. A policy paper of the Japan Economic Planning Agency, that was subsequently passed by the Japanese Diet, stated that, "It i s envisaged that the number of housing starts during the plan period w i l l continue at about present levels (1.5 million in 1979) but progressive improvement i n the quality of such matters as siz e , f i x t u r e s and structure i s expected." (Japan, Economic planning Agency, New Economic And Social 7 Year Plan: 1978-1985, pp.45) It would therefore appear that instead of pushing for sheer numbers of housing s t a r t s that the Japanese government i s emphasizing the o v e r a l l q u a l i t y of the new housing constructed. The extent of t h i s change i n housing size or quality on lumber consumed per house w i l l be discussed l a t e r i n t h i s chapter. The question here, thouqh, i s that since housing starts are not continuing at 1978 lev e l s , i.e..only 1.3 m i l l i o n t h i s year, whether the government w i l l step in with even greater funding support. This seems unlikely for several reasons. . In order to bring present housing starts up to 1978 l e v e l s the Japanese government would have to increase present funding by at least a further 30%.. Given the present c a l l s , within and without the country, to increase military spending, or the fact that there was already a 100% increase in public housing investment between 1972 and 1977, or the generally recognized inadequacy of other elements i n the r e s i d e n t i a l environment,eg.,only 25% of the households in heavily urbanized 24 Japan are connected to a sewerage system - the government w i l l most l i k e l y try to hold the l i n e on the further expenditure of public funds for housing. This i s perhaps e s p e c i a l l y true since, as stated e a r l i e r , the government i s able to point to a housing stock which i s 10% greater than the number of households. The unwillingness of the Japanese government to further shore up the housing market becomes more evident when the number of publicly funded housing s t a r t s f o r 1980 are examined. The number of such units declined from 608,000 i n 1979 to 580,000 i n 1980. (Japan Lumber Journal, March 20, 1980 pp.15) This i s the largest decline ever for a single year and i s a good indication of a l e v e l l i n g off in public funded housing. It should be remembered, however, that t h i s 5% decrease in the number of units s t i l l represents an increase i n funding i n real terms. The increased size i n the housing produced, as well as an i n f l a t i o n a r y increase in housing prices of well over 5% (housing prices increased at an average of 15.9% per annum during the 1970's) means that a decline of only 5% r e f l e c t s r e l a t i v e l y firm government support of the housing market.. Yet i t can be considered l i k e l y that the s l i g h t t r a i l i n g off in the number of p u b l i c l y funded housing units w i l l continue through the 1980's. . In keeping with t h i s assessment Table 5 has been drawn 0 o up to estimate the probable yearly rate of government funded housing i n the 1980's.. It should be remembered that the single set of figures given in t h i s table i s merely meant to r e f l e c t a 25 Tattle 5 Projection of P u b l i c l y Funded Housing Starts to 1 9 9 0 ( 1 0 0 0 units) 1931 580 1982 560 1933 5I+0 1934- 525 1 935 500 1986 1+90 1937 4-80 1933 4-70 1939 1+60 1990 1+50^  26 genera l t rend through the decade . . F l u c t u a t i o n s , i n the a c t u a l f i g u r e s which come about , of 100,000 to 200,000 s t a r t s above or below the p r o j e c t e d f i g u r e s f o r any g iven year , should not be unexpected 2 . 1 . 2 The P r i v a t e Housing Market The s i t u a t i o n should be somewhat d i f f e r e n t regard ing housing i n the p r i v a t e s e c t o r . . The d e c l i n e of between 100,000 to 150,000 u n i t s t h i s year i s only surpassed i n q u a n t i t y by the year of the " o i l shock" - 1974. Th is i s not a l t o g e t h e r s u r p r i s i n g . The Japanese economy has s u f f e r e d a second o i l shock i n the l a s t year which w i l l be d e a l t wi th i n more d e t a i l l a t e r i n t h i s c h a p t e r . A lso the i n t e r n a t i o n a l l y t i g h t money supply and the very high i n t e r e s t r a t e s t h a t have been witnessed i n the l a s t 12 months, whi le not having had as severe an e f f e c t on housing i n Japan as i n the Un i ted S t a t e s , where s t a r t s have dropped 42% i n the l a s t year (The Vancouver Sun, May 17^1980, pp .C l ) have had t h e i r e f f e c t i n Japan nonethe less . . There are ,however , reasons f o r suggest ing t h a t the p r i v a t e housing market has bottomed out i n Japan and w i l l exper ience a s l i g h t upswing: 1) As mentioned above (page 20) the re are a l a r g e number of householders tha t wish to improve t h e i r l i v i n g environment, i . e . a c q u i r e newly c o n s t r u c t e d l a r g e r hous ing . 2) Japan has the h ighest r a t e of c a p i t a l investment i n housing as a p o r t i o n of GNP i n the w o r l d . . Indeed the d e s i r e of the average Japanese to own h i s own house must be cons idered one of the s t ronges t i n the wor ld . (Economist, Feb 2 , 1 980, pp.92) 27 3) The d e c l i n e i n i n t e r e s t r a t e s , which i s expected to l e a d t o an i n c r e a s e i n housing s t a r t s i n the O.S. f o r the r e s t of t h i s y e a r , w i l l probably have a s i m i l a r i f somewhat more be la ted e f f e c t i n J a p a n . . H) The p r i v a t e housing i n d u s t r y should b e n e f i t from the i n c r e a s e d a t t e n t i o n pa id by the government to urban i n f r a s t r u c t u r e and other r e s i d e n t i a l amen i t i es i n the coming years . The s i n g l e major f a c t o r which i s most l i k e l y to impede the growth of the p r i v a t e housing market, and l i k e w i s e p r i v a t e l y funded housing s t a r t s , i s the p r i c e of r e s i d e n t i a l l a n d . The average inc rease f o r the 1970's was s l i g h t l y lower than the i n c r e a s e i n consumer p r i c e s - 9.3% vs . 8 .7%. (The Economist , Feb. 2 ,1980, pp.92) The problem,however, i s t h a t i n 1979 the r i s e i n land p r i c e s edged up , past the r a t e of i n f l a t i o n , no doubt exacerbat ing the e f f e c t s of the h igh i n t e r e s t r a t e s and the poor economic performance of the country to b r i n g about the dramat ic f a l l i n housing s t a r t s t h i s year . I f the p r i c e of land cont inues to a c c e l e r a t e upward, and t h i s i s a b i g i f , i t would s e r i o u s l y l i m i t the improvement i n the housing market i n the 1980«s. Never the less i t would seem p o s s i b l e t o suggest from a look at the t o t a l p i c t u r e , that p r i v a t e l y funded housing w i l l recover s l i g h t l y d u r i n g the next year or two and l e v e l o f f f o r the r e s t of the decade. The extent of the upswing i s r e f l e c t e d i n the p r o j e c t i o n i n Table 6 . . A g a i n , these f i g u r e s are t o represent a rough t r e n d . The a c t u a l f i g u r e s f o r any p a r t i c u l a r year are l i a b l e to f l u c t u a t e by as much as 200,000 to 300,000 u n i t s above or below the pro jec ted f i g u r e . . 2g Table 6 • Projection of Housing Starts to 1 9 9 0 (1000 units) i Total P r i v a t e l y Funded P u b l i c l y .Funded 1 9 * 1 1 , 3 6 0 770 5 6 0 1982 1 , 3 7 0 goo 5 ^ 0 1 9 * 3 1 , 3 7 5 3 3 0 5 2 5 19*4- 1 , 3 6 0 2 5 0 510 1 9 * 5 1 , 3 5 0 2 5 0 5 0 0 1 9 * 6 l , 3 4 o * 5 0 4-90 1 9 * 7 1 , 3 3 0 8 5 0 4-go 1 9 * * 1 , 3 2 0 250 4-70 19S9 1 , 3 1 0 8 5 0 4,60 1990 1 , 3 0 0 g 5 0 4-50 29 2 . 1 . 3 Wood Based Versus Non-wood Based Housing The next major quest ion i n s o f a r as lumber consumption i s concerned i s what percentage of housing s t a r t s w i l l be wood based. In genera l wood based houses are a maximum of three s to reys i n he ight with the most common form being the two storey s i n g l e f a m i l y d w e l l i n g . Non-wood based housing are best t y p i f i e d by h igh r i s e apartments or condominiums i . e . the Japanese "mansion" . . Robert F o r s t e r i n a paper pub l i shed i n 1978 f o r the Canadian F o r e s t r y S e r v i c e s t a t e d t h a t , "Wooden houses have always played the most important r o l e i n the Japanese house c o n s t r u c t i o n p i c t u r e . In 1964 wooden houses comprised 78% of t o t a l c o n s t r u c t i o n . . as s u b s t i t u t e products became a v a i l a b l e at c o m p e t i t i v e p r i c e s the number of wooden houses c o n s t r u c t e d as a p r o p o r t i o n of the t o t a l s l o w l y dropped to a low of 59% i n 1973. Th is percentage rose to 66% i n 1974 and i s expected to cont inue t o r i s e as the r e l a t i v e p r i c e of competing m a t e r i a l s i n c r e a s e s because of the r i s i n g c o s t s of petroleum products and e n e r g y . . Thus the t rend has reversed and wooden houses are expected to remain a dominant p ropor t ion of t o t a l housing s t a r t s . (Robert F o r s t e r , 1978, PP.12) However, as shown i n Table 7 the number of wood based housing s t a r t s dropped again as a p r o p o r t i o n of t o t a l housing i n 1977 t o 62 .7%, i n 1978 to 61 .8%, and again l a s t year to 6 1 . 0 % . ( M i n i s t r y of C o n s t r u c t i o n , i n the Japan lumber j o u r n a l , F e b . 2 0 , 1980, pp.12) The t rend then seems to be towards a s l i g h t i n c r e a s e i n the p ropor t ion of non-wood based d w e l l i n g s which c o u l d we l l cont inue through the next decade. I t i s not d i f f i c u l t t o f i n d reasons f o r why t h i s t rend may c o n t i n u e . Perhaps most important 30 Table 7 Trends In Wood Based and Non-Wood Based Housing Starts (1000 units) Total Wood Based Non-Wood Based 1 9 6 5 843 6U-7 1 9 § I 9 6 S 1 , 2 0 2 8 8 6 316 1970 1 , 4 8 5 1 , 0 3 6 ^9 1 9 7 3 1 , 9 0 5 1 , 1 2 0 735 I S j i 1 316 370 1975 1 356 9 0 7 ^ 9 1 9 7 6 1 524 1 . 0 2 3 501 1977 1 , 5 0 3 94,6 562 1 9 7 3 l 5^9 9 5 3 591 1979 1,492 910 5 3 3 1 9 8 0 (est.) 1 , 3 5 0 3 1 7 5 3 3 Source: Japan M i n i s t r y of Construction, in Japan Lumber Journal Feb.2 0 , 1 9 8 0 . pp . 1 3 . Table 8 Projection of Wood Based and Non-Wood Based Total 1981 1 , 3 6 0 1 9 3 2 1 , 3 7 0 1 9 3 3 1 , 3 7 5 1 9 3 4 1 , 3 6 0 1 9 3 5 1 , 3 5 0 1936 1,340 1 9 3 7 1 , 3 3 0 1 9 8 8 1 , 3 2 0 1 9 3 9 1 , 3 1 0 1 9 9 0 1 , 3 0 0 ( 1 0 0 0 units) Wood Based Non-Wood Based 816 544 8 1 5 555 811 564 7 9 3 5 § 2 737 5 § 3 7 J 7 5 § 3 767 5 § 3 756 5 6 * 7 * 7 5 § 3 733 562 31 i s that non-wood based d w e l l i n g s , such as h igh r i s e condominiums, he lp to a l l e v i a t e the burden of high land c o s t s f o r the p r o s p e c t i v e home owner. A lso i n a country where the i n d i v i d u a l ' s t r a n s p o r t a t i o n i s u s u a l l y de f ined by h i s / h e r access to the t r a i n l i n e s , the condominiums u s u a l l y provide a more convenient l o c a t i o n i . e . c l o s e r t o the t r a i n s t a t i o n and not so fa r from the center of the c i t y . I t i s l i k e l y t h e n , t h a t condominiums and s i m i l a r housing forms w i l l cont inue to ho ld t h e i r own i n the Japanese housing market and perhaps s l i g h t l y i n c r e a s e t h e i r percentage of t o t a l hous ing . T h i s i s depicted i n Table 8 as an i n c r e a s e of a f r a c t i o n of a percent annua l l y throughout the 1 9 8 0 ' s . . I t i s important to po in t out that the f i g u r e s i n t h i s t a b l e are rough es t imates of an expected t r e n d . F l u c t u a t i o n s i n the a c t u a l f i g u r e s i n any year should be expected. . 2 . 2 . 0 Lumber Demand P r o j e c t i o n For The 1980's The f i r s t q u e s t i o n to ask i s whether the re i s any obvious c o r r e l a t i o n between annual t o t a l lumber demand and wood based housing s t a r t s . The answer seems t o be a " y e s " but with l i m i t a t i o n s . For example, Table 9 shows that i n 5 of 7 years lumber demand per wood based housing u n i t averaged about 60 cubic meters . U n f o r t u n a t e l y , the f i g u r e s f o r the other two years of 69.8 m3 per u n i t i n 1974 and 64.8 m3 i n 1979 make the p o s s i b i l i t y of a genera l c o r r e l a t i o n somewhat remote . . A l s o t h i s k ind of a n a l y s i s , g iven that a 100 m2 house i n Japan c o n t a i n s 32 Table 9 Lumber Demand Vls-a - v i s Wood Based Housing Starts 1970 1973 197$ 1975 1977 1973 1979 Total Lumber Demand (1000 m3) 62,009 §7,470 60,734 55 ,341 57,100 57,560 59,010 Wood Based Housin ( 1 0 0 0 s t a r t s 1 , 0 3 6 1 , 1 2 0 S70 - f $ 9 5 3 9 1 0 Lumber Demand Per Wood Based Housing Starts 5 9 . 8 m?/start 6 0 . 2 m*/start 6 9 . 8 mVstart 6 1 . 0 ra2/start 6 0 . 2 mVstart 6 0 . 1 m|/start 6 4 . 8 mVstart Source: Japan Lumber Journal Feb.20, 1930, pp . 1 3 . Table 10 trends i n Sawn Lumber Shipments i n Japan (1000 m3) 1970 1971 1972 1 9 7 3 1974 1 9 7 5 Building Construction {% of Total) 3 1 , 3 7 4 t 4 . 9 3 4 , 4 1 3 7 5 . 9 3 0 , 7 2 8 76 . 2 NA 76 C i v i l Engineering 1 , 9 1 7 1 ,820 1 , 7 7 3 1 ,823 1 , 4 7 7 NA Packaging 3 , 5 7 3 3 ,573 3 , 4 9 4 3 , 6 0 0 3 , 3 9 9 NA Furniture 2 , 9 3 7 3 , 1 3 1 3 , 0 5 9 3 , 3 3 2 2 , 7 6 8 NA Vessels and Vehicles 440 411 377 424 337 NA Other 1 , 6 9 3 1 , 5 4 4 1 , 4 9 5 1 ,742 1 , 5 7 4 NA Total 42 , 1 6 5 4 1 , 8 5 8 4 4 , o 6 i 4 5 , 3 3 9 4 0 , 3 3 3 NA NA - Not Available Source: Japan Ministry of Agriculture and Forestry, S t a t i s t i c a l Yearbook. 33 about 20 m3 of wood, does not provide any reasonable explanation for how the other 40 m3 per unit are u t i l i z e d , thus making the correlation even less trustworthy. On the other hand there i s a more d i s t i n c t c o r r e l a t i o n between the amount of finished lumber shipments for t o t a l housing construction and other wood consuming ind u s t r i e s . In Table 10 i t can be seen that between 1970 and 1975 housing construction accounted for a yearly average of 75.7% of t o t a l lumber shipments, that i s wood shipped from the sawmills, and only fluctuated by about 2 percentage points.. For the purposes of the rough estimation of lumber consumption reguired here t h i s figure can be si m p l i f i e d to the extent where i t can be said that 75% of lumber shipments are used i n housing construction. . In a 1973 publication of the Japan Forestry Agency (the l a s t year in which such a projection was performed) the proportion i n lumber of t o t a l timber demand - which includes timber used for pulp or plywood - was estimated at 60.4% for 1971 - 1973.. This percentage was forecast to r i s e to 71.6% by 1981. However, due to the fact that the lumber demand i n Japan has remained r e l a t i v e l y constant for the la s t f i v e years while the demand for pulp has increased markedly, lumber has declined as a proportion of Japan's t o t a l timber demand almost every year.(Table 11) There are two major reasons which may account for the r e l a t i v e l u l l in lumber consumption i n Japan during t h i s time. 1) While Japanese houses have been getting larger the lumber used per sguare meter has been declining as a r e s u l t of technological and design innovations, and substitution by 3 * Table 11 1965 1970 1971 1972 1973 197^ 1975 1976 1977 197* 1979 19S0 Japanese Timber and Lumber Consumption (1000 m5) Timber Lumber Lumber as a % of Timber 7 0 , 5 3 0 ^7,Og4- 6 6 . 7 1 0 2 , 9 7 9 6 2 , 0 0 9 6 0 . 3 101,405 59 ,301 5 9 . 0 106 ,5011 6 3 , 6 1 3 5 9 . 7 1 1 7 , 5 * 1 6 7 , 4 7 0 57.4-113,04O 6 0 , 7 ^ 5 3 .7 9 7 , 2 0 0 5 5 , 3 * 1 5 7 . 4 1 0 1 , 4 0 0 57,394- 5 6 . 6 1 0 1 , 8 5 4 56,564- 5 5 - 5 1 0 3 , ^ 1 7 5 7 , 5 6 o 5 5 . 6 l o g , 9 7 0 5 9 , 0 1 0 5 4 . 1 1 0 6 , 2 5 0 5 6 , 7 5 0 53.4-Source: Japan Forest Agency March 1 9 g 0 Table 12 Wholesale Price Index of Wood and Wood products i n Japan ° 100 L A U A N L O G S P L Y W O O D L U M B E R ft W O O D P R O D U C T S A L L C O M M O D I T I E S / 4 e 12 4 s ig7B i s r e 12 4 s 12 4 e 12 4 a 1977 1B78 1879 M O N T H AND Y E A R Source: data from Nippon Ginko In Yozo Shiota e t . a l . Forest Products Journal. May 1 9 3 0 . pp . 3 1 . 35 other products. 2) Wood based housing did not grow by any apppreciable amount but hovered around the low 900,000 per year mark for four of the la s t f i v e years. From the housing estimates for the 1980's developed above (page 28) i t would appear that the trend towards a continuing decline i n wood based housing, and therefore lumber consumption, w i l l continue. This thought must be tempered with a few opposing f a c t s . One, as shown above (page 31) there has been only a tenuous correlation between figures for wood based housing and t o t a l lumber demand. Also the r i s i n g costs of energy and lumber substitutes due to high o i l prices in Japan have made further substitution for lumber less l i k e l y and the proportion of non-wood building materials may even decline.. Lumber prices, i t should be pointed out, have remained f a i r l y steady in Japan through the decade. (Table 12) F i n a l l y , housing size should continue to increase (Table 13) and eventually lead to r e a l increases in lumber consumption.. Since 1976 the increases i n housing volumes, that i s t o t a l housing s i z e , not simply f l o o r space, have averaged 5.5% annually. The emphasis i n government policy upon a larger and better quality housing stock and the s t i l l common desire among consumers f o r larger housing, should mean that the trend towards larger houses w i l l continue through the 1980's.. I f t h i s continues at about the 5% l e v e l i t w i l l e a s i l y o f f s e t the very marginal decline in wood based housing as well as any further, though unlikely, wood product substitution, and result in a net increase in Japan's t o t a l annual lumber demand. 36 Table 13 1965 1970 1 9 7 3 1974 1975 1976 1977 1972 1979 Average New House Size: Wood Based Dwellings House^Size (m2) % Increase Floor 0Space (m2) 7 7 . 5 80.8 9 1 . 7 1 0 0 . 0 1 0 1 . 3 104.4 1 0 9 . 5 1 1 5 . 2 6 . 3 4 . 9 5 . 2 NA 6 8 . 1 7 6 . 9 81 . 5 8 2 . 9 82.2 84 . 1 88 . 0 NA NA -^Not Available Source: (House Size) Japan Lumber Journal. A p r i l 3 0 , 1 9 8 0 .pp.8, and Feb.20,1980. pp . 1 3 . (Floor Space) Japan Ministry of Construction Table 14 Lumber Demand Projection to 1 9 9 0 ( 1 0 0 0 m^ ) 1% Yearly Increase 2% Yearly Increase 1 9 3 0 5 6 , 7 5 0 5 6 , 7 5 0 1931 5 7 , 3 1 7 5 6 , 8 8 5 1932 5 7 , 3 9 0 5 9 , 0 4 2 1 9 3 3 5 3 , 4 6 9 60 ,222 1 9 3 4 59,053 61,426 1 9 3 5 5 9 , 6 4 3 6 2 , 6 5 4 1 9 3 6 60,239 6 3 , 9 0 7 1937 60,841 6 5 , 1 8 5 1 9 3 8 6 1 , 4 4 9 66,488 1 9 3 9 6 2 , 0 6 3 6 7 , 8 1 7 1 9 9 0 6 2 , 6 8 3 6 9 , 0 7 3 1 37 The r e s u l t , then, for the 1980's should be that there w i l l be some increase in lumber consumption for housing purposes. The range of t h i s increase could be from the most s l i g h t to perhaps 3 to 4% annually. -What i s most l i k e l y i s an increase of between 1 and 2% annually, given that housing sizes continue to increase at the 3 to 5% per year l e v e l . To revert to the e a r l i e r statement that lumber for housing construction has accounted for a steady 75% of Japan's t o t a l lumber demand a 1 to 2% per year increase i n lumber demand for housing should r e s u l t in a similar increase in other wood product consumption. Volumes for millwork and furniture especially should become larger as the housing units themselves become larger. Thus i t seems reasonable to expect a 1 to 2% increase in t o t a l yearly lumber demand in Japan in the next decade. Table 14 has therefore been drawn up to r e f l e c t t h i s b e l i e f . . 38 2.3.0 Other Factors affecting Housing And Lumber Demand The consumption of a large commodity such as housing can be affected by other factors that have not yet been dealt with. For example, any fluctuations in national income or consumer prices w i l l r e s u l t in a deleterious effect upon housing consumption. I t i s necessary to discuss these broader variables in order that a more complete picture regarding housing and lumber consumption i n Japan can be provided.. To t h i s end the following variables w i l l be examined: 1) the Japanese economy, 2) changes in disposable income, 3) household formation, and 4) the p o l i t i c a l climate.. 2.3.1 The Japanese Economy The l a s t decade has witnessed some considerable changes i n the domestic workings and international environment of the Japanese economy.. The 1970's marked the end of the post war era of 10% r e a l annual growth i n GNP, and the beginning of serious problems involving pollution and energy.. The pattern of economic growth r e f l e c t e d i n Table 15 shows that increases i n GNP settled to between 5 and 6% in the l a t t e r years of the 1970's. This figure may decline further to between 4 and 5% i n at least the early years of the 1980's., The Japanese Government's o f f i c i a l projection for the coming year stands at only 4.8% and even t h i s i s considered o p t i m i s t i c . ( O r i e n t a l Economist, Feb..1980, pp.4) In August of 1979 the Ministry of International Trade and Industry announced long term growth 39 Table 15 Growth Rate of Japan's GNP Real Growth Rate of GNP (#) ( M i l l Real on yen) Nominal F i s c a l 1 9 6 9 12 . 3 6 7 , 6 9 4 . 3 64 , 5 1 3.6 1 9 7 0 10.2 7 4 , 5 7 6 . 4 7 5 , 5 2 3 . 9 1971 5.6* 7 3 , 7 6 6 . 5 8 3 , 1 6 6 . 0 1 9 7 ? 1 0 . 4 - 3 6 , 9 2 5 . 7 9 6 , 8 8 3 . 7 1 9 7 3 6 . 5 9 2 , 5 9 6 . 3 1 1 7 , 2 5 7 . 9 19 71* - 0 . 0 9 2 , 5 8 2.2 1 3 9 , 2 1 9 . 3 1 9 7 5 3.2 9 5 , 5 5 7 . 0 1 5 3 , 1 2 6 . 3 1976 5 . 9 1 0 1 , 1 9 2.0 1 7 1 , 7 3 5 . 6 1977 5 . 6 1 0 6 , 9 0 1.6 1 9 1,426 . 3 1 9 7 * r 5 . 5 1 1 2,808 . 3 2 1 0 , 6 5 4.6 1979 6 . 0 (eat. Tokal Bank) Source: Japan,Economic Planning Agency 40 r a t e s of 5.7% i n 1977 through 1985, 5% from 1986 through 1990, and 4% from 1991 through 1995. (Takeo Takahash i , J a n . 1980, pp.9) These f i g u r e s now appear to be somewhat exaggerated . On the other hand even at a growth r a t e of on ly 3 to 4% the Japanese economy w i l l probably outperform t h a t of Canada or the Uni ted S ta tes with l i t t l e d i f f i c u l t y . From a genera l p e r u s a l of the arguments sur rounding the f u t u r e of the Japanese economy o f f e r e d in the O r i e n t a l Economist the s i t u a t i o n seems t o be one of weakness i n the shor t run and s t rength i n the long run . In order t o e x p l a i n t h i s s i t u a t i o n i n the proper context i t i s best t o de lve a l i t t l e i n t o the past to f o l l o w the recent path the Japanese economy has t a k e n . At the beg inn ing of the 1970 , s the economic out look i n Japan was understandably b r i g h t . Remarkable growth r a t e s were c o n t i n u i n g at over 10% per y e a r . . In 1974, however, came the " o i l shock" and the i n i t i a l $7 inc rease i n the p r i c e of crude o i l . . Japan t h e n , as now, r e l i e d on f o r e i g n o i l impor ts to supply no l e s s than 75% of i t s energy needs. (Takeo Takahash i , J a n . . 1 9 8 0 , pp.9) The immediate r e s u l t was a bout of r a p i d i n f l a t i o n and a t o t a l h a l t i n economic g r o w t h . . Accord ing t o Takafusa Nakamura an easy money p o l i c y had preceded the p r i c e h i k e (the money supply had been i n c r e a s i n g at 20% per year) and f a c i l i t a t e d the commodity hoard ing and the i n f l a t i o n a r y per iod of "c razed p r i c e s " ( k y o o r a n bukka) that f o l l o w e d the o i l c r i s i s . ( T a k a f u s a Nakamura, Winter 1980, pp.156) The government responded to t h i s wi th a per iod of c r e d i t t i g h t e n i n g t h a t l a s t e d 41 24 months and, whi le s lowing i n f l a t i o n , brought on a r e c e s s i o n i n 1974 and 1975. I t was not u n t i l 1976 that the Japanese economy managed to p u l l i t s e l f out of t h i s r e c e s s i o n . . The means of doing t h i s was through r a p i d export expans ion . Th is amounted t o i n c r e a s e s of 20.5% i n 1976, a f u r t h e r 20.4% i n 1977, and 16.1% i n 1978. At the same t ime the yen rose d r a m a t i c a l l y a g a i n s t the (U.S.) d o l l a r moving from 300 yen to the d o l l a r i n 1975 t o 190 yen to the d o l l a r i n the f a l l of 1978. (Nakamura, J o u r n a l of Japanese S t u d i e s , Winter 1980, pp.160) The Canadian d o l l a r d u r i n g the same p e r i o d d e p r e c i a t e d from 300 to about 160 yen. U n f o r t u n a t e l y , the growth in expor ts was not matched by a s i m i l a r i nc rease i n domestic consumption. Th is " e x p o r t - l e d growth" has prompted more than one observor to accuse the Japanese of dumping, i . e . s e l l i n g goods abroad at lower p r i c e s than at home, and u n f a i r government s u b s i d i z a t i o n of e x p o r t s , accord ing to the 0 . S . . I m p o r t - E x p o r t Bank f o r example, the Japanese Government provided f i n a n c i a l c r e d i t s or guarantees f o r 42% of the c o u n t r y ' s t o t a l exports i n 1977 compared to 7% f o r the United S ta tes and 6% f o r Canada.(quoted i n Ke i th Hay 1979, pp.54) Besides the f l u c t u a t i o n i n the value of the yen , la rge r i s e s i n the p r i c e s of imported raw m a t e r i a l s - e s p e c i a l l y o i l , and the imbalance i n the growth of the e x t e r n a l l y and d o m e s t i c a l l y o r i e n t e d s e c t o r s of the economy, the Japanese economy i n the 1970's was a l s o s t r u c k by a major d e c l i n e i n two c r u c i a l i n d u s t r i e s - s h i p b u i l d i n g and c h e m i c a l s , and f u r t h e r 42 faced increased costs and public concern for environmental protection. A l l these contributed to economic i n s t a b i l i t y throughout the decade.. Since no economy thrives i n i n s t a b i l i t y the Japanese economy appears to be s t i l l s uffering, but there are signs that the sit u a t i o n may be improving. In August 1979, the Japanese Government published a white paper on the economy which pronounced that the economy had "returned to an eguilibrium". (Oriental Economist, Oct. .1979, pp.6) While the i m p a r t i a l i t y of the source i s somewhat doubtful f i v e factors were specified as giving r i s e to t h i s eguilibrium: 1) Growth i n the economy of strong domestic demand 2) Improvement in corporate p r o f i t s 3) S t a b i l i z a t i o n of commodity prices 4) The movement of the in t e r n a t i o n a l balance of payments towards eguilibrium 5) Improvement in the employment s i t u a t i o n . . This picture , however, appears to be too good to be true and i n several ways i t i s . For example, while the balance of payments sit u a t i o n in general has improved, Japan i s s t i l l having a d i f f i c u l t time reducing i t s trade imbalance with the United States.. This imbalance grew in Japan's favor from $1.7 b i l l i o n i n 1975 to almost $12 b i l l i o n in 1978. (U.S. Senate Subcommittee On Trade Of The Committee On Ways And Means, 1979, pp.2) A U.S. Senate Subcommittee on Trade has urged the Japanese to make a much more concerted e f f o r t to reduce t a r i f f and non- t a r i f f barriers on American goods entering Japan.(U.S. Subcommittee on Trade Of The Committee On Ways And Means, 1979, pp.5) I f such barriers are further reduced Japan's balance of payments could 43 again become seriously impaired. The l i k l i h o o d , however, considering the languor with which most GATT resolutions have been undertaken i s that the further removal of b a r r i e r s w i l l take time. The most serious f a i l i n g , and the potential A c h i l l e s ' heel of the Japanese economy i s the almost t o t a l dependence on foreign o i l imports to meet i t s energy requirements*, Japan's economy i s very vulnerable to unpredictable increases i n the price of o i l . It e f f e c t s not only the production of energy, but also the synthetic f i b r e and petrochemical industries. (Oriental Economist, March 1980, pp.28) Other related effects include a predicted drop i n 1980 of consumer demand and r i s i n g i n f l a t i o n brought on by the 1979 o i l price increase. (Tokai Monthly Economic Letter, June 1980, pp.1) It has been estimated that a (O.S.) $1 per barrel increase i n the price of crude pushes up wholesale prices by . 395 in Japan and consumer prices by .1%. (Tokyo Financial Review, May 1980, pp.3) The major guestion i s how great an e f f e c t w i l l the o i l price increase of 1979 have? There i s reason to believe that i t w i l l not be that serious.. Takeo Takahashi, the Administative Councillor of the Economic Planning Agency, has stated that the increase from late 1978 to July 1979 of $7.89, and even more, on the spot market, w i l l have only a f r a c t i o n of the effect of the January 1974 price increase of $8.65. . Takahashi gives four reasons for t h i s : 1) The GNP had doubled i n the f i v e year interim which e s s e n t i a l l y halves the impact, 2) The consumption of energy per unit of GNP 44 had been cut by 20% l e s s e n i n g the blow by a f u r t h e r 20%, 3) The i n f l a t i o n a r y e f f e c t of the inc reased p r i c e i s not as s e r i o u s (no doubt due to the t i g h t e r money p o l i c i e s which preceded the recent o i l p r i c e i n c r e a s e ) , 4) The yen had a p p r e c i a t e d a g a i n s t the U.S. d o l l a r f u r t h e r reduc ing the cost to Japan. A f u r t h e r s t r e n g t h a g a i n s t fu tu re o i l shocks was po inted out by H i r o s h i T a k e u c h i , the Bank of Japan. Japanese people t h a t c h i e f economist of the Long Term C r e d i t I t i s one of those i n t e r e s t i n g f a c e t s about the more c y n i c a l a n a l y s t s tend to f o r g e t . As Takeuchi s t a t e d : "Japan i s a r a c i a l l y homogeneous n a t i o n with a very h igh l e v e l of e d u c a t i o n . . . . In the event that the Japanese economy i s i n a (o i l ) c r i s i s the w i l l t o overcome the c r i s i s w i l l surge up among the people and b ind them t o g e t h e r . " ( H i r o s h i T a k e u c h i , Aug. .1979, PP. 15) Perhaps most i m p o r t a n t l y , however, when a s s e s s i n g the g e n e r a l c o n d i t i o n of the Japanese economy i s t h a t i t be recogn ized that the Japanese economy i s , and has been per forming w e l l , and o c c a s i o n a l l y above e x p e c t a t i o n s . The important min ing -manufactur ing index rose 9.4% i n f i s c a l 1979, w e l l above the expected high of 8%.(H. Katsumata, June 1980, pp.4) Also* wage i n c r e a s e s dur ing the a n n u a l " s p r i n g o f f e n s i v e " (shunto) i n 1979 were at a very moderate 6% and should remain between 6 and 8% f o r f i s c a l 1980. (Focus Japan, Jan . .1980, pp.3) L a s t l y i n f l a t i o n was a n . e x t r a o r d i n a r i l y low 3.8% i n 1978 and 3.6% i n 1979. (O r ien ta l Economist , A p r i l 1980, pp.47) C o n s i d e r i n g the dramat ic impact of the 1974 o i l shock then , the Japanese economy 45 must be viewed as having weathered the c r i s i s well., This bodes well f o r the present o i l shock as well.. This optimism f o r the future i s shared by two important f i n a n c i a l publications. . The "Keidanren Review" states that: "Business a c t i v i t y w i l l remain sluggish in the f i r s t half of f i s c a l 1980 but as the rate of i n f l a t i o n eases off at the beginning of the autumn the economy as a whole w i l l regain increased steadiness. . I t w i l l perhaps resume an upswing after the turn of the year. Even with the recovery i n the l a t t e r half the GNP growth rate for f i s c a l 1980 as a whole w i l l be limited to 4%. (Keidanren Review, Feb.. 1980, pp.12) The "Tokyo Fin a n c i a l Review" published by the Bank Of Tokyo, while t y p i c a l l y less favorable, i s also optimistic: " i t i s expected that Japan's r e a l economic growth w i l l slow from an estimated 6.4% for f i s c a l 1979 to around 4% for both f i s c a l 1980 and f i s c a l 1981, but accelerate to about 5% for f i s c a l 1982, as the economy w i l l l i k e l y commence on a path of moderate recovery about the middle of f i s c a l 198 1."(Tokyo Financial Review, May 1980, PP. 3) To judge from these views then, the Japanese economy i s i n reasonably good health and has a good outlook for the 1980's. While t h i s projection i s incumbent on the moderation of future o i l price hikes the large price hike l a s t year and the present glut of o i l on the market make inordinate price increases very unlikely. This, however, w i l l ultimately be determined at the next OPEC conference in November. 2.3.2 Disposable Income When speaking of housing s t a r t s , the income and 46 consumption variables regarding the average worker who purchases the housing are equally as important as the general condition of the economy. The reasons for this are simple enough. If a worker i s enjoying a real increase in income that i s higher than increases in consumer prices, and i s maintaining a healthy savings rate, then i t may be expected that the a b i l i t y to make large c a p i t a l outlays, as are needed to buy housing, w i l l be greatly f a c i l i t a t e d . . From Table 16 i t seems evident that incomes have kept pace with the r i s e s i n consumer prices. Indeed, there was a 2.7% and 3.4% income surplus over consumer price r i s e s i n 1978 and 1979 respectively. In addition to t h i s the average propensity to consume has remained steady at about 77% (Table 16) which means a healthy savings rate of about 23% of disposable income. The 1979 increase in the price of o i l i s largely responsible for driving consumer price increases above average wage hikes. (Tokai Monthly Economic Letter, June 1980, pp.2) As stated above, however, the improvement i n the economy in the next few years should also lead to a bettering of the wage-price r a t i o similar to that of the l a s t two years.. It i s d i f f i c u l t to measure even with t h i s surplus i n expendable income whether the average worker i s s t i l l able to fi n d good affordable housing. Obviously with over 40% of householders d i s s a t i s f i e d with their housing (above page 20) the average worker does not seem to be able to do s o . i f , however, he/she i s able to maintain an increase i n re a l income, as seems l i k e l y , continuing into the 1980's, the a b i l i t y to afford better 47 Table l 6 Income and Prices Monthly Real % Income (Yen) Growth 1 9 7 5 2 3 6 , 1 5 2 14. g 1 9 7 6 2 5 g , 2 3 7 9 . 4 1977 2 g 6 , 0 3 4 1 0 . g 1 9 7 * 304 , 5 6 2 6 . 5 1979 3 2 6 , 0 1 3 7 . 0 # over previous year Average Propensity to Consume 11M 11.2% 17-7 7 . % Increase i n Consumer Prices 11.9 9.3 g . l 3.f 3 . 6 Source: The Oriental Economist A p r i l 1 9 * 0 , pp.47,4g. Table 17 I960 1 9 6 5 1970 1 9 7 5 Rate of Household Formation (1000'a) Total Increase Yearly Increase Households I 9 , 6 7 g 2 3 , 0 8 5 2 6 , 8 5 6 3 1 , 2 7 0 3,407 ~'77} .414 681.4 754.2 gg2.g 195* 19§3 196* 1973 197* 1 8 , 6 4 7 2 1 , g 2 1 2 5 , 3 2 0 2 9 , 6 5 1 3 3 , 0 9 3 3 , 1 7 4 , 4 9 9 3 , 6 3 4 . 8 7 0 0 . 0 8 6 6 . 2 6 8 8 . 4 1970 1 9 7 1 1 9 7 2 1 9 7 3 1974 1 9 7 5 1 9 7 6 Households 29,146 3 0 , 0 2 7 3 0 , g 5 3 3 1 . 9 0 8 3 2 , 6 2 g 3 3 , 3 1 0 3 3 , 9 1 1 Source: Office of the Prime Minister, Japan. Yearly Increase ggl 8 2 6 1 , 0 5 5 720 6 8 2 601 Source: Economic Yearbook, 1 9 7 S - 7 9 . o 48 housing should increase.. 2.3.3 Household Formation As stated e a r l i e r household formation in Japan i s not as e a s i l y t i e d to demographics as i n the West, primarily because there i s the additional guestion of the state of the extended family unit and how rapidly i t i s breaking down. . The unravelling of the large household has i n no small part been responsible for a rate of household formation equalling three times the rate of population increase over most of the l a s t three decades. (Economist, Feb.. 2 1980, pp.93) There i s no clear way to v e r i f y whether t h i s trend w i l l continue, or at what rate. It would seem though that there i s a slackening i n the rate of household formation. The figures available, however, are contradictory and t h i s makes a projection hazardous.. The Prime Minister's Office i n Japan offers two sets of figures. (Table 17) Both are from surveys taken every f i v e years. . A t h i r d source of data i s the Economic Yearbook of the Oriental Economist.(also Table 17) From these i t would seem that the yearly increase i n households was declining a f t e r 1973 from over 1 m i l l i o n to between 600,000 and 700,000 by 1978._ I f th i s i s true i t would be in keeping with the decline in the marriage rate during the same period.(Table 18) Unfortunately (at least for the purposes of c l a r i f i c a t i o n ) , there does not seem to be a close c o r r e l a t i o n between the number of marriages and the number of new households. Perhaps from the population pyramid, given i n Table Table l g Marriages 49 1969 1970 1 9 7 1 1972 1 9 7 3 1 9 7 4 1 9 7 5 1 9 7 6 1 9 7 7 Yearly Total 9 g 4,l42 1 , 0 2 9 , 4 0 5 1 , 0 9 1,229 1 , 0 9 9 , 9 3 4 1 , 0 7 1 , 9 2 3 1 , 0 0 0 , 4 5 5 9 4 1 , 6 2 g 3 7 1 , 5 4 3 g 2 1 , 0 2 9 Marriages per 1 0 0 0 pop. 9 . 6 1 0 . 0 1 0 . 5 1 0 . 4 9 - 9 9 . 1 7 . 3 7 . 2 Source: Office of the Prime Minister (Japan) Table 19 Changing Demographic Aspects i n Japan Age 8 5 -8 0 - 8 4 7 5 - 7 9 7 0 - 7 4 6 5 - 6 9 6 0 - 6 4 5 5 - 5 9 5 0 - 5 4 45 — 49 40 — 44 3 5 - 3 9 3 0 - 3 4 2 5 - 2 9 2 0 - 2 4 1 5 - 1 9 10 — 14 5 - 9 0 - 4 1970 Census £ 3 _ Mole P X J I L Female J 1 L 6 4 2 0 2 4 6 1975 Census A. wm 2 3 _ mm. 3 J ! I I 1 I L 6 4 2 0 2 4 6 1977 Survey J I I I I 1 I 22L 6 4 2 0 2 4 6 Source: Economic and Foreign A f f a i r s Research Association, pp. 4. 50 19, i t i s p o s s i b l e to make the f u t u r e course of household fo rmat ion c l e a r e r . The major d i f f e r e n c e between the 1970 census and the 1977 survey i s that t h e r e i s about a 10% drop i n the s i z e of the very important 20-29 age group. Th is he lps t o account f o r some of the drop i n households and mar r iages . However the drop i n both household fo rmat ion and marr iages i s about 30% between 1970 and 1977. I t i s c o n c e i v a b l e t h a t the " c i l shock" , whi le h u r t i n g the economy, a l s o lowered the r a t e of i n c r e a s e i n the number of households . I f t h i s i s the case then the recent improvement i n the economy should a l s o l e a d to an i n c r e a s e i n new households . The surveys necessary to v e r i f y t h i s , though, have only j us t been undertaken. Perhaps t h e best guess then i s t h a t the i n c r e a s e i n households i n the 1980 's w i l l be i n the 750,000 per year range. The gues t ion i s , at a p o s s i b l e r a t e of 750,000 new households per year i n the 1980 's , what number of housing s t a r t s w i l l prove adequate to provide s u f f i c i e n t accommodation. . The important f a c t o r here i s that between 1972 and 1978 the replacement of o ld houses by new d w e l l i n g s i n c r e a s e d from 20% t o 30% of a l l houses b u i l t . That means tha t of the 1.5 m i l l i o n d w e l l i n g s cons t ruc ted i n 1978 450,000 u n i t s were replacements w i t h i n the e x i s t i n g housing s t o c k . . I f t h i s t rend c o n t i n u e s , which seems l i k e l y , i t would be necessary t o b u i l d 1.2 or 1.3 m i l l i o n new d w e l l i n g s y e a r l y t o prov ide both replacements and accommodate the b a s i c i n c r e a s e i n new h o u s e h o l d s . . When i t i s r e a l i z e d that the average Japanese home s t i l l has only 43 m2 of space i t i s d i f f i c u l t to ignore the pressure that e x i s t s t o i n c r e a s e the number of l a r g e r housing u n i t s . A r a t e of housing 51 s t a r t s in the 1.3 m i l l i o n range , t h e n , as est imated e a r l i e r , would seem to be commensurate wi th the housing need tha t 750,000 new households, per year would b r i n g onto the Japanese market i n the 1980 's . 2 . 3 . 4 The P o l i t i c a l C l imate Except f o r the i n i t i a l postwar e l e c t i o n the c o n s e r v a t i v e L i b e r a l Democrat ic P a r t y (LDP or J iminto ) has he ld m a j o r i t y power i n the Japanese D i e t . Even a f t e r the "Lockheed Scandal " which shook the r i g h t wing base of the pa r t y and l e d to the r e s i g n a t i o n and temporary imprisonment of the then Prime M i n i s t e r , Kakuei Tanaka, the LDP s t e a d f a s t l y manages to c c n t r o l the government. Nor d i d the recent death of the leader of the par ty and Prime M i n i s t e r only days before a n a t i o n a l e l e c t i o n prevent the maintenance of the LDP's par l iamentary m a j o r i t y . . Japan t h e n , must be cons idered one of the more p o l i t i c a l l y s t a b l e n a t i o n s i n the w o r l d . . I t i s u n l i k e l y that there w i l l be any dramat ic s h i f t s i n the c o u n t r y ' s p o l i t i c a l makeup dur ing the next decade. I f the scanda ls and economic d i f f i c u l t i e s of the l a s t decade have not shaken the LDP's h o l d , i t makes i t d i f f i c u l t to imagine what w i l l . . A s t a b l e p o l i t i c a l c l i m a t e s u i t a b l e t o a "good investment c l i m a t e " i s not a very r i s k y p r o j e c t i o n to make for the Japan of the 1980*s i . 2 . 4 . 0 Conc lus ion What e f f e c t w i l l these v a r i a b l e s d i scussed above have, t h e n , on housing s t a r t s and lumber demand i n Japan i n the 52 1980's.. To sum up, i t has been s t a t e d t h a t the Japanese economy i s gcing through some momentary d i f f i c u l t i e s but t h a t i t i s hea l t h y and should continue so. Japanese workers have been enjo y i n g r e a l i n c r e a s e s i n expendable income, over the r i s e i n consumer p r i c e s , and with t h e i r l a r g e savings r a t e s should continue to be a b l e t o b e t t e r t h e i r housing c o n d i t i o n s i n the 1980's. The r a t e of household f o r m a t i o n , even i f i t does d e c l i n e i n accordance with the p o p u l a t i o n decrease, should s t i l l r e s u l t i n the maintenance of a h e a l t h y demand f o r new housing. And the p o l i t i c a l s i t u a t i o n i s perhaps as s t a b l e as ever.. Given t h i s , t h e r e does not seem to be any s i g n i f i c a n t enough reason to a l t e r s e r i o u s l y the lumber demand e x p e c t a t i o n s o f f e r e d i n the f i r s t h a l f of t h i s chapter.. T h i s , of course, depends t o a g r e a t extent on the outcome of f u r t h e r o i l p r i c e i n c r e a s e s . N e v e r t h e l e s s , given the s t r e n g t h of the Japanese economy i t should r e t u r n to a p o s i t i o n of 5% growth w i t h i n a year or two and thus serve to maintain a l e v e l of 1.3 m i l l i o n housing s t a r t s throughout the decade. 53 CHAPTER 3 B.C.'S POSITION AMONG JAPAN'S DOMESTIC AND INTERNATIONAL SOURCES OF LUMBER SUPPLY In order to assess B r i t i s h Columbia's position as a lumber supplier to Japan i t i s f i r s t necessary to investigate Japan's own lumber producing c a p a b i l i t y . . This i s followed by a guick look at the lumber supply s i t u a t i o n surrounding Japan's major external sources of softwood supply.. 3.1.0 Japan's Domestic Lumber Production Capacity Considering that i n Japan there are 115 mi l l i o n people l i v i n g on a land area less than 4% that of Canada's i t i s surprising to discover the size of Japan's forest resource. F u l l y 68% of Japan i s forested with a growing stock of over 2 b i l l i o n m3. (Robert Forster, 1978, pp.52) Also due to rampant \ overharvesting during the war years there i s a substantial amount of timber that i s not expected to become harvestable u n t i l the second or t h i r d decade of the next century. (Japan Forest Agency, 1980, pp.49) The growing stock then, as well as the annual allowable cut (AAC), are expected to increase, leading to expansion of domestic timber production i n the future. As can be seen in Table 20 however, domestic timber production declined between 1965 and 1975 aft e r which i t l e v e l l e d out to approximately 34 m i l l i o n cubic meters (hereafter Table 2 0 Trends In Japanese Domestic Production and Imports of Wood: 1965—- 1 9 8 0 ( 1 0 0 0 m5) Domestic Imports Total Imports as a f of Total 1 9 6 5 5 0 , 3 7 5 2 0 , 1 5 5 7 0 , 5 3 0 2 8 . 6 1 9 6 6 5 1 , 5 3 5 2 5 , 0 4 1 7 6 , 8 7 6 3 2 . 6 1967 5 2 , 7 4 1 3 3 , 2 0 6 3 5 , 9 4 7 3 * . 6 1 9 6 8 4 8 , 9 6 3 4 2 , 8 4 3 9 1 , 8 0 6 4 6 . 7 1 9 6 9 4 6 , 8 1 7 4 8 , 7 5 3 9 5 , 5 7 0 5 1 . 0 1 9 7 0 4 6 , 2 4 1 5 6 , 4 3 * 5 1 0 2 , 9 7 9 5 4 . 8 1 9 7 1 4 5 , 9 6 6 5 5 , 4 3 7 1 0 1 , 4 0 5 5 4 . 7 1 9 7 2 4 3 , 9 4 1 6 2 , 5 6 3 1 0 6 , 5 0 4 5 8 . 7 1 9 7 3 4 2 , 2 0 9 7 5 , 3 7 2 H 7 , 5 * l 6 4 . 1 1 9 7 4 3 9 , 4 7 4 7 3 , 5 6 6 1 1 3 , o 4 o 6 5 . 2 1 9 7 5 3 4 , 8 2 0 6 2 , 3 8 O 9 7 , 2 0 0 6 4 . 2 1 9 7 6 3 4 , 7 9 0 6 6 , 6 1 0 101,400 6 5 . 7 1 9 7 7 3 4 , 2 3 1 6 7 , 6 2 3 1 0 1 , 8 5 4 6 6 . 4 1 9 7 * 3 2 , 5 5 8 7 0 , 8 5 9 1 0 3 , 4 1 7 6 8 . 5 1 9 7 9 3 4 , 1 4 0 7 4 , 8 3 0 1 0 8 , 9 7 0 6 8 . 7 1 9 8 0 3 3 , 9 0 0 (est. ) 7 2 , 3 5 0 1 0 6 , 2 5 0 6 8 . 1 Source: Japan Forest Agency, March 198O. 55 cited as mm3) per year. In the meantime the proportion of imported timber rose rapidly from 28% i n 1965 to 64% i n 1973 to over 68% in 1980.. The domestic supply of timber therefore has been declining as a proportion of t o t a l supply, though not so rapidly in recent years.. The 1980's w i l l probably witness an increase, though small, i n the proportion of domestically produced timber i n Japan. There i s l i t t l e doubt that domestic production w i l l grow eventually.. The question i s when w i l l i t start? Robert Forster's estimate from his study of Japanese forestry i s that timber production w i l l grow from the present 34 mm3 to 70 or 80 mm3 at the "time of maximum production".(Robert Forster, 1978, pp.57) This i s substantially below o f f i c i a l government projections. However, government projections made in 1973 have already proven overly optimistic in regard to the basic forest land area. Forster gives 4 reasons why the f a i l u r e to meet the goals of domestic production set in 1973 w i l l continue: 1) no market has, or l i k e l y w i l l be established for the vast larch plantations in Hokkaido, 2) the conservation movement i s growing and w i l l continue to place r e s t r i c t i o n s on forest harvesting, 3) the expected r e s u l t s from forest management programs are overly optimistic, especially for remote or distant areas where management has recently been i n i t i a t e d , 4) there i s i n s u f f i c i e n t labor to carry out the highly labor-demanding harvesting management and s i l v i c u l t u r e programs.(Robert Forster, 1978, pp.57) Due to these f a i l u r e s i t does not appear that there i s an 56 accurate forecast of Japanese timber production available from the Japan Forest Agency. While Forster's figure of 70 or 80 mm3/year i s a more reasonable estimate of maximum production, he does not state when t h i s maximum w i l l be reached or at what rate of increase. Much of the growth i n timber production towards the 70 or 80 mm3/year mark w i l l l i k e l y be attained i n large yearly increments around the year 2010 when much of the presently overabundant immature forest becomes harvestable. Before that, however, the growth in production should be r e l a t i v e l y slow. To put a figure on the rate growth i n Japan's domestic timber production i s d i f f i c u l t . Differences in tree species, rotation periods, c u l t i v a t i o n practices, climate* market conditions, and a c c e s s i b i l i t y greatly complicate the projection analysis.. For example, at present approximately 70% of plantations and 40% of natural forests are comprised of immature trees under 20 years of age.(Robert Forster, 1978, pp.52 and Japan Forest Agency, 1980, pp.46) Together they amount to 50% of t o t a l forest area. (Japan Forest Agency, 1980, pp.46) Some of these forests, l i k e the larch plantations i n Hokkaido, mature i n 35 years. . This larch w i l l become harvestable during t h i s decade. The problem though, i s that no market exists for larch in Japan and i t w i l l not be harvested u n t i l there i s a viable market. Forster doubts whether t h i s market w i l l ever develop. Other plantations are of sugi, or Japanese cedar, which i s the most common species of tree in Japan, and reguires about a 50 to 60 year rotation period to produce good sawlogs. The r o t a t i o n period though, can vary from 15 to 120 years depending on the 57 quality of timber required. (Robert Forster, 1978, pp.54,58) Another factor i n h i b i t i n g e f f e c t i v e projection of harvestable timber i s that of the approximately 20% of the land that supports mature forests, i.e.trees 60 years o l d or more, (Robert Forster, 1978, pp.52) much i s inaccessible due to the mountainous t e r r a i n of Japan. 42% of forest land i s on slopes of 15 to 30 degrees, and 28% i s on slopes in excess of 30 degrees. (Jaakko Poyry and Co., 1975,pp.38) Naturally enough, a gcod proportion of the mature timber i s on the most inaccessible of t e r r a i n . Thus, perhaps the best means of achieving an estimate for timber production in 1990 i s simply to take Forster's figure for maximum domestic production - 70 to 80 mm3 - determine when i t should be attained, and divide the increase into yearly average increments between the present and the time of maximum production. According to the Forestry Agency maximum growing stock, and likewise A AC, w i l l be arrived at sometime in the 2020 's. (Forestry Agency, 1980rpp.49) While the actual Forest Agency figure for volume of growing stock seems seriously exaggerated, there i s reasonable v a l i d i t y in the estimate of when maximum growing stock and AAC w i l l be attained.. This i s because the Forest Agency's error l i e s i n the overestimation of forest land "area" and the volume of growth per acre as opposed to an overestimation of the maturation rate of the ex i s t i n g timber. Since Forster's figure takes the former into account i t i s reasonable to accept 2020 as the year when Japan should be harvesting between 70 and 80 mm3 of timber annually.. 58 Since present product ion i s 34 mm3/year the average y e a r l y increment to a t t a i n 70 t o 80 mm3/year by 2020 i s .9 t o 1.15 mm 3 /year. . By 1990 t h i s would r e s u l t i n a h a r v e s t of between 43 and 45 .5 mm 3/yr. Th is es t imate can be modi f ied f u r t h e r because, as s t a t e d e a r l i e r , the y e a r l y increment i n growing stock w i l l l i k e l y be g reater towards the end of the r o t a t i o n c y c l e than at the b e g i n n i n g , when the p r e s e n t l y vast young f o r e s t s are approaching m a t u r i t y . . T h u s , i n the shor t term . 9 t o 1.15 mm3/year must be recogn ized as a very o p t i m i s t i c p r o j e c t i o n . Perhaps most l i k e l y i s a 1990 harvest of about 40 mm3. . An even lower f i g u r e i s a l s o i n the range of p o s s i b i l i t y i f bad weather or poor markets f o r the f a s t e r maturing s p e c i e s a f f e c t the h a r v e s t . I t would appear though, that the s a f e s t range i s between 40 and 43 mm3/year and t h i s w i l l be used as the est imate f o r t imber p roduct ion i n 1990. I t s t i l l remains necessary to t r a n s l a t e t h i s f i g u r e f c r t imber product ion in 1990 i n t o a f i g u r e f o r lumber p r o d u c t i o n . . In Japan, domestic t imber i s made i n t o two major products - lumber and pulp ( i n c l u d i n g ch ips ) - with on ly a very s m a l l p r o p o r t i o n used fo r plywood and other p roduc ts . . In the f i v e years between 1970 and 1974 the p r o p o r t i o n of sawlogs t o t o t a l t imber p roduct ion v a r i e d from 57.5% t o 62 .7%, and averaged 6 0 . 1 % . (Japan, M i n i s t r y of A g r i c u l t u r e and F o r e s t r y , S t a t i s t i c a l Yearbook, 1974, pp.320) I t would seem f a i r to say t h e r e f o r e that about 60% of domestic t imber i s made i n t o lumber. . P laced aga ins t the p r o j e c t i o n f o r t imber p roduct ion i n 1990 t h i s would amount to domestic product ion of between 24.0 mm3 and 2 5 . 8 mm3 59 of sawlogs. Of t o t a l domestic timber production between 1969 and 1974 the proportion of hardwoods to t o t a l timber fluctuated from 39.5% to 42.7%, again a very consistent pattern.. The average for the six years i s 41%. (Japan Ministry of Agriculture and Forestry, S t a t i s t i c a l Yearbook, 1974, pp.308) Since 98% of the recent, a r t i f i c i a l l y planted forests are softwood this proportion can be expected to f a l l . But the proportion of hardwoods should f a l l only after another 10 to 20 years when these plantations begin to be harvested.. As a result of the 24 to 25.8 mm3 of timber estimated as sawlogs in 1990 about 41% should be hardwoods or between 9.8 and 10.5 mm3 . Likewise 59% should be softwoods or approximately 14.1 to 15.2 mm3.. The reason for breaking down timber production into softwoods and hardwoods i s because in Japan i t reguires 1.31 m3 of softwood log to produce 1 m3 of sawn lumber, while for hardwoods i t takes 1.54 m3 of log to produce 1 m 3 of lumber.(statistics from The Ministry of Agriculture, i n Robert Forster 1978, pp.8) In order to determine t o t a l lumber production t h i s difference in conversion factors must be taken into consideration. Thus the 9.8 to 10.5 mm3 of hardwood timber should come to between 6.4 and 6.9 mm3 of hardwood lumber. Similarly the 14.1 to 15.2 mm3 of softwood timber should amount to between 10.8 and 11.6 mm3 of softwood lumber. Total domestic lumber production in 1990 should approximate 17.2 to 18.5 mm3. j i Of the 62.6 to 69.1 mm3 of lumber projected as Japan's t o t a l demand in 1990 then, imports w i l l account for a low of 60 44.1 mm3, and a high of 51.9 mm3. Since imported lumber, or lumber produced from imported sawlogs varied between 35 mm3 and 40 mm3 annually throughout the 1970's, i t can be concluded that Japanese lumber and sawlog imports w i l l increase over the next decade though not as dramatically as in the 1960's and early 1970's.. By 1990 the increase in yearly imports w i l l have resulted i n between 4 and 12 mm3 per year more lumber derived from imported wood than during the peak years of the 1970's. 61 3.2.0 Where The Competition Stands With over 50 n a t i o n s e x p o r t i n g lumber to Japan Canada w i l l not have an easy time competing f o r whatever g a i n s there are to be made i n the Japanese market over the next decade. . The slower growth r a t e of the lumber market i n Japan t h a t i s p r o j e c t e d here f o r the 1980's however, does not mean t h a t there w i l l be no room f o r Canadian lumber export expansion to that country.. On the other hand, i t may mean t h a t a more concerted e f f o r t w i l l have to be made i n order t o p i c k up a s i g n i f i c a n t l y i n c r e a s e d s l i c e of the Japanese lumber market p i e . . The next major gue s t i o n then, i s where does Canada stand v i s - a - v i s the other major "softwood" s u p p l i e r s to the Japanese market. Table 21 shows t h a t the market i s dominated by the United S t a t e s and the U.S.S.R. T h i s does not mean that Canada i s not an important source of supply however.. In order to b e t t e r understand Canada's, and more s p e c i f i c a l l y B.C.'s p o s i t i o n i n the Japanese market i t i s necessary to examine the c o n d i t i o n of the f o r e s t i n d u s t r i e s and resource bases of the other major softwood s u p p l i e r s , namely the U.S., the U.S.S.E., B r i t i s h Columbia, New Zealand, and, because of i t s p o t e n t i a l , South America. The manner f o r doing t h i s i s to r e l y on prominent f o r e s t r y j o u r n a l s or r e s p e c t i v e government a g e n c i e s t o develop an a n a l y s i s f o r each country or r e g i o n . . 3.2.1 The United S t a t e s In a study undertaken i n 1979 by David Darr and Gary L i n d e l l , both of the United S t a t e s Department of A g r i c u l t u r e 62 Table 21 Major Suppliers of Softwood to Japan: 1979 (quantity: 1000 a?, value: 1000 yen) LOG LUMBER quantity value quantity value U.S.A. 12,34-6 4-26,588,758 1,522 64-,173,109 U.S.S.R. 7,302 151,383,027 187 3 , 7 5 M 3 7 Canada 334- 11,593,171 2,083 39,381,837 New Zealand 994- 16,627,932 293 6,808,516 Source: Japan Lumber Journal, A p r i l 30, 19*0, pp . 1 0 , o 63 (USDA) Forest S e r v i c e , a p r o j e c t i o n was developed f o r U.S. lumber consumption, domestic p r o d u c t i o n , impor ts and expor t s u n t i l the year 2030. (Table 22) Accord ing t o t h i s s tudy , lumber consumption i n the United S t a t e s i s espected to i n c r e a s e r a p i d l y from 1977 to 1990 by a t o t a l of 19% a f t e r w h i c h . i t w i l l l e v e l o f f . The U.S. d e s p i t e l a r g e exports t o Japan w i l l remain a net importer of softwood lumber . . The percentage of impor ts t o t o t a l consumption w i l l peak i n 1990 at 2 8 . 2 % . . During the 1980's lumber expor ts are expected to i n c r e a s e as domestic p roduct ion expands. I t would appear from Darr and L i n d e l l ' s s tudy that U.S. lumber p roduct ion w i l l expand by no l e s s than 25% over the next 30 y e a r s . . A l s o , even though the United S ta tes i s a net importer they are expected to expand expor ts of softwood between 1977 and 1990 by 500 m i l l i o n board feet or 35%. . Imports from Canada meanwhile should grow by about 3 b i l l i o n board f e e t or 29%. Th is i n c r e a s e i n expor ts w i l l come at the expense of any Canadian e f f o r t at market d i v e r s i f i c a t i o n . . As Darr and L i n d e l l s t a t e : " I f the past i s any guide the U .S . .market w i l l probably cont inue to buy the bulk of Canadian product ion at the expense of reduced Canadian s a l e s to o f f shore m a r k e t s . " (Darr and L i n d e l l , Fores t Products J o u r n a l , May 1980, pp.17) Darr and L i n d e l l e v i d e n t l y fo resee l i t t l e change i n the present Canadian dependence on the U.S. lumber market . . Darr and L i n d e l l ' s r e s u l t s d i f f e r markedly from another study prepared i n 1979 by R i c h a r d Haynes and Dar ius Adams. Haynes i s a l s o from the USDA Fo res t S e r v i c e , w h i l e Adams Table 22 U.S« Production, Imports, Exports, and Consumption of Softwood Lumber to 2030 Domestic Production 1970 27.5 1975 26.2 1977 31.1 Imports from Canada 5.7 5.7 10.2 Total Imports : 5.7 10.4 Exports 1.2 1.4 1.4 ( b i l l i o n board feet) Apparent Consumption 32.1 30.5 40 .1 Imports as a % of Consumption 185.7 25.9 1990 2000 2010 2020 2030 36.2 37.4 41.1 41.1 40 .9 NA NA NA NA NA 13.5 13.0 13.0 12.5 12.0 1.9 l . g 1.7 1.6 1.6 4 7 .g 4 g . 6 52.4 52.0 51.3 2g.2 26.g 24. g 24.0 23.4 NA - Not Available Source: David Darr and Gary L i n d e l l , Forest Products Journal. A p r i l 1930, pp .17. 65 i s a p ro fessor of f o r e s t r y at Oregon State U n i v e r s i t y . . Haynes and Adams, whose r e s u l t s appear i n Table 23 foresee no i n c r e a s e i n U.S. domestic lumber product ion between 1980 and the year 2 0 0 0 . . In f a c t , they p r o j e c t a decrease of 1.7 b i l l i o n board fee t or 5 .3%. The i r i n c r e a s e s i n domestic consumption are s m a l l e r than D a r r ' s and L i n d e l l ' s f o r the year 2000, i . e . 48.6 b i l l i o n board f e e t f o r Darr and L i n d e l l versus 44 .5 b i l l i o n board f e e t f o r Haynes and Adams. The l a t t e r expect an even g r e a t e r i n c r e a s e i n imports from Canada t o compensate f o r the poor performance of the domest ic lumber i n d u s t r y , i . e . . 1 4 . 3 b i l l i o n board f e e t versus 13 b i l l i o n board f e e t f o r Darr and L i n d e l l . . I f t h i s becomes t rue the dominat ion of the American market w i l l be tha t much g r e a t e r . Despite t h i s r e l i a n c e on lumber imports from Canada the U.S. w i l l probably remain Canada's g r e a t e s t o b s t a c l e to the expansion of s a l e s i n the Japanese lumber market . . There are s e v e r a l reasons f o r t h i s . . As a l ready s t a t e d i t i s d i f f i c u l t f o r Canadian lumber producers to make the e x t r a e f f o r t to expand lumber s a l e s i n Japan when the American market i s so c l o s e , so l a r g e , and so f a m i l i a r . . Secondly , the U . S . . i s not on ly Japan 's l a r g e s t s u p p l i e r of sof twood, but furthermore 90% of these e x p o r t s are i n l o g fo rm. (Japan Lumber J o u r n a l , 1979 f i g u r e s , A p r i l 30,1980, pp.10) The Japanese p r e f e r l o g s as t h i s s u p p l i e s t h e i r own l a r g e n a t i v e s a w m i l l i n g i n d u s t r y which b e t t e r serves t h e i r own lumber market. A lso the types of wood the United S t a t e s expor ts to Japan are g e n e r a l l y of the same s p e c i e s of wood as Canada 's . (Japan Lumber J o u r n a l , A p r i l 3 0 , 1 9 8 0 , pp. 10,11) Thus i t appears that the dominat ion of the American 66\ Table 23 1980 2000 2030 U.S. Consumption, Imports (from Canada), Exports and Production of Softwood Lumber to 2030 Domestic Consumption 4-1.0 4-4-. 5 47.5 Imports from Canada 9 .1 14 .3 14.1 ( b i l l i o n board feet) Exports 1.3 1.4 1.2 Apparent Production 31.9 30.2 33.4 Source: R. Haynes and D. Adams, Forest Products Journal. October, 1979. PP .77. 67 market and the fact that Canada exports lumber, not logs, w i l l prevent Canada from making any gains in the Japanese market at the expense of the Americans present market share.. The p o s s i b i l i t y of a major change in U.S..log exporting policy i s unlikely, though there i s a growing movement to halt log exports i n favor of more processed wood exports, i . e . lumber. This movement has already recorded some v i c t o r i e s . The export of logs has been r e s t r i c t e d from U.S. National Forest west of the 100th meridian by federal law.(Robert Forster, 1978, pp.85) Also Oregon, C a l i f o r n i a and Alaska have prohibited the export of unprocessed timber from state lands., The r e s u l t has been that in 1975, for example, one-third of the timber harvest from Washington, Oregon and C a l i f o r n i a was prohibited from export i n log form by Federal or State controls. ( L i n d e l l , Log Export Restrictions, 1971, pp12) S t i l l , log exports account for one-fifth of a l l timber harvested in the United States Northwest. Shutting t h i s flow off would antagonize not only the Japanese who r e l y heavily on U.S..log exports, but would also arouse opposition from large companies l i k e Weyerhauser. . The Japanese pay high prices for logs mainly because the care with which they saw the wood allows them to re t r i e v e more usable lumber.(Economist, May 24,1980, pp.44) According to "The Economist" Japanese bidding increases the price of logs to Weyerhauser by an extra $75 per 1000 board feet. (Economist, May 24,1 980, pp.44) Also, because of U.S..transportation policy, i . e . the "Jones Act, which necessitates the use of American ships for 68 shipments between American p o r t s , i t i s cheaper f o r B . C . . m i l l s to sh ip lumber through f o r e i g n f r e i g h t e r s t o the nor th eastern Uni ted S t a t e s than i t i s f o r the s t a t e s of Washington and Oregon who must use American f r e i g h t e r s . In t h i s s i t u a t i o n the Japanese market cou ld be almost cons idered an escape va l ve t o keep western American lumber producers from p u t t i n g pressure on the government to change i t s t r a n s p o r t a t i o n p o l i c y . . L a s t l y , s i n c e i t i s more d i f f i c u l t f o r the l a r g e American s a w m i l l s to cut lumber to i n t r i c a t e Japanese s p e c i f i c a t i o n s , r e s t r i c t i o n s on l o g expor ts would not a u t o m a t i c a l l y r e s u l t i n an i n c r e a s e i n lumber e x p o r t s . . I t would mostly mean l o s t markets . The Japanese would seek logs e l s e w h e r e . . I f i t meant impor t ing more lumber the Japanese would probably turn to the s m a l l e r Canadian m i l l s than to the m i l l s i n the United S t a t e s . I f t h i s happened Canada would n a t u r a l l y b e n e f i t g r e a t l y , but there would be no s m a l l uproar from workers and i n d u s t r y i n the U . S . . N o r t h w e s t . . N e v e r t h e l e s s , on the immediate h o r i z o n , i t appears that the S t a t e of Washington w i l l f o l l o w C a l i f o r n i a , Oregon, and A laska i n pass ing a government b i l l p r o h i b i t i n g the expor t of unprocessed wood from S t a t e l a n d s . . In 1974, 22% of l o g s shipped from the State o r i g i n a t e d from State-managed l a n d s . . The b i l l i s g iven a " f a i r chance of succeed ing . 1 1 (Economist , May 24 , 1980, pp.44) I f i t does i t may open up a market of 400 m i l l i o n board feet/year - which i s 22% of the 1977 expor ts of 2,003 m i l l i o n board f e e t . (F lorence Buderman, USDA, 1978, pp.27) S ince 90% of the State of Washington's log expor ts are des t ined f o r Japan the 69 Japanese may have to look to other sources for approximately 360 million board feet of softwood timber in the near future. The p o s s i b i l i t y c e r t a i n l y exists for B.C. capturing a share of t h i s market. The capturing by B.C., however, of even a l l of the 360 million board feet in lumber form would only amount to about a 10% increase in present exports to Japan. . I f we are to speak of r e a l l y d i v e r s i f y i n g Canadian/B.C. lumber markets the Japanese market should be at least doubled, i f not quadrupled during the next decade. A 10% increase would be a step i n the right d i r e c t i o n , but c e r t a i n l y net a t e r r i b l y s i g n i f i c a n t one.. Besides changes in export policy there i s also the guestion of export supply, and especially of whether the United States can maintain i t s proportion of the Japanese softwood trade given the projected increase in Japanese demand for sawlogs and lumber by 1990.. The prospects are not c r y s t a l c l e a r . Darr and L i n d e l l who projected an increase both i n domestic timber production and exports, a l l o t only 500 extra mi l l i o n board feet for possible export.. This would make up only a small f r a c t i o n of the projected increase i n Japan's lumber requirements and would furthermore be t o t a l l y neutralized by the passing of the State of Washington b i l l . Haynes and Adams' projected increase in U.S. exports i s even smaller at 100 m i l l i o n board feet, (see Table 23) Accordingly the U.S..would appear to be able to maintain i t s present volume of wood exports to Japan, but not much more, over the next decade.. This i s i n keeping with the trend of the l a s t decade during which there has been a f a i r l y consistent flow of about 11 70 mm3/year of logs and lumber to Japan. On the other hand, the U.S..trade imbalance with Japan i s inordinately weighted towards the l a t t e r * s favor. In the l i g h t of t h i s p o l i t i c a l l y s ensitive issue i t i s not impossible that log exports may even be stimulated to help a l l e v i a t e the embarassing imbalance of trade. The eruption of Mount St. Helens may also enter t h i s c a l c u l a t i o n as the volcano blew down no less than 4% of Weyerhauser•s extensive timber holdings creating the d i s t i n c t p o s s i b i l i t y of the dumping of these logs onto the Japanese market i n the near future. Keeping the above i n perspective, however, and including the p o s s i b i l i t y of large growth i n U.S. domestic lumber consumption i t would not appear that there w i l l be very much wood l e f t over for export expansion to Japan. The maintenance of the present export volume i s possible through the next decade. 3. 2. 2 The U.S.S.R. The U.S.S.E..possesses over half of the world's softwood growing stock. Much of t h i s lumber i s in the remote eastern area of Siberia and thus far from European markets. This makes i t well suited for export to Japan. ( L i n d e l l , Forest Products Journal, July 1979, pp.47) These factors enabled the U.S.S.R. to supply Japan with over 27% of the l a t t e r ' s forest product imports in 1975. Since that time, however, timber production has s t a l l e d despite a 5 year plan aimed at increasing production. (Jay Holowacz, July 1979, pp.23) The r e s u l t has been a proportionate decline i n Russia's export share of not only the Japanese market but other markets in Europe as well.. In the 71 l a s t f i v e years only i n 1977 has the value of wood expor t s t o Japan r i s e n . (Japan E x t e r n a l Trade O r g a n i z a t i o n , White Paper On I n t e r n a t i o n a l Trade 1977-1979) This f a l l i n g o f f has reached dramat ic p r o p o r t i o n s t h i s year as shipments of logs to Japan were down 28% i n the f i r s t q u a r t e r . (Japan Lumber J o u r n a l , Jan . 20, 1980, pp. 1) While U . S . S . R . wood expor ts may rebound somewhat i t does not appear l i k e l y that any expansion of t imber p roduct ion or t imber expor ts i s i n the o f f i n g . Jay Holowacz g i ves th ree reasons f o r t h i s : 1) the t imber i n d u s t r y i s of r e l a t i v e l y low s t a t u s i n the O . S . S . E . and as a r e s u l t encounters d i f f i c u l t i e s i n r e c r u i t i n g and b u i l d i n g a permanent work f o r c e , 2) with about 100 government m i n i s t r i e s , i n s t i t u t i o n s and departments governing wood opera t ions e f f e c t i v e a d m i n i s t r a t i o n i s e x t r a o r d i n a r i l y d i f f i c u l t , 3) the huge land mass r e g u i r e s e f f i c i e n t land based means of t r a n s p o r t i n g wood and the U . S . S . R . has s imply not developed adequate l o g moving equipment to mainta in t imber output and boost labor p r o d u c t i v i t y . . Jan S o l e c k i , who has w r i t t e n s e v e r a l a u t h o r i t a t i v e s t u d i e s on the f o r e s t i n d u s t r y i n the U . S . S . R . agrees w i th the t e c h n o l o g i c a l inadequacy and low s t a t u s of the S o v i e t lumber i n d u s t r y . (Personal I n t e r v i e w , August 1980) The lack of p r i o r i t y g i ven to lumber p roduc t ion i s f u r t h e r r e f l e c t e d i n the f a c t t h a t d e s p i t e the s i z e of the r e s o u r c e , planned output may even be surpassed by p r o j e c t e d consumption by 1995. ( L i n d e l l , World Softwood Lumber Trade, J u l y 1979, pp.47) S o l e c k i , however, p o i n t s out that that, t h i s s i t u a t i o n may change i f the i n d u s t r i a l 72 p r i o r i t i e s of the Sov ie t government s h i f t . . The U . S . S . R . i s a planned economy. Resources , i . e . men and machines, are a l l o c a t e d accord ing t o a system of i n d u s t r i a l p r i o r i t i e s . At present the p r i o r i t i e s i n eastern S i b e r i a center upon 1) the new Ba ika l -Amur r a i l r o a d extending from Lake B a i k a l to the P a c i f i c , 2) the f e r t i l i z e r i n d u s t r y to shore up lagg ing a g r i c u l t u r a l p r o d u c t i o n , and 3) o i l and gas development. (Jan S o l e c k i , Persona l I n t e r v i e w , August 1980) These p r i o r i t i e s may change, f o r example, when the r a i l r o a d i s completed i n the near f u t u r e . . At t h a t p o i n t , accord ing t o S o l e c k i , i t i s e n t i r e l y p o s s i b l e that the emphasis may s h i f t t o the f o r e s t i n d u s t r y . Y e t , s i n c e the r e t u r n on investment i n the f o r e s t i n d u s t r y i s not as great as i n other areas the second c l a s s s t a t u s of wood product ion i s l i k e l y t o p e r s i s t . . As S o l e c k i s t a t e d : " I t cannot be s a i d c a t e g o r i c a l l y tha t changes i n p r i o r i t i e s w i l l not happen, but i t i s not l i k e l y f o r the U .S .S .R . to engage i n f o r e s t i n d u s t r y c o m p e t i t i o n ( in the Japanese market) because i t i s a h igh c o s t i n d u s t r y . ( P e r s o n a l I n t e r v i e w , August 1980) I t can a l s o be mentioned that even i f a change i n government p o l i c y o c c u r s , i t could take 5 years to a decade fo r i t t o r e s u l t i n any s u b s t a n t i a l l y i n c r e a s e d t imber p roduct ion c a p a b i l i t y . I t would appear t h e n , t h a t un less the Japanese are w i l l i n g to - i n v e s t i n eastern S i b e r i a to the g reat extent necessary to s t i m u l a t e f o r e s t p roduct ion they cannot count too s t r o n g l y on the s t e a d i n e s s of t h e i r t imber supply from the 73 0.S.S.R. Indeed, the large investments that have already been made do not serve as that strong a guarantee of future supply. Furthermore the t e r r i t o r i a l c o n f l i c t s with the Soviets over Sakhalin and other northern islands north of Hokkaido, to say nothing of the differences i n p o l i t i c a l systems* mi l i t a t e s against the building of extensive Japanese investment commitments i n Russia. . In conclusion then, while Russia i s s t i l l a very prominent source of lumber supply, the condition of the Russian forest industry does not bode well for the future.. Japan may have to consider i t s e l f fortunate simply to maintain i t s present l e v e l of softwood imports. Any expansion of imports would not seem j u s t i f i a b l e i n the l i g h t of the amount of investment that Japan would have to offer. It would appear therefore that Japan w i l l have to make up the projected expansion in domestic lumber consumption elsewhere. 3.2.3 B r i t i s h Columbia (Canada) Canada i s a distant t h i r d as a supplier of softwood to Japan exporting only about o n e - f i f t h as much as either the U.S.. or the U.S.S.R. Since well over 90% of the wood shipped to Japan from Canada originates i n or near B r i t i s h Columbia this section w i l l be primarily concerned with the B.C. .lumber industry. At present t h i s industry i s i n an i n t e r e s t i n g position. As stated e a r l i e r a decline in U.S. lumber demand has caused a lowering of exports, a f a l l in lumber pr i c e s , and 7a g e n e r a l l y a depressed s i t u a t i o n i n the lumber i n d u s t r y as a whole. The sawmi l l s i n the i n t e r i o r have been p a r t i c u l a r l y hur t as they r e l y h e a v i l y on the performance of the 0.S . . m a r k e t . . On the other hand, the deva lua t ion of the Canadian d o l l a r a g a i n s t American currency d u r i n g the l a s t two years has l e d t o hea l thy p r o f i t margins i n the f o r e s t products i n d u s t r y . . T h i s i s p r e s e n t l y encouraging la rge c a p i t a l expend i tures on p lant modern izat ion and expansion which w i l l r e p o r t e d l y soon t o t a l $3 b i l l i o n * ( B . C . , M i n i s t r y of Economic Development, 1 9 7 9 , pp .67) Thus, d e s p i t e the present product ion downturn, the i n d u s t r y i s hea l thy and w e l l po ised to take advantage of boosts i n lumber demand i n e i t h e r the United S ta tes or Japan dur ing the coming decade. An important quest ion t h e n , i s whether t h e r e i s a s u f f i c i e n t and a c c e s s i b l e supply of t imber to enable much expansion i n p r o d u c t i o n . Th is i s a d i f f i c u l t q u e s t i o n to answer. . The t imber supply s i t u a t i o n v a r i e s accord ing to the area of the p r o v i n c e . P roduct ion f a l l d o w n s are imminent i n the Kamloops Region w h i l e the supply i n the Peace R iver Region seems v i r t u a l l y i n e x h a u s t i b l e . ( B . C . , M i n i s t r y of F o r e s t s , March 1 9 8 0 , pp .15 ) According t o the recent resource a n a l y s i s undertaken by the B r i t i s h Columbia M i n i s t r y of F o r e s t s , the t imber harvest p r o j e c t e d as being needed t o meet the p o t e n t i a l demand f o r B.C. f o r e s t products i s as f o l l o w s : 1977 7 0 . 0 mm3 1980 75.1 mm3 1990 8 3 . 7 mm* 2000 91.1 mm3 75 ( B . C . , M i n i s t r y of F o r e s t s , March 1980,pp.14) The repor t goes on t o show that the maintenance of t imber p roduct ion i n l i n e wi th these p r o j e c t i o n s cou ld cause s e r i o u s supply fa l l downs beg inn ing i n 5 t o 20 y e a r s . . U n f o r t u n a t e l y , the f i g u r e s used do not take i n t o account the 5% of p r o d u c t i v e f o r e s t lands which are p r i v a t e l y owned. (B.C.* M i n i s t r y of F o r e s t s , March 1980, pp.783) Th is i s not j u s t the marg ina l o v e r s i g h t which i t may appear to be s i n c e much of t h i s p r i v a t e f o r e s t land i s among the most p roduct i ve f o r e s t i n the count ry . Despi te t h i s o v e r s i g h t , i t i s c l e a r tha t p o t e n t i a l problems of t imber supply do e x i s t . I t would t h e r e f o r e be i m p o s s i b l e to fo resee B .C . i n c r e a s i n g p roduct ion d r a m a t i c a l l y by 1990. I t i s e q u a l l y imposs ib le t h e n , f o r B . C . . to supply a s i g n i f i c a n t l y l a r g e r p r o p o r t i o n of the Japanese market without s h i f t i n g lumber away from the Un i ted S t a t e s . I t would seem, g iven the i n c r e a s e s i n U.S. demand f o r lumber imports p ro jec ted by Darr and L i n d e l l , and the even greater . i m p o r t demand p r o j e c t i o n by Haynes and Adams,that the B r i t i s h Columbia lumber i n d u s t r y w i l l have i t s hands f u l l i n the coming decades i n s imply supp ly ing the U.S. market. Nor i s the t i g h t n e s s i n the B.C. t imber supply s i t u a t i o n l i k e l y to lead to any pronounced over tu res from Japan to inc rease lumber imports from B r i t i s h Columbia. The Japanese are net l i k e l y to f o r g e t past Canadian f i c k l e n e s s r e g a r d i n g the supply of lumber. The Canadian lumber i n d u s t r y has been known to develop markets i n Japan dur ing slumps i n U.S. .demand and then drop them when the American market has p i c k e d up 76 a g a i n . ( La i rd W i l s o n , Seaboard, Persona l I n t e r v i e w , May 1980) I t would seem t h e r e f o r e , that the s t a t u s quo* i n terms of the r e l a t i v e p r o p o r t i o n of B . C . ' s lumber that i s expor ted e i t h e r to the U.S. or to J a p a n , w i l l be p r e s e r v e d . . T h i s , however, need not be the c a s e . As s t a t e d before a< l a r g e r Japanese market f o r B.C. lumber would probably add to the l e v e l of s t a b i l i t y i n the i n d u s t r y by o f f e r i n g an impor tant a l t e r n a t i v e market when the U.S. market takes one of i t s p e r i o d i c d i v e s . . A lso the Japanese a p p r e c i a t e , and are w i l l i n g to pay f o r q u a l i t y lumber. B .C . s t i l l has l a r g e r e s e r v e s of high g u a l i t y lumber and the maintenance of a hea l thy Japanese market w i l l he lp support the best p o s s i b l e p r i c e f o r the r e s o u r c e . . Indeed i t has been mentioned t h a t , "The Japanese are expected t o pay more (than the Americans) f o r e x a c t l y t h e same p r o d u c t . " (Henrik B l i c h f e l d , Eacom, P e r s o n a l I n t e r v i e w , May 1980) Of course the b e t t e r p r i c e o b t a i n a b l e i n Japan i s i n no s m a l l par t r e s p o n s i b l e f o r the recent inc reased p r o p o r t i o n of B.C. . lumber bound f o r Japan. The q u e s t i o n of what course B.C. lumber expor ts t o Japan may take over the coming decade given "p resent " c o n d i t i o n s w i l l be examined i n the next c h a p t e r . . S u f f i c e i t t o say here t h a t there are supply problems which w i l l i n h i b i t expansion of the lumber market i n Japan, and, t h a t wh i le the prov ince i s an important source of lumber supply t o Japan i t w i l l never move i n t o a dominant p o s i t i o n comparable to the U . S . . o r the U . S . S . R . . 77 3 . 2 . 4 New Zealand The only o ther major expor ter of softwoods t o Japan i s New Zealand though i t s market share i s only h a l f t h a t of C a n a d a ' s . . New Zealand cannot be expected to expand expor t s to Japan much beyond the present volume. L i m i t a t i o n s i n the s i z e of the f o r e s t e d areas a lone c l e a r l y show the l i m i t e d p o s s i b i l i t i e s f o r f u r t h e r export e x p a n s i o n . . New Zealand possesses only 6.4 m i l l i o n acres of f o r e s t compared to 191 m i l l i o n acres i n Canada and even 91 m i l l i o n ac res i n Japan. (Jaakko Poyry and C o . , 1975, pp. 23,38,47) While t imber p roduct ion has i n c r e a s e d over the l a s t decade, i t has done so s l o w l y . In the l a s t few years t o t a l wood expor ts to Japan have hovered around the 1000 mm3 mark. ( Japan E t e r n a l Trade O r g a n i z a t i o n , White Paper on I n t e r n a t i o n a l Trade 1977,1978 1979) Given that Japan a l ready accounts f o r 80% of t o t a l New Zealand log expor ts there i s l i t t l e p o s s i b i l i t y of s h i f t s from other markets to open up more wood f o r shipment to J a p a n . . Thus, whi le New Zealand w i l l probably remain an important source of softwood logs f o r Japan, there w i l l not be much i n c r e a s e i n present volumes f o r a t l e a s t a decade. 3 . 2 . 5 South America With over 1300 m i l l i o n a c r e s of f o r e s t coupled with r a p i d t r e e growth and the p o t e n t i a l of a very shor t r o t a t i o n p e r i o d . South America possesses a p o t e n t i a l f o r wood product ion which i s g r e a t e r even than t h a t of the S o v i e t O n i o n . . While perhaps only 75 m i l l i o n acres are softwoods t h i s i s s t i l l a 78 s i g n i f i c a n t a r e a . (Jaakko Poyry and C o . , 1975, pp.52) Present expor ts t o Japan from the e n t i r e c o n t i n e n t , however, s t i l l amount to l e s s than 10% of Canada's volume.(Japan E x t e r n a l Trade O r g a n i z a t i o n , White Paper on I n t e r n a t i o n a l Trade, 1979) There are a l s o many o b s t a c l e s c o n f r o n t i n g e f f o r t s to i n c r e a s e t imber p roduct ion i n c l u d i n g d i f f i c u l t t e r r a i n , weather, and a g e n e r a l l y i n h o s p i t a b l e c l i m a t e . At p resent , C h i l e i s the best prepared to expand wood expor ts and has a l ready e s t a b l i s h e d a permanent s a l e s miss ion i n Japan. (Economist, May 24, 1980,pp.44) But g iven the very c a r e f u l Japanese s t y l e of developing new bus iness r e l a t i o n s h i p s i t i s very doubt fu l whether any major i n r o a d s i n t o the Japanese market w i l l be made dur ing the coming decade. N e v e r t h e l e s s , depending on the se r iousness of any t imber supply s h o r t f a l l tha t Japan may face d u r i n g the coming decade. South America may serve to f i l l some of the gap. 3 . 3 . 0 Conc lus ion While Japan d e r i v e s i t s softwood t imber from many sources there i s no denying the dominance of two n a t i o n s - the O .S . .and the U . S . S . R . . Both may, however, have reached the l i m i t of t h e i r export c a p a b i l i t i e s . No other e x i s t i n g source of softwood i s ab le t o export to the Japanese much more than they are supp ly ing at present i f they are s t i l l t o mainta in other supply commitments. . South America has yet to develop la rge s c a l e exports to Japan and to do so w i l l r e q u i r e t i m e . . New Zealand cannot expand expor ts much f u r t h e r s imply because the resource base i s not l a r g e enough. . S i m i l a r l y Canada/B.C. without a major s h i f t i n expor t s from the U.S. t o 79 Japan could not hope to handle a market i n Japan much g reate r than the present one. An expansion i n the Japanese . demand (as pro jec ted e a r l i e r ) of b etween 4 and 12 mm3 of lumber annua l l y by 1990, even th ough perhaps h a l f may be hardwoods, w i l l t h e r e f o r e leave the Japa nese hard pressed t o f i n d s u f f i c i e n t sources of so ftwood supp ly . . Th is i s e s p e c i a l l y so when i t appears that bot h the Uni ted S t a t e s and the U . S . S . B . may cut back log e x p o r t s . . - the U.S. because of government r e g u l a t i o n , and the U . S . S . E . . b e c a u s e of d e c l i n e s i n p roduct ion and volume a v a i l a b l e f o r e x p o r t . . The i m p l i c a t i o n s of t h i s s i t u a t i o n and the path which B.C. lumber expor ts to Japan seem l i k e l y t o f o l l o w i n the 1980's w i l l be d i scussed i n the f o l l o w i n g chapter . 80 CHAPTER 4 THE B.C..LUMBER INDUSTRY AND THE JAPANESE MARKET B r i t i s h Columbia i s i n somewhat of a unique p o s i t i o n i n the Japanese market i n t h a t B.C. i s J a p a n ' s l a r g e s t source of softwood lumber. So f a r i n t h i s study the d i f f e r e n c e s i n Japanese demand f o r e i t h e r imported softwood sawlogs or softwood lumber have been n in imized and the two types of wood have been d e a l t wi th as easy s u b s t i t u t e s i n regard to J a p a n ' s t o t a l softwood demand p i c t u r e . The r a t i o n a l e f o r t h i s has come from two d i r e c t i o n s . . F i r s t , much of what passes f o r "lumber e x p o r t s " t o Japan i s l i t t l e more than sguared t i m b e r . Most of the m i l l i n g of t h i s wood i s s t i l l l e f t to be done i n J a p a n . . About 47% of the softwood shipped to Japan from B.C. i n 1979 was i n the form of e i t h e r logs (13%), or l i g h t sguares (23%), heavy sguares (11%), and cants (. 2%). (Japan Lumber J o u r n a l , March 20,1 980, pp.10) Secondly , whi le i t cou ld be p o s i t e d that i n Japan wood demand i s a s p e c i f i c amount, say "X" f o r sawlogs and "Y" f o r lumber, i t seems to make sense to expect that i f the l o g s are not a v a i l a b l e than lumber of s i m i l a r s p e c i e s and q u a l i t y w i l l be r a p i d l y s u b s t i t u t e d . Thus i f the world softwood sawlog supply s i t u a t i o n i s t i g h t , as i t appears i t w i l l be with world ( i n c l u d i n g Japan) demand i n c r e a s i n g and the U . S . . a n d U . S . S . R . s low ing export growth, then i t would d o u b t l e s s not take J a p a n ' s wood impor te rs long to f i n d a g r e a t e r market f o r imported lumber, and more s p e c i f i c a l l y , B . C . . l u m b e r . . In other words, i f there i s a demand 81 f o r softwood lumber i n Japan that i s not being s a t i s f i e d by e i t h e r domestic or e x t e r n a l sources of softwood sawlog s u p p l y , wh i le i n t e r n a t i o n a l sources of softwood lumber are a v a i l a b l e , then the p r o p o r t i o n of imported lumber w i l l i n c r e a s e . . I t i s n e c e s s a r y , t h e n , t o develop here a d e s c r i p t i o n of the bus iness r e l a t i o n s h i p that e x i s t s between the B.C. lumber i n d u s t r y and Japan i f we are t o make some e s t i m a t i o n of how the the i n d u s t r y w i l l f a r e i n Japan over the coming decade . . To do t h i s the f o l l o w i n g aspec ts w i l l be examined: 1) past exper ience i n deve lop ing a lumber market i n Japan ; 2) the export of CLS lumber; 3) the Japanese t r a d i n g companies and t h e i r r e l a t i o n s h i p with the B.C. lumber i n d u s t r y ; and 4) the o v e r a l l supply-demand o u t l o o k . . 4 . 1 . 0 B u i l d i n g A Lumber Market In Japan Lumber from overseas i s not an easy commodity t o s e l l i n Japan. At t imes cost and p r i c e r e l a t i o n s h i p s c r e a t e very f r u s t r a t i n g problems. For example, when the supply s i t u a t i o n f o r sawlogs i s t i g h t the p r i c e of sawlogs i n Japan can e a s i l y r i s e above the p r i c e of processed wood, even though the l a t t e r would n a t u r a l l y c o s t more to produce. The s t r e n g t h of t h i s market f o r sawlogs i s d i r e c t l y r e l a t e d to the q u a l i t y of lumber that the Japanese m i l l i s ab le to p r o v i d e . . Steve Kaufman, managing d i r e c t o r of MacMi l lan J a r d i n e , po inted out t h a t the Japanese lumber buyer o f t e n r e q u i r e s s m a l l amounts of p r e c i s e l y sawn lumber which are i m p o s s i b l e to supply from overseas . Not only are the q u a n t i t i e s too smal l f o r most overseas s a w m i l l s to 82 bother w i t h , but a l s o , i n the i n t e r i m between m i l l i n g and d e l i v e r y from ah overseas m i l l , the lumber may change s l i g h t l y i n dimensions due to d r y i n g or s h i p p i n g s t r e s s and may no longer meet the exact measurements of the h i g h l y demanding Japanese buyer . (Steve Kaufman, Pe rsona l I n t e r v i e w , August 1980) In s p i t e of t h i s , B.C. has been more s u c c e s s f u l i n e x p o r t i n g t o Japan lumber cut t o s p e c i f i c s i z e s than any other r e g i o n or count r y . I t has o f ten been assumed tha t t h i s has been due s o l e l y to the B r i t i s h Columbia p o l i c y r e s t r i c t i n g l o g e x p o r t s . A study by Eden Shand on the development of the P a c i f i c Northwest lumber market i n Japan argues that i t was p a r t l y the B.C. lumber i n d u s t r y ' s more en l igh tened approach to the Japanese market , as opposed to t h e i r American c o u n t e r p a r t s , which al lowed B.C. t o become so s u c c e s s f u l i n s e l l i n g lumber i n Japan. (Eden Shand 1968) However, as Shand a l s o s t a t e s , " I t would be an o v e r s i m p l i f i c a t i o n to say tha t B.C. overtook Washington and Oregon i n the Japanese lumber market because she decided t o cut hemlock baby sguares to Japanese requirements whi le the Americans could not be b o t h e r e d . . . . I t was not mere apathy on the par t of the American Northwest lumbermen t h a t caused them t o ignore Japanese r e q u e s t s . I t was a matter of d o l l a r s and c e n t s . They s imply cou ld not manufacture to Japanese s p e c i f i c a t i o n s and d e l i v e r t o Japan at a p r i c e as c o m p e t i t i v e as that of B.C. (Eden Shand, 1968, pp.144) Shand g ives s e v e r a l reasons f o r t h i s , a l l of which hinge on the f a c t t h a t B.C. was more export o r i e n t e d than the Americans. F i r s t , B r i t i s h Columbia lumbermen had more f i n e s s e . . The two main lumber market ing agencies - MacMi l lan B l o e d e l L t d . and 83 Seaboard Lumber Sa les L t d . - were b e t t e r eguipped t o put l a rge shipments together and take bes t advantage of economies of s c a l e . (Eden Shand, 1968, pp.145) These two companies a l s o graduated very e a r l y from working s t r i c t l y through the Japanese t r a d i n g companies to e i t h e r developing an appointed t r a d i n g agent i n Japan, as d i d Seaboard wi th A a l l and C o . , or e s t a b l i s h i n g a j o i n t venture with an East As ian t r a d i n g company, as d i d MacMi l lan B l o e d e l with the o l d and d i s t i n g u i s h e d J a r d i n e , Matheson and Co. (Eden Shand, 1968, pp.145) S ince Shand's study Seaboard has moved a step f u r t h e r c r e a t i n g t h e i r own t r a d i n g agent - Seaboard Lumber and Plywood Sa les A s i a L t d . , or s imply S e a s i a - to dea l wi th the Japanese. These k i n d s of i n i t i a t i v e s gave, and cont inue to g i v e , g rea te r access to Japanese buyers and more f l e x i b i l i t y i n sh ipp ing t o , and maneuvering shipments w i t h i n the Japanese market . C e r t a i n l y these i n i t i a t i v e s have pa id o f f . Tab le 24 shows the advantage B.C. has developed and maintained over the four s t a t e s of A l a s k a , Oregon, Washington, and C a l i f o r n i a i n e x p o r t i n g lumber to Japan. Much of B . C . ' s s u p e r i o r i t y l i e s i n the area of "customer c u t s " ( l i s t e d i n Table 24 as "Other Lumber") of which B r i t i s h Columbia accounts f o r 63% of the t o t a l volume i n that category and t h i s amounts to almost 47% of B . C . ' s t o t a l export volume t o Japan. Since 1975 B.C. has managed to i n c r e a s e the volume of lumber expor ts to Japan from 407 m i l l i o n board f e e t to 1*013 m i l l i o n board f e e t . (Counci l of Fo res t I n d u s t r i e s , A p r i l 1980) Dur ing the same p e r i o d the value of Canadian lumber shipments t o 84 Exports of North American Lumber to Japan by Region (1000 m^ ) 1973 1974 1975 1976 1977 197* 1979 Alaska 990 271 691 754 557 567 694 B.C. 1,372 1,177 967 1,341 1,164 1,745 2,115 Oregon 113 107 i l l 97 73 73 251 Washington 189 406 366 305 284 288 492 C a l i f o r n i a 10 5 1 5 1 0 1 Source: Japan Lumber Journal, March 20, 1980. pp . 10. Table 25 Exports of B.C. Wood to Japan by Form of Wood (1000 m3) 1973 1974 1975 1976* 1977 197* 1979 Logs 90 174 159 239 309 287 311 Light Squares 376 425 431 511 568 5** 562 Heavy Squares 314 364 285 330 418 291 277 Cants - 55 7* 40 26 4 5 CLS # # # # 69 80 145 Other Lumber 681 388 250 498 59* 7*5 1,132 # - included i n Other Lumber Source: Japan Lumber Journal, March 20, I98O. pp . 10. o 85 J a p a n , i n current, d o l l a r s , has t r i p l e d (jumping 650% s i n c e 1972) from $145 m i l l i o n i n 1975 to $468.8 m i l l i o n i n 1 9 7 9 . . Increases i n volume account fo r much of the i n c r e a s e i n v a l u e , but a l s o important are the p r o p o r t i o n a l i n c r e a s e s i n more 1 processed lumber, i . e . more custom cuts and l e s s heavy squares (Table 25) , as we l l as the Japanese w i l l i n g n e s s t o pay f o r g u a l i t y Canadian lumber. Japan a l ready accounts f o r over 15% of the " v a l u e " of t o t a l B.C. lumber shipments , but only 8% of the "volume". (Counci l of F o r e s t I n d u s t r i e s , March 1980) This imbalance, g iven present t r e n d s , should be expected to i n c r e a s e . 4 .2 .C The I n t r o d u c t i o n Of CLS Lumber To Japan The l a t e s t example of the B.C. lumber i n d u s t r y ' s a b i l i t y to undertake novel and ambi t ious approaches to p e n e t r a t i n g the Japanese market has been the i n t r o d u c t i o n , beg inning i n 1973, of CLS lumber, that i s 2x4 's and s i m i l a r c u t s , and the promotion of the p l a t f o r m frame method of housing c o n s t r u c t i o n . . Compared to e a r l y e x p e c t a t i o n s - the Japanese M i n i s t r y of C o n s t r u c t i o n p r o j e c t e d t h a t 30% or about 450,000 houses would be c o n s t r u c t e d us ing CLS lumber by 1976 - the progress of CLS lumber exports has been d i s a p p o i n t i n g . . These e a r l y p r o j e c t i o n s of the M i n i s t r y of C o n s t r u c t i o n , however, are now thought unreasonable and the program i s s t i l l cons ide red a modest success . In 1979 Canadian expor ts to Japan of CLS amounted to 145,000 m3 or 6% of t o t a l export vo lume. . T h i s i s perhaps enough to b u i l d between 10,000 and 12,000 u n i t s or about .8% of t o t a l houses c o n s t r u c t e d . (N.B. D u s t i n g , September 1979, p.2) 86 The i n t r o d u c t i o n of CLS lumber i n t o Japan has not been e a s y . . I t has i n v o l v e d o b t a i n i n g p e r m i t s , a t t r a c t i n g b u i l d e r s , t r a i n i n g tradesman, and encouraging p u b l i c a c c e p t a n c e . . F o r t u n a t e l y the p la t fo rm frame method possesses s e v e r a l important advantages over the t r a d i t i o n a l Japanese " p o s t and beam" method. The f i r s t of these i s t h a t with the North American system, the c o n s t r u c t i o n m a t e r i a l i s h i g h l y s t a n d a r d i z e d . . While t h i s i s t r u e , Robert F o r s t e r has po in ted out that the t r a d i t i o n a l method i s not as complex as i s o f ten b e l i e v e d . In the t r a d i t i o n a l method 10 s i z e s of lumber make up 90% of the p r o d u c t i o n . The b u i l d i n g of a p la t fo rm frame house can invo l ve a wide v a r i e t y of s i z e s eg. 2 x 4 ' s , 2 x 6 ' s , 2 x 8 ' s , 2 x 1 0 ' s , 2 x 1 2 ' s , 1 x 3 ' s , 1x4's e t c . , i n a v a r i e t y of lengths* The d i f f e r e n c e i s t h a t w i th the North American system a house can be complete ly framed with approx imate ly th ree s i z e s , w h i l e the Japanese system r e g u i r e s approx imate ly 10 d i f f e r e n t s i z e s . (Robert F o r s t e r , 1978, pp .38-9) Thus the l a t t e r i s somewhat more c o m p l i c a t e d , but not as compl i ca ted as has o f t e n been suggested. Th i s i s perhaps r e s p o n s i b l e f o r the M i n i s t r y of C o n s t r u c t i o n ' s o v e r e s t i m a t i o n of the acceptance l e v e l of CLS lumber i n the e a r l y 7 0 ' s . The second, and perhaps foremost b e n e f i c i a l f e a t u r e of the p la t fo rm frame method i s that l e s s l a b o r e r s are needed per house dur ing the c o n s t r u c t i o n p r o c e s s . . With North American c o n s t r u c t i o n the c o n t r a c t o r b u i l d s the f o u n d a t i o n , then frames the house, r o o f s i t , and c a l l s i n the plumber, e l e c t r i c i a n , d r y w a l l team, and f i n i s h i n g ca rpente r and the house i s ready fo r 87 s a l e . . (Robert F o r s t e r , 1978, pp.38) Using the t r a d i t i o n a l method a carpenter and a p p r e n t i c e s work from beginning t o end and c a l l i n a plumber or e l e c t r i c i a n as needed. (Robert F o r s t e r , 1978, pp.38) Plumbers or e l e c t r i c i a n s may come to the s i t e 7 to 9 t imes dur ing the c o n s t r u c t i o n p e r i o d . As they are p a i d f o r t r a v e l , s i m i l a r t o here i n North Amer ica , the c o s t s i n c u r r e d are s e r i o u s . . F o r s t e r a l s o reasons that wi th the p l a t f o r m frame method these subtrades cou ld be p latooned a l l o w i n g a c o n t r a c t o r to b u i l d 7-8 houses per year r a t h e r than the u s u a l 3 or 4. ( F o r s t e r , 1978, pp .90-1) A t h i r d b e n e f i c i a l aspect of the p la t fo rm frame method i s that the c o n s t r u c t i o n i t s e l f i s s imp le r and t h e r e f o r e the l a b o r t r a i n i n g per iod i s much s h o r t e r . . Th is f a c i l i t a t e s both the i n i t i a l i n t r o d u c t i o n of the system i n t o Japan and the growth of t rade s k i l l s w i t h i n the p r o f e s s i o n . A program funded by the C o u n c i l of F o r e s t I n d u s t r i e s and the B.C. and F e d e r a l Governments i s aimed at c r e a t i n g a base of tradesmen exper ienced with the p la t fo rm frame method. As y e t , however, the number of t r a i n e d tradesmen i s l i m i t e d . Given the above f a c t o r s the p la t fo rm frame method i s expected to reduce the c o s t of housing c o n s t r u c t i o n by between 20% and 4 3 % . ( F o r s t e r , 1978, pp.91) Such s u b s t a n t i a l sav ings would seem to l ead to o p t i m i s t i c f o r e c a s t s f o r f u r t h e r CLS lumber acceptance i n Japan. . However, t h e r e are s e r i o u s problems as w e l l . As a l r e a d y s t a t e d there a r e , as y e t , an i n s u f f i c i e n t number of exper ienced tradesmen. .Consumers are h e s i t a n t about r i s k i n g investment i n a house tha t was not b u i l t by t r i e d and 88 true methods, especially in earthguake-prone Japan.. Also the additional savings in construction have not been passed along to consumers. (Forster, 1978, pp.89) On the other hand western st y l e homes have a proven market i n Japan and a very favorable image. For example, a very common saying among Japanese men i s that happiness i s an American house, Chinese food, and a Japanese wife. The expected trend i s that there w i l l be a steady, long term, but gradual increase in CLS lumber exports to Japan.. Between 1977 and 1979 exports grew from 69,000 to 145,000 m3. This was the fastest rate of growth of any form of lumber shipped from B.C. to Japan. As such i t does not seem impossible to expect CLS lumber shipments to Japan of between 1 and 1.5 mm3 by the end of the decade. The most important factor here i s not necessarily that the volume of t o t a l lumber exports to Japan w i l l increase, but that the value of the shipments w i l l increase as they include a greater proportion of CLS or other more processed forms of lumber. There are several reasons for t h i s . . F i r s t , the industry i s better suited to produce CLS lumber which w i l l r e s u l t i n lower production costs per unit volume of lumber exported. Secondly, the price of CLS lumber w i l l be bid up as Japanese demand grows. Thirdly, CLS lumber i s a more processed and, by and large, more costly form of lumber than simple cants or sguares. Thus, while the expansion of export volume to Japan i s uncertain, the growth in value, through greater exports of CLS lumber, should help maintain the growth of the lumber 89 i n d u s t r y . 4 . 3 . 0 The Sogo Shosha And The B.C. Lumber Indust ry The success of the Canadian lumber t rade wi th Japan i s a l s o a product of the t rade r e l a t i o n s h i p s that have been e s t a b l i s h e d between the major Canadian lumber expor te rs through the la rge Japanese t r a d i n g companies, the sogo shosha , t o Japanese b u y e r s . . While c o n t a c t s and d e a l s are a ided and abet ted by the t r a d i n g branches t h a t MacMi l lan B l o e d e l , Seaboard, or Eacom have e s t a b l i s h e d i n Japan almost a l l of the market ing t r a n s a c t i o n s p a s s , at one point or another , through the hands of one of the major sogo shosha. These are the companies that grease the opera t ions of the Japanese m a r k e t . . Without t h e i r exper ience i n d e a l i n g and d i s t r i b u t i n g goods w i th in Japan , or wi thout t h e i r s k i l l i n coping with the h igh l y i n f o r m a l nature of Japanese bus iness " c o n t r a c t s " , the Japanese market would prove v i r t u a l l y impenet rab le t o f o r e i g n t r a d e . There are a wide v a r i e t y of sogo shosha i n J a p a n . . Some, l i k e M i t s u i or M i t s u b i s h i are enormous conglomerates that import and export a great range of p r o d u c t s . . M i t s u i and M i t s u b i s h i are among the l a r g e s t companies i n the c o u n t r y , and thus a l s o i n the w o r l d . Other sogo shosha are f a r s m a l l e r and tend to s p e c i a l i z e i n p a r t i c u l a r products or market s e c t o r s . . I t i s g e n e r a l l y wise when e n t e r i n g the Japanese market to make i n i t i a l c o n t a c t s through a l a r g e sogo shosha , i f p o s s i b l e , and then branch out to more s p e c i a l i z e d f i r m s . (Yoshi Tsurumi , 1977, p160) There are s e v e r a l reasons f o r t h i s . . The 90 l a r g e t r a d i n g companies lend credence and r e s p e c t a b i l i t y t o a f o r e i g n f i r m ' s presence i n J a p a n . . The l a r g e sogo shosha have long and e s t a b l i s h e d r e p u t a t i o n s with la rge f i n a n c i a l r e s e r v e s to back up t h e i r d e a l i n g s . . A l s o , once a t r a d e r e l a t i o n s h i p has been e s t a b l i s h e d the la rge t r a d i n g f i r m s w i l l he lp main ta in a steady f low of goods almost r e g a r d l e s s of whether the market i s hea l thy or n o t . The s m a l l e r sogo shosha are l e s s r e l i a b l e , but o f t e n t h e i r s p e c i a l i z e d c o n t a c t s and more p e r s o n a l i z e d s e r v i c e can give be t te r market p e n e t r a t i o n fo r p a r t i c u l a r goods than the l a r g e r t r a d i n g f i r m s . A lso the former t r y to make up i n v igor and d r i ve what they lack i n p h y s i c a l s i z e and i n t e r n a t i o n a l r e p u t a t i o n . There are approx imately nine major sogo shosha invo l ved i n the lumber t rade between the P a c i f i c Northwest and Japan. Each l a r g e Canadian lumber company has a l l e g i a n c e s t o two or three of the sogo shosha, eg . MacMi l lan B l o e d e l with M i t s u i , M a r u b e n i and Kanematsu, or Seaboard wi th Nissho Iwa i and Sumitomo among o t h e r s . (La i rd W i l s o n , Seaboard, and A l Bates , MacMi l lan B l o e d e l Persona l I n t e r v i e w , May 1980) C . . I t o h and M i t s u b i s h i a l s o own and operate lumber m i l l s on the West Coast . These sogo shosha encourage steady r e l i a b l e t r a d i n g r e l a t i o n s h i p s and are g u i t e prepared to take heavy l o s s e s i n bad t imes i n order to mainta in t h i s image of bus iness s t a b i l i t y . The B.C. lumber i n d u s t r y has f a i r l y w e l l proven i t s e l f as a r e l i a b l e source of lumber supply . The cont inued s t r e n g t h e n i n g of the t i e s between the major sogo shosha and the major Canadian lumber e x p o r t e r s almost ensures the maintenance of a good market f o r Canadian lumber i n Japan. There a r e , however, problems 91 invo l ved i n r e l y i n g too h e a v i l y on the sogo shosha and these w i l l be d e a l t with i n Chapter 5. 4 . 4 . C B.C. Lumber - Supply And Demand The b a s i c guest ion to be asked here t h e n , i s whether the f a i r l y c o n s i s t e n t i n c r e a s e s i n volume and value of lumber expor ts to Japan dur ing the l a s t f i v e years w i l l be mainta ined over the coming decade. As has a l ready been d i s c u s s e d Japanese demand f o r Canadian lumber, due t o l i m i t s i n the i n t e r n a t i o n a l supply s i t u a t i o n , growing markets at home, and the long steady r e l a t i o n s h i p s between the sogo shosha and the B.C. . lumber i n d u s t r y , w i l l probably remain h e a l t h y . . Again t h e n , i t i s necessary to speak of B . C . ' s w i l l i n g n e s s and a b i l i t y t o s u p p l y . . According to the 1979 "Annual Report" of the M i n i s t r y of F o r e s t s 71.4% of the AAC w i t h i n the prov ince i s committed, wh ich , a t l e a s t i n t h e o r y , l eaves 29.6% f o r f u r t h e r harvest expans ion . (Annual Repor t , 1979) U n f o r t u n a t e l y , but not s u r p r i s i n g l y , most of the uncommitted AAC l i e s i n the l e a s t a c c e s s i b l e r e g i o n s of the p r o v i n c e . . F u l l y 77.6% of the s u r p l u s AAC i s i n the nor thern P r i n c e George and P r i n c e Rupert Forest Regions. ( B . C . , M i n i s t r y of F o r e s t s and M i n i s t r y of Economic Development, 1979, pp.16 see Table 26) Simply put , t h i s t imber i s more expensive to cut and sh ip than t imber e l s e w h e r e . . Thus much of the a l l o w a b l e cut w i l l remain unharvested i n d e f i n i t e l y or u n t i l i t becomes economica l l y v i a b l e t o do s o . . Fur ther to t h i s , the M i n i s t r y of F o r e s t s p r e d i c t s that almost 22% of the e x i s t i n g 47.4 b i l l i o n hectares of f o r e s t land 92 Table 26 Committed Timber Y i e l d Units i n B. Forest Region AAC Vancouver 7,751.2 Prince Rupert 14,6l6.5 Prince George 2 1 , 6 l 4 . 2 Cariboo 7,060.5 Kamioops 7,347.7 Nelson 6,028.5 Total .64,413.6 olumes in Public Sustained . by Forest Regions (1000 m3) Committment % Committed 6,335.7 88.2 7,363o7 50.4 14,456.2 66.9 5,817.0 82.4 6,613.4 90.0 4,890.7 81.1 45,976.7 71.4 Source: The B.C. Forest Industry: An Overview. Ministry of Forests and Ministry of Economic Development November 1979. pp . l 6 . o 93 w i l l become a l i e n a t e d by the year 2000 due to i n c r e a s e s i n f a r m l a n d , urban a r e a s , and c o n s e r v a t i o n a reas . ( B . C . , M i n i s t r y of F o r e s t s , Fores t and Range Resource A n a l y s i s T e c h n i c a l Repor t , March 1980, pp.776) Th is f i g u r e i n c l u d e s the e c o n o m i c a l l y and p h y s i c a l l y i n a c c e s s i b l e areas mentioned above . . S t i l l the M i n i s t r y of F o r e s t s p r e d i c t s an i n c r e a s e i n lumber p roduct ion by 1990 of about 3 mm3 or approx imate ly 10%. ( B . C . , M i n i s t r y of F o r e s t s , March 1980, pp.754) Accord ing to the M i n i s t r y 1/3 of t h i s i n c r e a s e , or 1mm3, i s d e s t i n e d f o r the U . S . . m a r k e t , and about 20% each t o Japan and the E . E . C . ( B . C . , M i n i s t r y of F o r e s t s , March 1980, pp.756) The 33% f i g u r e f o r exper ts t o the O.S. does not seem reasonable accord ing to past t r e n d s . . In 1975 and 1977 B.C. accounted fo r about 80% of t o t a l Canadian lumber expor ts t o the United S t a t e s . (Counc i l of Fo res t I n d u s t r i e s , A p r i l 1980) Darr and L i n d e l l ' s repor t d i scussed e a r l i e r p r e d i c t e d an i n c r e a s e of 3.1 b i l l i c n board feet i n Canadian lumber expor ts to the U.S. Th is t r a n s l a t e s i n t o roughly 7 mm3 of lumber . . Against t h i s the M i n i s t r y of F o r e s t s p r e d i c t i o n of an i n c r e a s e of on ly 1 mm3 from B.C. seems f a r too low. Indeed f o r B.C. t o maintain i t s 80% share of the U.S. market the necessary exports would consume more than double the M i n i s t r y of F o r e s t s ' t o t a l p ro jec ted i n c r e a s e i n lumber p roduct ion fo r 1990, l e t a lonethe growing markets in the r e s t of Canada, Japan and the E . E . C . . As s ta ted e a r l i e r t h e n , i t appears that there w i l l be no shor tage of markets f o r B.C. lumber by the end of the decade . . There fo re , un less the market s t r u c t u r e s h i f t s , 94 d r a m a t i c a l l y i n c r e a s e d expor ts of lumber to Japan, i n volume te rms , are u n l i k e l y . . I t i s then very p o s s i b l e tha t B .C . w i l l cont inue to supply between 2 mm3 and 2.36 mm3 of lumber per year to the Japanese market as the M i n i s t r y of F o r e s t s suggests . ( M i n i s t r y of F o r e s t s , March 1980, pp. 756) T h i s , however, i s probably the bottom end. Depending on the growth of CLS lumber e x p o r t s , which i s very hazardous to p r e d i c t wi th any hope of accuracy , t o t a l B . C . . lumber expor ts to Japan cou ld e a s i l y reach 3 mm3 to 4 mm3 by the end of the decade. The important f a c t o r to remember, and which most of t h i s study seems to suppor t , i s that there i s l i t t l e danger of the bottom f a l l i n g out of the Japanese market, (or f o r that matter of i t going through the roof) but tha t there w i l l be a l i m i t e d yet hea l thy demand i n Japan f o r B.C. lumber f o r the decade and beyond . . 4 . 5 . C Conc lus ion v Th is leads to an i n t e r e s t i n g s i t u a t i o n . . Between the 0 . S o , Japan, and an expected growing market f o r B.C. lumber i n the E . E . C . , B.C. w i l l have more than enough markets f o r i t s l umber . . Th is may be the case by about the middle of the decade. Un fo r tunate l y the l i m i t a t i o n s of the AAC w i l l not a l l o w f o r much inc rease i n t imber h a r v e s t . . The B.C. lumber i n d u s t r y t h e n , i n seeking to mainta in i t s p r o f i t s , w i l l be l i m i t e d i n i t s a b i l i t y to i n c r e a s e p roduct ion volume i n order t o i n c r e a s e the t o t a l va lue of i t s export shipments. The only s o l u t i o n then i s t o seek more markets f o r lumber end products which i n h e r e n t l y means more f u l l y processed lumber, more manufactured lumber p r o d u c t s , and o v e r a l l , more va lue added to the lumber before i t i s shipped 95 from B.C.!s borders. Added to t h i s i s the o r i g i n a l dilemma which draws the attention of B.C..lumbermen towards the Japanese market creating an alternative market to the U.S. thus enabling greater s t a b i l i t y in the lumber industry, and also, developing a strong Japanese market for B.C. lumber products to boost the international value of those products.. It has been shown e a r l i e r in t h i s chapter that i t i s very unlikely f o r Japan to develop into a large volume market for B.C..lumber l i k e the United States. The B.C. lumber industry i s not that interested because to do t h i s would mean withdrawing from large American markets, which i s , undoubtedly, a hazardous act.. Also, as stated above, B.C. w i l l probably not need another large volume lumber market i n 5 years i f other world markets for B.C..lumber grow as they should. The major problem i s increasing the value of the present volume of exportable lumber. A volume which i s not l i k e l y to grow that much. This problem can be tackled i n two ways.. 1) We can do nothing and s i t back and wait for the other world markets for volume lumber to build and eventually bid the price of lumber up.. Or 2 ) we can develop markets in other areas, l i k e Japan, for more valued and more processed lumber products. The f i r s t course i s not only unworthy of the r e l a t i v e l y dynamic past of the B.C..lumber industry, i t i s also dangerous.. The markets might not develop naturally. And the industry as a whole, i f i t becomes l a c k a d a i s i c a l about foreign markets, could e a s i l y lose i t s competitive edge. Emphasis should be put, then, on the 96 second course of i n c r e a s i n g the va lue of lumber exports t o Japan to accompl ish the g reate r income and market s t a b i l i t y t h a t the lumber i n d u s t r y seeks . I t seems c l e a r that e f f o r t s have been, and are being made to i n c r e a s e the va lue of e x i s t i n g shipments by encouraging more processed wood expor ts (custom c u t s , CLS) and l e s s baby or heavy s g u a r e s . ( T a b l e 23) The guest ion yet remains , however, as to how more value can be obtained f o r B.C. lumber expor t s and s p e c i f i c a l l y , B.C. lumber expor ts to J a p a n . . The succeeding chapters w i l l d e a l wi th the o b s t a c l e s t o be overcome and the p o s s i b l e means of approach to a c h i e v i n g t h i s o p t i m a l va lue f o r the lumber B . C . . e x p o r t s to J a p a n . . 97 CHAPTER 5 BARRIERS TO TRADE IMPROVEMENT There is l i t t l e denying that Canada faces many problems and obstacles i n dealing e f f e c t i v e l y i n the Japanese market.. Some of these problems are common to a l l Canadian businessmen who have dealings with Japan.. The lumber industry i t s e l f has other more s p e c i f i c d i f f i c u l t i e s . F i n a l l y , Canadians who wish to export manufactured goods must overcome d i f f e r e n t obstacles. In order to evaluate Canada's/B.C.'s future position in marketing more processed lumber and finished lumber products in Japan i t i s necessary to examine each of these areas separately. 5.1.0 General Problems In Marketing E f f e c t i v e l y In Japan It i s important perhaps to begin an examination of marketing practice in Japan by pointing out the differences i n economic perspective between the two countries.. This has been described very well by Keith Hay the economic advisor to the Canada-Japan Trade Council: "While Japan figures very importantly as second buyer and second supplier for us, I think we should recognize that on the Japan side Canada i s the number 5 supplier to Japan. We are not number 2, we are number 5. Now, of course, in the four nations ahead of us there are countries that are p r i n c i p a l l y s e l l i n g o i l . But bear i n mind also that for Japan, Canada i s only the 16th largest purchaser of Japanese products.. So i t i s a somewhat asymmetric s i t u a t i o n . . Japan i s very important to us, Canada i s obviously important to Japan.. In my view 98 however, s i n c e 1960 we should have been aware t h a t , wh i le Japan i s becoming p r o g r e s s i v e l y more important to us , I do not th ink t h a t the same t h i n g can be s a i d about Canada's importance to Japan. Japan has looked fo r more markets and found them. . Japan has looked f o r more s u p p l i e r s and found them. . So t h a t , i n a sense , we have become r e l a t i v e l y l e s s important to Japan and they have become more important to u s . . . (and) i n the f u t u r e , t h i s i s l i k e l y to be accentuated i f any th ing . 1 1 (Ke i th Hay et a l . , Nov. 22, 1979, pp.23) The t h r u s t of Hay's statement here i s t h a t Canada i s not i n a p o s i t i o n to throw her weight around i n the Japanese market . . I t i s o f ten thought t h a t because Canada i s a s u p p l i e r of pr imary m a t e r i a l s that t h e i r markets need us more than we need them. This argument i s not v a l i d f o r many Canadian r e s o u r c e s . . Th is i s not to say that Japan should be t r e a t e d wi th k i d g l o v e s . . Over the years c o n t i n u i n g c r i t i c i s m s have been made of Japan ' s f a i l u r e to purchase Canadian manufactured goods, r e c e n t l y repeated by M i n i s t e r of Indust ry Herb Grey, and. these are v a l i d and warranted. Only 2% to 3% of Canadian expor ts to Japan are f u l l y manufactured goods, v i r t u a l l y the oppos i te of the s i t u a t i o n regard ing Japanese expor t s to Canada. . However, t o e s c a l a t e these c r i t i c i s m s i n t o p o l i c y a c t i o n c r e a t e s r i s k s of a r e a c t i o n that might hurt us more than t h e m . . The blame f o r the sad performance of Canadian manufactured goods i n Japan, however, may be l a i d a t the doorsteps of both c o u n t r i e s . J a p a n ' s ascendency as a Canadian t r a d i n g par tner has not proceeded hand i n hand w i th Canadian awareness and f a m i l i a r i t y with the Japanese market* economy and c u l t u r e . A good example of t h i s i s our cont inued r e l i a n c e on t rade miss ions led by h igh p r o f i l e p o l i t i c i a n s i n an attempt to 99 b r i n g a t t e n t i o n to Canadian d e s i r e s t o i n c r e a s e expor t s t o Japan . These have achieved l i t t l e success and w i l l c o n t i n u e t o achieve l i t t l e s u c c e s s . . Japanese businessmen do not make guick d e c i s i o n s and w i l l seldom a l l o w themselves to be pressured i n t o doing s o . . They p r e f e r long s tand ing bus iness r e l a t i o n s h i p s where t r u s t and conf idence are g r a d u a l l y b u i l t u p . . Th is r e g u i r e s t i m e . Trade miss ions s imply do not a l low such t ime . C r e a t i n g a strong business t i e wi th a Japanese f i r m a l s o r e g u i r e s a c e r t a i n awareness of Japanese bus iness e t i q u e t t e . There i s , f o r example, no denying the importance of a few d r i n k s at a l o c a l bar t o he lp s e a l a bus iness dea l - though i t i s d i f f i c u l t to have anyone admit i t . . O b v i o u s l y , the a b i l i t y to speak Japanese i n t h i s type of s i t u a t i o n i s a d i s t i n c t advantage . . I t i s an a b i l i t y possessed by remarkably few Canadian businessmen invo lved with Japan. I n c r e a s i n g the l e v e l of Canadian expor ts around the whole of the P a c i f i c Rim a l s o faces s e r i o u s geograph ica l b a r r i e r s . Canada has been t e r r i b l y slow to promote the be t te r placement of i n d u s t r y to take advantage of the growing economic o p p o r t u n i t i e s around t h e P a c i f i c . Par t of the reason f o r t h i s i s no doubt due to the p r o x i m i t y and dominance of the D.S. market. The major O.S. market c o n c e n t r a t i o n s extend from New York C i t y through to Ch icago , and Canadian i n d u s t r i a l development has cent red around Ontar io and Quebec t o take bet te r advantage of these markets . However, the extent of the i n d u s t r i a l c o n c e n t r a t i o n i n t h a t area of the country has now f r o z e n us i n t o those markets and prevented Canadian expor ts from expanding r a p i d l y o v e r s e a s . . Thus the dominance of the American 100 market i s due p a r t l y to the i s o l a t i o n of the Canadian i n d u s t r i a l h e a r t l a n d from the c o a s t a l sea lanes and markets abroad . I t would appear to be t ime to s t a r t i n v e s t i g a t i n g means of c r e a t i n g a g rea te r i n d u s t r i a l / m a n u f a c t u r i n g c a p a c i t y on the west coas t i f we are ever to expand expor ts to the growing markets not only i n Japan but around the e n t i r e P a c i f i c Rim. One of the bases f o r Japanese success i n e x p o r t i n g manufactured goods to Canada can be found i n the a rea of i n t e r n a t i o n a l bus iness e x p e r t i s e . Resident Japanese businessmen i n Canada e a s i l y outnumber t h e i r Canadian c o n f r e r e s i n Japan by a wide marg in . Whi le exact numbers f o r Canada are not a v a i l a b l e i t i s l i k e l y s i m i l a r to the 0 . S . . s i t u a t i o n where i n 1977 the U.S. had 162 t r a d i n g o f f i c e s i n Japan with 1,901 employees, wh i le Japan had 764 o f f i c e s i n the United S t a t e s employing no l e s s than 20,884. (Subcommittee on Trade of The Committee On Ways And Means, January 1979, pp.42) Yoshi Tsurumi has de f ined market i n f o r m a t i o n as one of the f o u r v i t a l f a c t o r s i n genera t ing i n t e r n a t i o n a l t r a d e . . (Yoshi Tsurumi, 1977, pp.7) C e r t a i n l y on t h i s po int the Japanese have earned t h e i r s u p e r i o r i t y i n p e n e t r a t i n g i n t e r n a t i o n a l markets . Any d i s c u s s i o n of t rade r e l a t i o n s h i p s wi th Japan cannot ignore the gues t ion of t a r i f f and n o n - t a r i f f b a r r i e r s t o e n t r y i n the Japanese market. There i s a common p e r c e p t i o n among f o r e i g n businessmen that these b a r r i e r s are e n d l e s s . . In many cases t h i s view i s a c a r r y over from a per iod not long ago when e x p o r t i n g to Japan was f a r more d i f f i c u l t than now. Thanks to the GATT n e g o t i a t i o n s many b a r r i e r s have been r e l a x e d or 10 1 removed. Thus some of the l a c k of i n i t i a t i v e by f o r e i g n businessmen t o i n c r e a s e markets i n Japan i s o f t e n the r e s u l t of s imple misunderstandings of the t rade s i t u a t i o n . Other problems are s o l v a b l e through s imple n e g o t i a t i o n s . . S t i l l o t h e r s , of c o u r s e , i n v o l v e an enormous amount of work. The means of remedying t h i s was suggested i n the Task Force Report on O . S . -Japan Trade: "What i s needed i s a format f o r Japanese and Americans to work together i n a non-c o n f r o n t a t i o n a l atmosphere t o i d e n t i f y perce ived t rade b a r r i e r s , d e f i n e the f a c t s i n each c a s e , and see what mutual s teps can be taken to remove the t rade i r r i t a n t . " (0 .S . .Subcommittee on Trade Of The Committee on Ways And Means, 1979, pp.19) The same can be s a i d f o r Canada-Japan t r a d e . The Japanese t r a d i n g companies can a l s o be as much of a h indrance as an a i d t o en te r ing the Japanese market* . Simply put , they wish to monopolize a l l t r a d e with the Japanese market. The sogo shosha do not look k i n d l y on any t r a d e , e s p e c i a l l y i n v o l v i n g past c l i e n t s , being done ou ts ide t h e i r c o n t r o l . . While s p e c i f i c examples of r e t a l i a t i o n by a t r a d i n g company f o r such misbehavior was not s t a t e d s p e c i f i c a l l y dur ing the i n t e r v i e w s undertaken f o r t h i s s tudy , i t was o f ten i m p l i e d . C e r t a i n l y i t i s not d i f f i c u l t to imagine what a company with the f i n a n c i a l resources of a M i t s u i or M i t s u b i s h i i s capable of d o i n g . The t h r e a t i n i t s e l f i s s u f f i c i e n t . The sogo shosha a l s o s t r i v e t o monopolize bus iness c o n t a c t s and knowledge of the complex Japanese d i s t r i b u t i o n and f i n a n c i n g system. Ne i ther t h i s nor the market p r o t e c t i o n i s m of the sogo shosha i s " n e c e s s a r i l y " b a d . . However, the re are 102 d e f i n i t e i n s t a n c e s not only of p r i c e gouging by the sogo shosha ( 0 . S . . Subcommittee On Trade Of The Committee On Ways And Means, 1979, p p . 7 7 ) , but a l s o where the company was not doing an adeguate j o b . ( M i t s u a k i Shimaguchi and Lar r y Rosenberg, 1979, pp.39) In such cases i t would d e f i n i t e l y be worthwhi le to be ab le to operate o u t s i d e of the c o n t r o l of the s o g o . s h o s h a . . In va ry ing degrees the B.C. lumber i n d u s t r y encounters a l l of the above problems. There a r e , however, o thers which r e l a t e s p e c i f i c a l l y to the lumber i n d u s t r y . 5 . 2 . C The Problems Of Market ing B.C. Lumber In Japan By and l a r g e the B.C. lumber i n d u s t r y has been more s u c c e s s f u l perhaps than many other s e c t o r s of Canadian i n d u s t r y , perhaps "any" other s e c t o r of Canadian i n d u s t r y i n r e s o l v i n g a t l e a s t some of the problems g iven above as they r e l a t e to e x p o r t i n g lumber. In l a r g e par t t h i s i s due to the es tab l i shment of s o l i d t r a d e r e l a t i o n s wi th the prominant sogo shosha i n c o n j u n c t i o n with other t r a d i n g organs - MacMi l lan J a r d i n e , Seas ia - which a l low f o r more m a n e u v e r a b i l i t y w i t h i n the conf ines of the Japanese marketing system. There i s a l s o , of c o u r s e , the C o u n c i l o f Forest I n d u s t r i e s which i s funded by both i n d u s t r y and government, and which promotes market development i n Japan and elsewhere f o r most B.C. f o r e s t p r o d u c t s . . Never the less the major problem the B.C. lumber i n d u s t r y has to dea l wi th i n Japan i s i t s l i m i t e d a b i l i t y t o i n f l u e n c e or c o n t r o l any sec to r of the Japanese lumber market. 103 Th is i s odd c o n s i d e r i n g that the p rov ince i s the l a r g e s t lumber expor te r t o Japan and the l a r g e s t lumber e x p o r t e r i n the wor ld . On the other hand, however, B.C. i s t r u l y a minor a c t o r i n terms of Japan 's t o t a l sawlog and lumber supply p i c t u r e . A lso with Japan 's wood imports handled by the l a r g e t r a d i n g companies there i s l i t t l e way fo r the B.C. i n d u s t r y to p ressure or i n f l u e n c e p a r t i c u l a r buyers s i n c e i t has l i t t l e d i r e c t access and i s f a r from be ing in a p o s i t i o n of be ing the dominant source of supp ly . The great s i z e of the t r a d i n g companies' lumber and sawlog d e a l i n g s a l l o w s them to e a s i l y p lay o f f the B . C . . l u m b e r i n d u s t r y aga ins t t h a t from the U.S. and e lsewhere. In t h i s way Japan mainta ins i t s a b i l i t y to manipulate the sources of supply i n order to o b t a i n lower p r i c e s and l e s s o u t s i d e i n t e r f e r e n c e . . I t would t h e r e f o r e appear to be i n the best i n t e r e s t s of those c o u n t r i e s which supply Japan, l i k e Canada, to e s t a b l i s h a l t e r n a t i v e market ing agents i n order t o c i rcumvent the machinat ions of the l a r g e Japanese t r a d i n g companies. The ex tens ions of t h i s major f a i l u r e t o i n f l u e n c e the Japanese market mani fest themselves i n a number of s m a l l problems which hur t the B.C. lumber i n d u s t r y ' s o v e r a l l performance i n J a p a n . . The most important of these i s the 10% t a r i f f on SPF lumber , which w i l l be reduced to 6% i n 1984 fo r wood i n the rough. Th is i s an odd s i t u a t i o n f o r which the re i s no imminent r e s o l u t i o n . For example, i n the i n t o d u c t i o n of CLS the Japanese have been concerned about adequate supply . (N.E. D u s t i n g , " B r i e f i n g Paper Re-Premier Bennett V i s i t To J a p a n " , Sept . 1979, pp.2) The t a r i f f i s designed t o p r o t e c t the 3,000 Japanese m i l l s which cut s i m i l a r wood.. I t has been 104 po inted out through the course of past n e g o t i a t i o n s t h a t SPF cut to CIS would not compete with the sguares these m i l l s produce. N e v e r t h e l e s s , i t i s the percept ion of the sawmi l l s t h a t i t would . "And i t i s the p e r c e p t i o n t h a t i s the p o l i t i c a l l y important c o n s i d e r a t i o n . V (M. Sasges , The Vancouver Sun, June 2, 1980, pp. B7) The other f a c t o r i nvo l ved here i s that the s a w m i l l s which f e e l themselves v u l n e r a b l e to SPF impor ts prov ide employment f o r a t r a d i t i o n a l l y o u t c a s t segment of the Japanese p o p u l a t i o n . (Robert F o r s t e r , 1978, pp.97) As such , the t a r i f f i s a p o l i t i c a l l y potent i s s u e i n Japan. . Fu r ther n e g o t i a t i o n s on the e l i m i n a t i o n of the t a r i f f t h e r e f o r e , w i l l have to concent ra te on the e x c l u s i v e nature of SPF imports i n CLS form so as to d i m i n i s h as much as p o s s i b l e the p o l i t i c a l b a c k l a s h . Even now, many of these s m a l l Japanese m i l l s s u f f e r from low l e v e l s of e f f i c i e n c y and high o p e r a t i n g c o s t s , and have been going out of bus iness even wi th the t a r i f f . . Th is t r e n d i s l i k e l y to c o n t i n u e . As a r e s u l t the removal of the t a r i f f f o r any SPF lumber would probably be blamed f o r the c o n t i n u a t i o n of t h i s t rend whether i t was a c t u a l l y r e s p o n s i b l e or not . Mention has a l ready been made of the d i f f i c u l t i e s invo l ved i n g a i n i n g a wider acceptance of the p la t fo rm frame house and CLS lumber . . Problems e x i s t not only wi th consumer acceptance , but a l s o with the i n s u f f i c i e n t number of b u i l d e r s and tradesmen who are f a m i l i a r wi th the p l a t f o r m frame system. A lso important i s the a b i l i t y t o ensure adequate d i s t r i b u t i o n of CLS lumber to r e t a i l e r s . . T h i s , however, would i n v o l v e master ing 105 the complexities of the Japanese d i s t r i b u t i o n system. Few inroads have been made by any foreign company into t h i s area of the Japanese market. Needless to say, i f B.C..lumber was a v i t a l concern to the Japanese we would not be faced with any of these problems. 106 5 . 3 . 0 Problems I n v o l v i n g The Export Of Manufactured Goods To Japan The export of more f u l l y manufactured goods, e s p e c i a l l y of lumber, p rov ides advantages t o Canada i n a number of a r e a s . To begin wi th e x p o r t i n g manufactured goods c r e a t e s more employment i n Canada. The i n c r e a s e d value added i n h e r e n t i n manufactured products as opposed to the raw m a t e r i a l s boosts the d o l l a r value of expor ts and l i k e w i s e s t rengthens the domestic economy. A lso as suggested by G r i f f i n (as guoted e a r l i e r page 12,13) the export of manufactured goods enables g r e a t e r c o n t r o l w i t h i n a f o r e i g n market s i n c e the demand f o r manufactured goods i s more e l a s t i c f o r p r i c e decreases and l e s s e l a s t i c f o r p r i c e i n c r e a s e s . As a r e s u l t , the volume of expor t s of manufactured goods w i l l grow more than comparable u n i t s of raw m a t e r i a l s when the p r i c e i s lowered , and w i l l s h r i n k l e s s when the p r i c e i s r a i s e d . L a s t l y , and p a r t i c u l a r l y i n the case of manufactured goods made from lumber (knock-down k i t c h e n s , p r e f a b r i c a t e d houses , mi l lwork etc) the supply of the raw m a t e r i a l s necessary to b u i l d the goods i s abundant i n Canada, but i n c r e a s i n g l y t i g h t i n t e r n a t i o n a l l y . To e x p l a i n more f u l l y the importance of t h i s f a c t o r i t i s necessary to d i s c u s s t h e o r i e s of i n t e r n a t i o n a l t r a d e , and p a r t i c u l a r l y the Product L i f e Cyc le (PLC) model . The PLC model has g e n e r a l l y su rv i ved e m p i r i c a l t e s t i n g ( H i r c k i Tsurumi, Journa l of Econometr ics , Spr ing 1977) and i s u s e f u l f o r a n a l y s i n g t r a d e p a t t e r n s . Yosh i Tsurumi d e f i n e s i t accord ing to four b a s i c premises : 107 1) i n f o r m a t i o n i n regard t o p roducts , p roduct ion processes and markets i s not possessed e q u a l l y by p r o s p e c t i v e manufacturers at home or abroad and a l s o i s o f ten r e s t r i c t e d from f l o w i n g e a s i l y across i n t e r n a t i o n a l boundar ies ; 2) not on ly the a t t a i n e d l e v e l of t e c h n o l o g i c a l c a p a b i l i t y of the manufactur ing i n d u s t r i e s , but a l s o the d i r e c t i o n and speed of change i n t e c h n o l o g i c a l competence, vary both i n t ime and degree from one n a t i o n to another ; 3) product c h a r a c t e r i s t i c s i n a g iven market change over a per iod of t ime as the product goes through a l i f e c y c l e c o n s i s t i n g of i n t r o d u c t i o n , growth, m a t u r a t i o n , and d e c l i n e ; and 4) such compet i t i ve f o r c e s as monopoly of export p r o d u c t s , both imagined and r e a l product d i f f e r e n t i a t i o n , and s t a t i c and dynamic s c a l e s of economy of p roduct ion and market ing a c t i v i t i e s determine the pa t te rns of t rade of manufactured goods. (Yoshi Tsurumi , 1977, pp.8) In a d d i t i o n , throughout the l i f e c y c l e of a g iven new product the world t rade market goes through the phases of m o n o p o l i s t i c s u p p l i e r s market (few i n n o v a t o r s ) , to o l i g o p o l i s t i c c o m p e t i t i o n (more i m i t a t o r s ) , and f i n a l l y c o m p e t i t i o n among many producers (many more i m i t a t o r s ) . ( Y o s h i Tsurumi , 1977, pp.9) Consequent ly , f o r a p a r t i c u l a r country to remain on top i n the expor t of a p a r t i c u l a r manufactured good i t must c o n t i n u a l l y be 1) a t t a i n i n g the l a t e s t i n f o r m a t i o n i n regard t o p roduc ts , p roduc t ion processes and markets , both at home and abroad, 2) improv ing i t s t e c h n o l o g i c a l c a p a b i l i t i e s to produce new and b e t t e r products f a s t e r , and 3) m a i n t a i n i n g economies of s c a l e i n both the p roduct ion and market ing of goods. Canada i s at a d i s t i n c t d isadvantage i n a number of these areas when d e a l i n g i n and w i th J a p a n . . Our t e c h n o l o g i c a l 108 c a p a c i t y i s not as great and our investment i n r e s e a r c h and development i n order to keep up i s l e s s . The Canada Yearbook r e a d i l y admits t h a t Canada's r a t i o of R&D to GDP expend i tu re i s on ly 30% to 50% of . the r a t i o s of other developed n a t i o n s i n c l u d i n g Japan. (Canada, S t a t i s t i c s Canada, Canada Yearbook, 1978-1979, pp.399) Our access to market i n f o r m a t i o n i n Japan i s l i m i t e d due to the s m a l l number of Canadian r e s e a r c h e r s and businessmen d e a l i n g r e g u l a r l y w i th the Japanese market. Language d i f f i c u l t i e s , c u l t u r a l b a r r i e r s e t c . . e t c . / a l s o enter here . Our own s m a l l domestic market does not a l low us t o take much advantage of n a t u r a l economies of s c a l e i n product development, p roduct ion or market ing . Fur ther t o t h i s , Canadian manufactured goods face a v a r i e t y of both t a r i f f and n o n - t a r i f f b a r r i e r s to ent ry i n the Japanese market. Among the only areas where Canada possesses an innate advantage i n the product ion of a manufactured goods l i e s i n our possess ion of the n a t u r a l resources from which the products are made. Lumber, i n p a r t i c u l a r , lends i t s e l f q u i t e r e a d i l y t o f u r t h e r p rocess ing p r i o r to e x p o r t . . C e r t a i n l y i t i s more conducive t o t h i s use than than our other major e x p o r t s to Japan , i . e . wheat, c o a l , rapeseed e t c . Lumber can be fash ioned without e x t r a o r d i n a r i l y high c a p i t a l c o s t s i n t o a v a r i e t y of products from k i t c h e n c a b i n e t s to f u r n i t u r e t o f a c t o r y - b u i l t h o u s i n g . . Some Canadian companies, l i k e Pan-Abode B u i l d i n g s have q u i c k l y achieved annual s a l e s of over $2 m i l l i o n e x p o r t i n g f a c t o r y - b u i l t houses t o Japan. (David Thompson, Pan-Abode B u i l d i n g s , Persona l I n t e r v i e w , September 1980) As such p r e f a b r i c a t e d houses have r a p i d l y become one of Canada's l a r g e s t 109 manufactured expor ts to Japan. The q u e s t i o n i s , how p o s s i b l e i s i t t o r e l y on e x i s t i n g market ing mechanisms t o he lp i n c r e a s e t r a d e i n these types of p roducts . A l l of the problems o u t l i n e d above stand i n the way of the expansion of t rade i n manufactured lumber p roduc ts . Fur thermore, much of our t r a d e with Japan i s i n i t i a t e d or governed by the sogo shosha, which* though they attempt to r e f u t e i t , are undeniably o r i e n t e d towards impor t ing raw m a t e r i a l s and expor t ing manufactured goods . . The t r a d i n g companies t r y t o r a t i o n a l i z e t h i s imbalance i n t h e i r t rade s t r u c t u r e i n v a r i o u s ways. , For example, they p o i n t t o t h e i r l a r g e t r a d i n g volumes and smal l p r o f i t margins and s t a t e tha t they would l o s e money i f they d e a l t i n the s m a l l e r volumes of most manufactured p r o d u c t s . Most manufactured goods are cons idered too d i f f i c u l t to handle and d i s t r i b u t e i n the Japanese market. One t r a d i n g company r e p r e s e n t a t i v e s i m p l y s a i d that manufactured goods are a " p a i n i n the n e c k . " ( I have r e f r a i n e d from us ing a more graphic E n g l i s h equ iva lent ) Behind t h i s l i n e of reason ing l i e s the s e l f - p r o c l a i m e d image of the soga shosha as both impor te rs and e x p o r t e r s who attempt to be as competent and unbiased i n both areas as p o s s i b l e . . Th is does, however, c o n t r a d i c t a p o s i t i o n t h a t has been admitted to t h i s author on a number of occas ions by f r iends/employees of sogo shosha which i s t h a t i m p l i c i t l y upper management i n the sogo shosha f a v o r r a w - m a t e r i a l - i m p o r t s and f u l l y - m a n u f a c t u r e d - g o o d - e x p o r t s . I t would appear then t h a t the expansion of 110 manufactured expor ts to Japan r e q u i r e s i n c r e a s e d government and i n d u s t r y support to overcome the s i g n i f i c a n t b a r r i e r s presented t h e r e . Un fo r tunate l y the performance of Canadian manufactured expor ts abroad i s i n h i b i t e d by the l i m i t e d amount of government funding and other support a v a i l a b l e f o r the i n i t i a t i o n of new export markets or f o r the expansion of o l d ones. . In p r o p o r t i o n a l terms Canada f a l l s f a r s h o r t of o ther western na t ions i n the p r o f f e r i n g of such suppor t . According to the 0 . S . Import -Export Bank no l e s s than 42% of Japanese e x p o r t s i n 1977 b e n e f i t e d from government c r e d i t s or guarantees . (Quoted i n K e i t h Hay, 1979, pp.54) The comparable f i g u r e f o r Canada was only 6% of t o t a l e x p o r t s . . While the U.S. s tands at only 7% of expor ts r e c e i v i n g government s u b s i d i z a t i o n the U . S . . E x p o r t -Import Bank i s expected to i n c r e a s e export funding by 60% over the next few years . (Ke i th Hay, 1979, pp.53) While Canada's adherence to to l i m i t e d export s u b s i d i z a t i o n may seem a l a u d a b l e example to f r e e t r a d e economists i t c o u l d a l s o be viewed as a dangerously naive approach t o the h a r d , and sometimes underhanded d e a l i n g s of i n t e r n a t i o n a l t r a d e . . I t c o u l d be suggested t h a t i f no moves to counter the s h r i n k i n g markets f o r Canadian manufactured goods are made soon we cou ld l o s e any comparat ive advantage we s t i l l ma in ta in i n our d o m e s t i c a l l y manufactured p roducts . As Ke i th Hay has s t a t e d , "Canada s t i l l l a g s the f i e l d ( in government s u b s i d i z a t i o n of exports) and t h i s i s an important f a c t o r i n the c o n t i n u i n g u p h i l l s t r u g g l e of Canadian manufacturers to s e l l overseas , p a r t i c u l a r l y i n J a p a n . " (Kei th Hay, 1979, pp.53) Where then does t h i s leave Canadian manufactured 111 export products? And how does t h i s e f f e c t the lumber t rade? The avenues f o r p o s s i b l e r e c t i f i c a t i o n of the many and va r ied o b s t a c l e s r a i s e d above t o market development i n Japan and the r a m i f i c a t i o n s fo r the lumber t rade are d i s c u s s e d i n the next chapte r . 112 CHAPTER 6 IMPROVING MANUFACTURED LUMBER EXPORTS TO JAPAN To r e s t a t e some of the many c o n c l u s i o n s a r r i v e d a t thus f a r i n t h i s study i t has been determined that f i r s t , the f u t u r e of the B .C . lumber i n d u s t r y i s b r i g h t i n s o f a r as possess ing s u f f i c i e n t markets f o r i t s lumber i s concerned. Secondly , i t t h e r e f o r e appears t o be time to i n v e s t i g a t e means of i n c r e a s i n g the va lue added of e x i s t i n g lumber shipments and, more s p e c i f i c a l l y , i n c r e a s i n g the export of more manufactured or f i n i s h e d lumber p r o d u c t s , i . e . p r e f a b r i c a t e d hous ing , k i t c h e n c a b i n e t s , e t c . T h i r d l y , Japan w i l l remain a good market f o r B.C. lumber, but the expansion of manufactured lumber expor t s t o Japan faces many o b s t a c l e s . And f o u r t h l y , the expansion of f i n i s h e d lumber expor ts to Japan may be one of the most v i a b l e means of a c h i e v i n g an i n c r e a s e i n the p r o p o r t i o n of manufactured goods exported to tha t c o u n t r y . The guest ions to be i n v e s t i g a t e d here then a r e : 1) what needs to be done, 2) what i s being done, and 3) what can be done to e f f e c t i v e l y i n c r e a s e the expor t of manufactured lumber products t o Japan? 6 . 1 . 0 What Needs To Be Done? In t h i s s e c t i o n t h i s author has developed from a persona l p e r s p e c t i v e a p i c t u r e of the f a v o r a b l e c o n d i t i o n s that would f a c i l i t a t e the expansion of manufactured lumber e x p o r t s t o Japan. On the market ing s i d e t h e r e are f i v e b a s i c e lements : 113 1) there would be an established Canadian company or agency governing the trade in manufactured goods with Japan, and t h i s firm would serve as a source of assurance that the products would not only be of the expected g u a l i t y , but also that the goods would be delivered on time and in good condition, 2) t h i s agency or firm would have the a b i l i t y to locate buyers in Japan with or without the aid of the sogo shosha, negotiate the deals i t s e l f , provide cr e d i t * incentives, etc. to the Japanese to ensure the continued acceptance of the product, 3) t h i s firm would provide to Canadian producers accurate market information including possible alterations that should be made to the i r products to best meet the wishes of the Japanese buyer, 4) t h i s firm would be capable of negotiating the removal or relaxation of trade barriers or be capable of the necessary machinations to get around such barriers, 5) t h i s firm would either be supported by the government or have access to government support which would provide the necessary incentive both to i t s e l f and, i f necessary, the Canadian manufacturer to merit undertaking the recognizably substantial r i s k of marketing products i n Japan, at least i n the i n i t i a l stages; . On the production side there are three further aspects: 1) the Canadian producer would have access to s u f f i c i e n t technology to manufacture the product competitively, 2) the Canadian producer would be manufacturing a product that i s int e r n a t i o n a l l y known by i t s guality and design, 3) the Canadian manufacturer would be so located as to be able easily to transport i t s products to Japan, i . e . located on the west coast. . At present the on r e a l i t y of the exist iy ing point among Canadian manu the above which meets the factured lumber industry i s 11 a the l a s t p o i n t , i n tha t most of t h i s i n d u s t r y i s l o c a t e d on or near the coast of B r i t i s h C o l u m b i a . . At present there i s no Canadian f i r m designed t o guide or conduct the market ing of manufactured lumber products as d e s c r i b e d above . „ As p r e v i o u s l y s t a t e d the sogo shosha should not be r e l i e d upon to e f f e c t i v e l y market Canadian manufactured products i n Japan. I t i s necessary to examine t h e n , the manner i n which such a f i r m may be developed so that both the market ing of Canadian manufactured lumber products can be a s s i s t e d i n Japan and the p roduct ion c a p a b i l i t i e s of Canadian companies can be improved. . The f i r s t prospect to come to mind t o undertake t h i s r o l e i s the e x i s t i n g t r a d i n g i n d u s t r y . . Mention has a l r e a d y been made of the s m a l l t r a d i n g f i r m s t h a t the l a r g e r Canadian lumber e x p o r t e r s have e s t a b l i s h e d i n Japan to handle b e t t e r t h e i r a f f a i r s . However, these f i r m s shy away from manufactured goods f o r reasons s i m i l a r to the sogo shosha, that i s , manufactured goods are a problem to d i s t r i b u t e and the volumes are fa r s m a l l e r than those f o r raw m a t e r i a l s or lumber and l i k e w i s e the p r o f i t s . MacMi l lan B l o e d e l and Seaboard a l s o i n c l u d e w i t h i n t h e i r p roduct i ve c a p a c i t i e s l i t t l e i n d u s t r y d i r e c t e d towards the manufacture of f i n i s h e d lumber p r o d u c t s . . Thus they have l i m i t e d vested i n t e r e s t i n expanding t rade i n t h i s a r e a . . F a c t o r y - b u i l t houses and the l i k e are manufactured by s m a l l e r independent companies such as Pan-Abode, Orchardson Forest p r o d u c t s , Starmark Housing Corp. e t c . Yet i t i s o u t s i d e the c a p a b i l i t i e s of these s m a l l e r f i r m s t o undertake the c o s t l y placement of a permanent s a l e s r e p r e s e n t a t i v e i n Japan t o gather i n f o r m a t i o n , conduct n e g o t i a t i o n s or promote t h e i r products u n t i l , l i k e Pan -115 Abode, s u b s t a n t i a l success makes i t p o s s i b l e . , Thus f o r many of the e x i s t i n g t r a d i n g f i r m s to become invo l ved i n t h i s area they w i l l e i t h e r have to be s u b s i d i z e d or coerced i n t o promoting manufactured lumber e x p o r t s . Th is i s perhaps e s p e c i a l l y t rue f o r companies l i k e MacMi l lan Ja rd ine or S e a s i a . . I t i s worthwhi le t o po in t out t h a t B . C . ' s t h i r d l a r g e s t lumber expor te r - Eacom - markets Danish k i t chens i n J a p a n . . But Eacom has made no e f f o r t to launch s i m i l a r product l i n e s made i n Canada, no doubt a r e s u l t of t h e i r Danish o r i e n t a t i o n . (Hans B l i c h f e l d , Eacom, P e r s o n a l I n t e r v i e w , May 1980) I t would t h e r e f o r e appear t h e n , tha t MacMi l lan B l o e d e l ' s or Seaboard 's t r a d i n g f i r m s cou ld a l s o be u t i l i z e d t o move Canadian manufactured lumber products i n Japan. There are perhaps four p o l i c y o p t i o n s , o u t s i d e of the improvement of e x i s t i n g government t rade support programs, which would serve to expand the market ing of Canadian manufactured lumber products i n Japan. The f i r s t of these would be the c r e a t i o n of a Canadian t r a d i n g company, the e q u i v a l e n t of a sogo shosha, but a Crown C o r p o r a t i o n . A second would e n t a i l the s u b s i d i z a t i o n of f i r m s such as Seasia or MacMi l lan J a r d i n e to s t i m u l a t e these f i r m s to promote the t rade of Canadian manufactured lumber products i n Japan. A t h i r d may be through government r e g u l a t i o n s i m i l a r to t h a t which boosted B . C . ' s pulp producing c a p a c i t y by the t y i n g of the renewal of t imber h a r v e s t i n g r i g h t s to the c o n s t r u c t i o n of a pulp m i l l . (B.C. Royal Commission on F o r e s t Resources , v o l . 1 , 1976, pp.105) In t h i s i n s t a n c e the product ion and s a l e of a c e r t a i n p r o p o r t i o n of f i n i s h e d lumber products cou ld a l s o be t i e d t o the e x t e n s i o n of 116 t imber r i g h t s . A f o u r t h and more s e r i o u s a l t e r n a t i v e , would be the n a t i o n a l i z a t i o n of e x i s t i n g Canadian lumber i n d u s t r y t r a d i n g f i r m s i n order to use t h e i r pe rsone l and t r a d i n g e x p e r t i s e t o market manufactured lumber products as w e l l as o rd inary lumber i n Japan. In a d d i t i o n to these f o u r op t ions r e l a t e d to the marketing of lumber products t h e r e are a l s o o p t i o n s r e l a t e d to product development and p r o d u c t i o n . The f i r s t of these would i n v o l v e the upgrading of the l i n e of lumber products produced i n Canada through the c r e a t i o n of some form of "Wood Design I n s t i t u t e " . A second would be i n c r e a s e d government s u b s i d i z a t i o n of f i r m s to support t e c h n o l o g i c a l improvements i n the lumber remanufactur ing i n d u s t r y . Before these o p t i o n s are d i s c u s s e d , however, i t i s wise to i n v e s t i g a t e present government and i n d u s t r y endeavours to support the expansion of lumber and manufactured lumber expor ts to Japan. 6 . 2 . 0 What I s Being Done. Most i n d u s t r y and government e f f o r t s to expand and promote Canadian lumber expor ts t o Japan are channeled through the C o u n c i l of F o r e s t I n d u s t r i e s (COFI) . . COFI r e c e i v e s funding from member i n d u s t r i e s (most of the major f o r e s t product companies i n B . C . , but not the manufactured lumber products indust ry ) and both the p r o v i n c i a l and f e d e r a l governments. . I t conducts market r e s e a r c h , prepares b r i e f s f o r t rade m i s s i o n s , 117 and organ izes and funds promot iona l work. The t r a i n i n g of Japanese ca rpente rs i n p la t fo rm frame c o n s t r u c t i o n and the p r e s e n t a t i o n of model p la t fo rm frame houses i n many areas of Japan i s one of the more recent a c t i v i t i e s of the C o u n c i l of F o r e s t I n d u s t r i e s . The C o u n c i l operates a permanent o f f i c e i n Tokyo and employs about 8 people t h e r e . . Companies which manufacture p r e f a b r i c a t e d housing and other f i n i s h e d lumber products must g e n e r a l l y t r a v e l another route s i n c e COFI i s not p a r t i c u l a r l y geared to t h e i r market ing needs i n Japan and overseas . (Larry F o u r n i e r , Orchardson Forest P r o d u c t s , P e r s o n a l I n t e r v i e w , Sept.1980) These types of f i r m s l i k e a l l Canadian f i r m s which seek to break i n t o the Japanese market , are ab le to make use of Canadian embassy t rade a t t a c h e s , and the var ious research and i n f o r m a t i o n s e r v i c e s prov ided mainly by the M i n i s t r y of I n d u s t r y , Trade and Commerce. The P r o v i n c i a l and F e d e r a l Governments o f f e r a good range of programs designed to a s s i s t manufacturers of e x p o r t a b l e p roducts . While i t i s beyond the c a p a b i l i t i e s of t h i s study t o examine i n d e t a i l the e f f e c t i v e n e s s and the e f f i c i e n c y of these programs, i t i s perhaps important to g ive some idea of the types of support a v a i l a b l e . I t appears t h a t the t h r e e most important programs are the Program f o r Export Market Development (PEMD), the Promot iona l P r o j e c t s Program (PPP), and the E n t e r p r i s e Development Program (EDP). EDP i s s l i g h t l y d i f f e r e n t i n t h a t i t supports a l l Canadian manufacturers and not j u s t those producing e x p o r t a b l e goods. 118 PEMD i s designed to "develop and increase the export of Canadian goods and services by sharing with the business community the f i n a n c i a l r i s k s of entering new markets."(Canada, Ministry of industry. Trade and commerce. Program for Export Market Development, 1979, pp.4) E s s e n t i a l l y the program pays one-half of the pre-contractural personnel and transportation costs of Canadian companies trying to enter foreign markets. PEMD w i l l also 1) pay one-half the cost of bringing foreign buyers to Canada, 2)support p a r t i c i p a t i o n i n inte r n a t i o n a l trade f a i r s , and 3) support the organization of Canadian consortiums to engage in complex "turnkey" projects.. If any business res u l t s from the support offered by PEMD the Canadian company (ies) i s expected to pay back the costs incurred at the rate of 1% of the sales value of the part i c u l a r deal.. PPP offers support f o r Canadian companies to participate in trade f a i r s , and trade missions., It also a s s i s t s in the bringing of foreign business and government representatives to Canada to examine products and i n d u s t r i a l c a p a b i l i t y . . Such support i s also duplicated i n programs offered by the B.C..Ministry of Economic Development.. The objectives of the EDP i s to "help the growth of the manufacturing and processing sectors of the Canadian economy by providing assistance to small and medium size firms to make them more viable and inte r n a t i o n a l l y competitive.(Canada, Ministry Of Industry, Trade And Commerce, Enterprise Development Program, 1977) Through the EDP there are grants a v a i l a b l e ^ for product development, product design, and product improvement. 119 Loan insurance i s a l s o a v a i l a b l e f o r f i r m s unable to o b t a i n f i n a n c i n g a t reasonable t e r m s . . S i m i l a r support i s a l s o a v a i l a b l e to B.C. f i r m s through the T e c h n i c a l Ass i s tance Program of the M i n i s t r y of Economic Development. . In a d d i t i o n to t h i s apparent l y s u b s t a n t i a l amount of support there are a number of other government departments and agencies o f f e r i n g a s s i s t a n c e f o r i n t e r n a t i o n a l t r a d e . ( B . C . , M i n i s t r y of Economic Development, D i r e c t o r y of A s s i s t a n c e Programs f o r B.C. Business) Yet there a l s o appear t o be s e r i o u s f a i l i n g s i n these programs. David Thompson of Pan-Abode B u i l d i n g s s t a t e d the government has prov ided almost no support f o r t h e i r expansion of f a c t o r y b u i l t housing expor ts t o Japan. (David Thompson, P e r s o n a l I n t e r v i e w , Sept . 1980) A l l of the government programs, i n f a c t , were w r i t t e n o f f by Thompson as be ing more t r o u b l e than they are worth . T h i s , i t i s hoped, i s something of an extreme p o s i t i o n , but the f a i l u r e of these programs to r e s u l t i n the expansion of manufactured exports i s c e r t a i n l y supported by the d i smal performance of Canadian expor ts of manufactured products to Japan i n recent y e a r s . . There are s t i l l many s e r i o u s d e f i c i e n c i e s i n the manner in which t rade with Japan i s supported by the government. . I t i s now necessary t o t u r n to an assessment of the p r e v i o u s l y suggested p o l i c i e s f o r improvement of the t rade s i t u a t i o n , . 120 6 . 3 . 0 What Can Be Done With in the realm of p o s s i b i l i t i e s f o r the estab l i shment cf Canada's p o s i t i o n as an e x p o r t e r of manufactured lumber products to the Japanese there are two b a s i c areas f o r p o l i c y a c t i o n . The f i r s t i n v o l v e s the development of e x p o r t a b l e products here at home. . The second concerns the market ing of these products o u t s i d e of our b o r d e r s . . 6 . 3 . 1 Product Development I f t ime and money are going t o be spent to a i d the market ing of Canadian manufactures i t would f i r s t seem necessary to ensure that the re are products worth s e l l i n g . . As s ta ted e a r l i e r Canada ranks poor ly i n comparison wi th other developed c o u n t r i e s i i i i t s support of research and development. The manufactured lumber i n d u s t r y would appear t o be a prime ta rge t f o r the r e c t i f i c a t i o n of t h i s s i t u a t i o n . . To begin with i t has been shown tha t the i n t e r n a t i o n a l lumber supply s i t u a t i o n i s t i g h t . The manufactured lumber i n d u s t r y i n Canada, however, has access to a good supply of raw m a t e r i a l s and t h e r e f o r e c o n s i d e r a b l e comparat ive advantage. Thus any markets t h a t are developed w i l l l i k e l y be held onto f o r a long time s i n c e the i n t e r n a t i o n a l c o m p e t i t i o n w i l l be n a t u r a l l y l i m i t e d by the i n t e r n a t i o n a l l y l i m i t e d sources of s u p p l y . . In the l i g h t of the Product L i f e Cyc le model t h i s means t h a t funds a p p l i e d t o t e c h n o l o g i c a l development i n the manufactured lumber i n d u s t r y w i l l r e s u l t i n products with a very long l i f e c y c l e , and an e g u a l l y long term r e t u r n on investment . 121 Secondly , s i n c e the wood i n B.C. i s of h igh g u a l i t y the products produced from i t should be r e a d i l y r e c o g n i z a b l e as being of high q u a l i t y . Th i s w i l l f u r t h e r reduce the compet i t i veness of other n a t i o n s ' i n d u s t r y i n t h i s a r e a . T h i r d l y the manufactured lumber i n d u s t r y , as e x e m p l i f i e d by such companies as Pan-Abode B u i l d i n g s , A t c o , Gregory I n d u s t r i e s L t d . , and Orchardson Fores t P roduc ts , i s s u c c e s s f u l and reasonably c o m p e t i t i v e i n t e r n a t i o n a l l y . In o ther words, i t i s not a s i c k l y i n d u s t r y , but a hea l thy one, and growing. L a s t l y , much of the manufactured wood products i n d u s t r y i s l o c a t e d near the B.C. c o a s t l i n e and thus has good access to the major sea l a n e s . . Given t h i s , one of the best avenues fo r c h a n n e l l i n g funds i n t o the c r e a t i o n of b e t t e r wood products would be through the development of some k i n d of research e s t a b l i s h m e n t f o r c r e a t i v e wood products d e s i g n , i . e . a "Wood Design I n s t i t u t e " . Such an i n s t i t u t e cou ld help develop wood products around which the i n d u s t r y cou ld c r e a t e an i n t e r n a t i o n a l r e p u t a t i o n . Comparison could be made here wi th the success s t o r i e s of Danish f u r n i t u r e , E n g l i s h c h i n a , Japanese cameras e t c . . There i s no denying tha t worldwide, and p a r t i c u l a r l y i n Japan, products with valued r e p u t a t i o n s , be these products made of wood, metal or t e x t i l e s , command very high economic r e t u r n s . . The c r e a t i o n o f l i n e s of g u a l i t y wood products t h a t are i d e n t i f i a b l y Canadian c c u l d enable a s i m i l a r s i t u a t i o n h e r e . . Of b e n e f i t from For the rea course the more d i r e c t sons s t a t e d manufactu research above the red lumber i n d u s t r y c o u l d a l s o and development a s s i s t a n c e , lumber manufactur ing i n d u s t r y 122 should possess g rea te r e l i g i b i l i t y f o r i n c e n t i v e s t o support R&D.. P a r t i c u l a r emphasis should be p laced on improv ing the l e v e l of t e c h n o l o g i c a l s o p h i s t i c a t i o n of the i n d u s t r y and i n c r e a s i n g i t s p roduct ion c a p a c i t y . Th is should serve to preserve i n t e r n a t i o n a l compet i t i veness and mainta in the g u a l i t y of the manufactured p roduc ts . 6 . 3 . 2 Market ing The f u t u r e of government, or combined government and i n d u s t r y support of the market ing of manufactured export products may f o l l o w e i t h e r of two courses . The f i r s t i s the present course whereby embassy s t a f f or t rade miss ions g e n e r a l l y prov ide i n i t i a l c o n t a c t s , whi le programs l i k e PEMD prov ide funding to reduce t r a n s p o r t a t i o n and communication c o s t s dur ing the p r e - c o n t r a c t u a l pe r iod of t rade r e l a t i o n s . These programs may be i n c r e a s e d i n number, or p r e f e r a b l y improved i n e f f e c t i v e n e s s , i n an e f f o r t to spur export g rowth . . But even i f these programs are f u r t h e r upgraded they may s t i l l f a l l shor t of c r e a t i n g the best s i t u a t i o n f o r the market ing of products i n Japan. The e x i s t i n g arrangement f a i l s by a wide margin i n a c t i v e l y promoting the products of Canadian companies to s p e c i f i c Japanese businessmen. Nor i s t h i s the job of the embassy s t a f f or the e x i s t i n g programs. . As po inted out by John Lang of the M i n i s t r y of Indust ry Trade and Commerce, the t a s k of s e l l i n g the product i s s t i l l whol ly the r e p o n s i b i l i t y of the Canadian businessman.(John Lang, Pe rsona l I n t e r v i e w , Sept.1980) U n f o r t u n a t e l y , Canadian businessmen have never been 123 renowned f o r t h e i r aggress i ve market ing s t a n c e . . One can imagine that t h e i r performance i n Japan would be f u r t h e r damaged by the language b a r r i e r , d i f f e r i n g bus iness customs, t o say no th ing of c u l t u r e shock and j e t l a g . Would i t not be f a r s imp le r and more e f f e c t i v e to have a more or l e s s permanent r e p r e s e n t a t i v e of a s p e c i f i c i n d u s t r i a l s e c t o r a c t i v e l y s e l l i n g the products of that s e c t o r i n the Japanese m a r k e t . . One can even imagine the e x p e r t i s e that i s gained i n the market ing of one l i n e of products being moved to other l i n e s t o s low ly expand the market ing presence i n Japan of a wide range of Canadian manufactured goods. In essence the format and s t r u c t u r e s that would r e s u l t i n a t r a d i n g agency or f i r m and which were o u t l i n e d e a r l i e r i n t h i s chapter make a great dea l of s e n s e . . Thus the second course of a c t i o n to step up Canadian p e n e t r a t i o n of the Japanese market with manufactured goods i s t o develop a t r a d i n g arm, ou ts ide of the embassy s t a f f , which can take a more i n v o l v e d and a c t i v e r o l e i n the market ing of Canadian products i n J a p a n . . N e i t h e r of these two courses prec ludes the o t h e r , but there i s l i t t l e denying the l a t t e r represents a s i g n i f i c a n t a l t e r i n g of the e x i s t i n g means of developing markets i n Japan. There a r e , however, two major problems with t h i s more nove l form of p o l i c y d i r e c t i o n . . One i s l o c a t i n g the necessary e x p e r t i s e , of which at l e a s t some should be Canadian, to deal e f f e c t i v e l y i n the Japanese market . The second i s d e c i d i n g which Canadian manufactur ing s e c t o r s would b e n e f i t the most, and would b e n e f i t Canada the most, i f they rece i ved a s s i s t a n c e i n p e n e t r a t i n g the Japanese market . . 124 To the f i r s t of these problems the e a s i e s t s o l u t i o n would be to somehow u t i l i z e the manpower of the e x i s t i n g Canadian t r a d i n g f i r m s o p e r a t i n g i n Japan. As a l ready suggested e x i s t i n g t r a d i n g f i r m s can be coerced (that i s n a t i o n a l i z e d ) or s u b s i d i z e d i n t o b u i l d i n g more markets f o r manufactured goods . . The slow development of a competent s t a f f through the c r e a t i o n of a Crown Trading Corporat ion i s a l s o p o s s i b l e , but w i l l probably mean g r e a t e r opera t ing l o s s e s i n the short run whi le the people l e a r n the r o p e s . . In a t tempt ing to decide which manufactur ing s e c t o r s * products should be pushed i n Japan many of the arguments lodged above f a v o r i n g inc reased support to the manufactured lumber i n d u s t r y f o r product development a l s o support the same i n d u s t r y as a worthy r e c i p i e n t of market ing a s s i s t a n c e f o r i t s products i n Japan. Other c i rcumstances a l s o appear to j u s t i f y i n c r e a s i n g market ing support f o r t h i s i n d u s t r i a l s e c t o r . F i r s t , perhaps the best and l a r g e s t t r a d i n g s t a f f s d e a l i n g wi th Canadian products i n Japan are those of MacMi l lan J a r d i n e and S e a s i a . . As such these people would be a l ready f a m i l i a r w i th the problems of the lumber t r a d e , and thus many of the problems of the manufactured lumber t rade as w e l l . Secondly , with the growing t i g h t n e s s i n the lumber supply s i t u a t i o n i n Japan , and i n view of the r e c e n t l y o f t e n s ta ted d e s i r e of the Japanese to expand impor ts of processed m a t e r i a l s , the time would appear to be r i p e t c apply pressure i n t h i s a r e a . E s p e c i a l l y important here would be pressure to reduce t a r i f f and n o n - t a r i f f b a r r i e r s to the manufactured lumber i n d u s t r y ' s p roducts . 125 How, then, i f manufactured lumber products are worthy of g r e a t e r marketing a s s i s t a n c e , should t h i s a s s i s t a n c e be provided. I t i s now necessary t o speak of the f o u r p o l i c y o p t i o n s r a i s e d e a r l i e r (page 115). 6.3.3 The Formation Of A Canadian Trading C o r p o r a t i o n The c r e a t i o n of a Crown C o r p o r a t i o n to handle Canadian trade abroad i s not a pipe dream. At present, Ed Lumley, M i n i s t e r of I n d u s t r y , i s p r e p a r i n g a r e p o r t on the p o t e n t i a l of such a venture. (Kurt Copeland, Personal Interview, M i n i s t r y of Industry Trade and Commerce, Ottawa June 1980) Furthermore as s t a t e d by P a t r i c i a Anderson i n the F i n a n c i a l Post: "Lumley 1s determined t h e r e w i l l be a n a t i o n a l t r a d i n g c o r p o r a t i o n - and i t w i l l take aim at the $17 b i l l i o n d e f i c i t i n manufactured trade and help s m a l l - and medium-size i n d u s t r i e s f i n d f o r e i g n markets." (The F i n a n c i a l Post, J u l y 5, 1980, pp. 7) Of course, developing a c o r p o r a t i o n of t h i s k i n d i s no small t a s k . . Besides problems of s t a f f i n g , l o c a t i n g , a n d l e a r n i n g the business there i s a l s o h o s t i l i t y i n the b u s i n e s s community from those who: 1) hate the thought of "more government i n t e r v e n t i o n , " 2 ) f e a r competition from a f a t government opponent, and 3) do not know what a t r a d i n g company i s . ( P a t r i c i a Anderson, J u l y 5,1980, pp.7) Further to t h i s * i n t e r n a t i o n a l trade i s something of a complicated business and i t i s probably c o r r e c t t h at a Crown C o r p o r a t i o n would have d i f f i c u l t y maneuvering s u c c e s s f u l l y i n t h i s world.. L a s t l y , most s u c c e s s f u l sogo shosha r e l y f o r t h e i r p r o f i t s on t h e i r l a r g e volume products.. Canadian manufactures are d e f i n i t e l y not such an 126 e n t i t y . Thus a company formed e x p r e s s l y to export s m a l l volume manufactured goods would l i k e l y operate at a s u b s t a n t i a l l o s s . On the p o s i t i v e s ide a t r a d i n g company operated by t h e Canadian Government may accompl ish most of the f u n c t i o n s necessary to improve the market ing of Canadian manufactured lumber products i n Japan. I t cou ld be a d i s t i n c t l y Canadian presence, r e p r e s e n t i n g and promoting Canadian i n t e r e s t s , a i d i n g Canadian e x p o r t e r s , and serv ing as a l i a i s o n f o r p u b l i c and p r i v a t e s e c t o r s between both c o u n t r i e s . A l s o , and as s ta ted o f ten i n t h i s s tudy , i t may enable the es tab l i shment of long te rm, t rus twor thy t rade r e l a t i o n s h i p s , and serve to nu r tu re the necessary e x p e r t i s e i n d e a l i n g with the Japanese market and d i s t r i b u t i o n system that together are v i t a l to the expansion of manufactured e x p o r t s , i n c l u d i n g those made from lumber, i n Japan. . There i s at l e a s t one s u c c e s s f u l example of a government run t r a d i n g company. T h i s i s the New Zealand Expor t -Import C o r p o r a t i o n which was formed i n 1974 f o r the purpose of i n c r e a s i n g overseas markets f o r New Zealand a g r i c u l t u r a l and manufactured goods. Whi le the c o r p o r a t i o n operated a t a net l o s s f o r the f i s c a l year ending March 31 19 79 of $ 6 6 , 5 9 2 , most of t h i s was due to the a m o r t i z a t i o n of the c o s t of a new t rade cente r i n A u s t r a l i a . (Report of the New Zealand Expor t - Impor t C o r p o r a t i o n , 1 9 7 9 , pp .8) The a c t u a l opera t ing l o s s was only $ 1 0 , 8 9 2 wh i le f o s t e r i n g the export of over $ 1 0 . 7 m i l l i o n worth of goods and imports of $ 2 . 5 m i l l i o n worth. (Report of the New Zealand Expor t - Import C o r p o r a t i o n , 1 9 7 9 , p p . 5 , 8 ) In a d d i t i o n 127 the Corporat ion p o i n t s out t h a t : "Whi le our c l i e n t l i s t now numbers hundreds of companies i n c l u d i n g many of the major ones. we p r i d e o u r s e l v e s on the f a c t t h a t the bulk of them are s t i l l s m a l l to medium s i z e d e n t e r p r i s e s whose products are o f ten egual to or be t te r than s i m i l a r i tems manufactured anywhere e l s e i n the w o r l d , but who need a d d i t i o n a l access to a d d i t i o n a l export management s k i l l s and welcome the oppor tun i t y of s h a r i n g overseas market development c o s t s with o t h e r s . (New Zealand Expor t - Impor t C o r p o r a t i o n , pamphlet, pp.3) The New Zealand Expor t - Impor t Corpora t ion has not made any e f f o r t , however, to break i n t o the d i f f i c u l t Japanese market . , Never the less i t appears that the es tab l i shment of a Crown Trad ing C o r p o r a t i o n to inc rease the expor t of d o m e s t i c a l l y produced manufactured goods i s f e a s i b l e . . 6.3.4 S u b s i d i z i n g E x i s t i n g Trading Firms The e a s i e s t and probably the most s u c c e s s f u l method f o r a i d i n g the market ing of manufactured goods and lumber products in Japan would be to prov ide economic i n c e n t i v e s to e x i s t i n g t r a d i n g f i r m s t o engage more i n t h i s type of t r a d e . Th i s i s the route the Americans are l i k e l y to take wi th the "Export Trading Company Act " which i s now i n the C o n g r e s s i o n a l hear ings s tage . As regards the manufactured lumber t r a d e i n Canada, the most obvious r e c i p i e n t s f o r t h i s type of support would be f i r m s such as MacMi l lan J a r d i n e or S e a s i a . . The value of t h i s form of s u b s i d i z a t i o n i s t h a t i t p rov ides most of the same b e n e f i t s as a Crown Corpora t ion t r a d i n g company yet leaps over the great h u r d l e s of b u i l d i n g a company from the ground up. E s t a b l i s h e d companies l i k e MacMi l lan J a r d i n e and S e a s i a a l ready 128 possess good r e p u t a t i o n s and bus iness c o n t a c t s to a i d them i n t h e i r d e a l i n g s . . S u b s i d i z a t i o n of e x i s t i n g t r a d i n g companies i s (perhaps next to doing nothing at a l l ) the route favored by p r i v a t e i n d u s t r y . P u b l i c s u b s i d i e s are seldom snubbed. . A lso s m a l l lumber remanufactur ing i n d u s t r i e s as comprised i n the Independent Manufacturers A s s o c i a t i o n among others see no major problems i n s e l l i n g t h e i r products through companies l i k e MacMi l lan Ja rd ine - i f the l a t t e r i s " w i l l i n g to do the paper work and help n e g o t i a t e the d e a l s . " (Larry F o u r n i e r , Genera l Manager, Orchardscn Fores t Products L t d . Persona l I n t e r v i e w , Sept . 1980) The Managing D i r e c t o r of MacMi l lan J a r d i n e , Steve Kaufman, a l s o sees t h i s as a worthwhi le route to export expans ion . (Personal I n t e r v i e w , August 1980) The exact form t h i s type of s u b s i d i z a t i o n would t a k e , however, i s the work of another s tudy . 6 . 3 . 5 Government R e g u l a t i o n Of The Fores t Indust ry Regu lat ion of t h i s type would probably i n v o l v e t y i n g t imber h a r v e s t i n g r i g h t s to the p roduc t ion or export shipment of more f i n i s h e d or remanufactured lumber p r o d u c t s . . Needless t o say the f o r e s t i n d u s t r y does not favo r t h i s p o l i c y o p t i o n . The f o r e s t i n d u s t r y i s not pleased with the prospect of fo rced involvement i n the h igher r i s k ventures of expanding f i n i s h e d lumber product e x p o r t s , e s p e c i a l l y i n the d i f f i c u l t Japanese market . . The best argument i n favo r of government r e g u l a t i o n of the f o r e s t i n d u s t r y to support the export of more . f u l l y 129 processed lumber products i s the success i n b o o s t i n g pulp product ion which has been a t t a i n e d s i n c e t imber r i g h t s were t i e d to pu lp m i l l development i n 1962. The s t ronges t c o n t r a r y argument i s t h a t more r e g u l a t i o n i n t h i s manner may eat i n d e l i b l y i n t o the f o r e s t i n d u s t r y ' s economic v i a b i l i t y . . The adequate assessment of e i t h e r of these two p o i n t s r e g u i r e s more d e t a i l e d study which i s u n f o r t u n a t e l y beyond the c a p a b i l i t y of t h i s s tudy . I t should be pointed out , however, that the fo rced c r e a t i o n of a p u l p i n g c a p a c i t y has r e c e n t l y enabled the f o r e s t i n d u s t r y t o reap handsome d i v i d e n d s due to the s t rong i n t e r n a t i o n a l market f o r p u l p . . Of c o u r s e , n e i t h e r r e g u l a t i o n nor s u b s i d i z a t i o n p o l i c i e s are mutual ly e x c l u s i v e . Indeed they cou ld be combined i n a c a r r o t and s t i c k manner to f u r t h e r spur the f o r e s t i n d u s t r y on towards f u r t h e r p r o c e s s i n g of exported lumber at minimum c o s t to the taxpayer . Again the p o s s i b l e forms t h i s p o l i c y may take are e s s e n t i a l l y ou ts ide the range of t h i s s t u d y , but d e f i n i t e l y worthy of f u r t h e r i n v e s t i g a t i o n . 6 . 3 . 6 N a t i o n a l i z a t i o n Of E x i s t i n g Trading F i rms The l a s t and d e f i n i t e l y most dramat ic means of g a i n i n g c o n t r o l of the lumber t r a d e and the t rade i n manufactured lumber products i s to n a t i o n a l i z e one or more t r a d i n g f i r m s and guide the t rade through t h i s ins t rument . At present there i s no s i g n of t h i s be ing an implementable p o l i c y o p t i o n , no doubt due t o the uproar that such a p o l i c y would draw from the f o r e s t and t r a d i n g i n d u s t r i e s . A lso with the weakness of the support i n 130 the West of the present Federa l Government i t i s h i g h l y u n l i k e l y that the western based f o r e s t i n d u s t r i e s would be antagonized i n t h i s manner. I t would appear t h a t n a t i o n a l i z a t i o n i s , a t b e s t , a p o l i c y of l a s t r e s o r t . 6 . U . 0 Conc lus ion I f Canada i s to improve i t s record f o r e x p o r t i n g manufactured products the manufactured lumber i n d u s t r y has been shown t o be a worthwhi le s e c t o r i n which to c o n c e n t r a t e market ing and p roduc t ion a s s i s t a n c e from government. . Support f o r product ion would l a r g e l y mean i n c r e a s i n g a s s i s t a n c e f o r R&D. There are a l s o very i n t e r e s t i n g prospects f o r an e d u c a t i o n a l es tab l i shment geared to wood d e s i g n . I t would appear that the best course of a c t i o n f o r suppor t ing the market ing of manufactured lumber products would be through e i t h e r the s u b s i d i z a t i o n of e x i s t i n g t r a d i n g f i r m s or r e g u l a t i o n of the f o r e s t i n d u s t r y to f o r c e them to expand expor ts of these products i f they wish to renew t h e i r t imber l i c e n s e s . A lso a combinat ion of the two, c a r r o t and s t i c k s t y l e , may be wor thwhi le . 131 CHAPTER 7 SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS Th i s study o r i g i n a l l y s i t e d as i t s o b j e c t i v e an examinat ion of the f a c t o r s governing the Japanese market f o r B.C. lumber i n order t o determine the best means f o r u t i l i z i n g that market to overcome d e f i c i e n c i e s i n the lumber i n d u s t r y ' s , as w e l l as Canada's t rade with J a p a n . I t was proposed tha t Japan cou ld become a l a r g e r market f o r B .C . . lumber and thereby b r i n g g r e a t e r income and s t a b i l i t y to the lumber i n d u s t r y by reduc ing some of i t s dependence on the f l u c t u a t i n g American market. . However, expanding s imply the volume of lumber shipped t c Japan does not seem t o be the proper o b j e c t i v e . Th i s i s not because the Japanese market i s u n s t a b l e , nor tha t the demand f o r imported t imber and lumber w i l l d e c l i n e . . On the co r f t ra r y , the Japanese market should cont inue to r e q u i r e s u b s t a n t i a l imports of wood, probably i n even g reater volumes than i n the peak import years of the 1 9 7 0 ' s . Rather i t i s because B . C . . i s now f a c i n g l i m i t a t i o n s i n i t s lumber supp ly . The present p roduct ion s u r p l u s appears to be only very temporary. . I n c r e a s i n g the volume of lumber shipped to Japan may e v e n t u a l l y e n t a i l d i v e r t i n g s tocks from e i t h e r the U.S. or the E . E . C . . Such a s i t u a t i o n may very w e l l c rea te antagonism towards the B.C. lumber i n d u s t r y from a l l th ree market areas i f l e v e l s of supply are not kept u p . . The best course of a c t i o n then appears to be one of i n c r e a s i n g the v a l u e , and thus the l e v e l of 132 p r o c e s s i n g , of the lumber shipped t o Japan, and thus not over -committ ing the export volume. I n c r e a s i n g f u r t h e r processed and manufactured lumber expor ts o f f e r s many advantages. I t suppor ts an area of Canada's t rade with Japan tha t i s i n poor c o n d i t i o n - the 2% of t o t a l expor ts which i s comprised of manufactured goods* . I t w i l l generate more employment i n the f o r e s t products i n d u s t r y , boost o v e r a l l revenues, and a l s o a l low g reate r Canadian c o n t r o l of goods w i t h i n the Japanese market . . Th is l a s t f a c t o r i s not only due to the b e t t e r economic p o s i t i o n tha t t rade i n manufactured goods (as opposed to raw m a t e r i a l s ) p l a c e s the e x p o r t i n g nat ion w i t h i n a g iven f o r e i g n market, but a l s o , the i n c r e a s i n g of Canada's expor ts of manufactured lumber products to Japan should a l l o w f o r the development of the t r a d e r e l a t i o n s h i p s , and more i m p o r t a n t l y , the e x p e r t i s e necessary to open markets i n Japan f o r other Canadian manufactured p r o d u c t s . . E f f o r t s have a l ready been made by the lumber i n d u s t r y to i n c r e a s e the l e v e l of p r o c e s s i n g of the lumber exported to Japan . The i n t r o d u c t i o n of CLS lumber i s a good and pra iseworthy example of t h i s . More can be done, however. The problem i s that the onus f o r b u i l d i n g markets f o r manufactured lumber products cannot f a l l s o l e l y on the shou lders of the l a r g e lumber expor te rs i f only because they produce l i t t l e f u l l y manufactured lumber products . And the companies which produce manufactured lumber products are g e n e r a l l y too s m a l l and do not have the economic wherewithal t o develop the type of t r a d i n g r e l a t i o n s tha t are necessary to penet ra te the 133 Japanese market, u n l e s s , of c o u r s e , they have an ou ts tand ing product . But such commodities are not e a s i l y found. . Present government support f o r the lumber re -manufac tu r ing i n d u s t r i e s t o develop products and market them overseas s t i l l appears to be l a c k i n g s u f f i c i e n t p u n c h . . Probably the best source of the necessary Canadian operated e x p e r t i s e , though s t i l l i n nascent form i n s o f a r as manufactured goods are concerned, l i e s w i th the t r a d i n g ventures t h a t have a l ready been set up i n Japan by the l a r g e lumber expor te rs such as MacMi l lan B l o e d e l , Seaboard , and Eacom. The g u e s t i o n i s whether i t i s p o s s i b l e to j o i n the two i . e . the lumber t r a d i n g f i r m s of the l a r g e c o r p o r a t i o n s and the r e l a t i v e l y s m a l l manufactured lumber p r o d u c e r s . . C e r t a i n l y the re are ga ins t o be made f o r both the lumber and manufactured lumber p r o d u c e r s . . The l a t t e r w i l l s e l l more p roduc ts . The former w i l l s e l l the l a t t e r more lumber. A lso the former may come to p r o f i t from the market ing of the l a t t e r ' s products i n Japan. Why, t h e n , do not the l a r g e lumber expor te rs u t i l i z e t h e i r t r a d i n g f i r m s to market Canadian manufactured lumber products i n Japan? F i r s t , i t must be acknowledged that the Japanese lumber market i s a d i f f i c u l t nut to c r a c k . Not many f o r e i g n f i r m s have achieved success i n market ing manufactured products i n Japan, except fo r the wor ld famous name b r a n d s . . The mul t i tude of b a r r i e r s to be overcome need not be r e i t e r a t e d h e r e . S u f f i c e i t to say t h a t market ing manufactured goods i n Japan i s r i s k y and d i f f i c u l t . . Secondly , i t i s gues t ionab le whether the Canadian manufactured lumber product i n d u s t r y 134 possesses s u f f i c i e n t t e c h n o l o g i c a l and design c a p a b i l i t i e s to manufacture goods tha t can be marketed c o m p e t i t i v e l y i n Japan. L a s t l y , the sogo shosha which govern most of the t rade between Canada and Japan are not t e r r i b l y i n t e r e s t e d i n manufactured p roducts . Japanese t a r i f f and n o n - t a r i f f b a r r i e r s d e f i n i t e l y support t h i s stance whatever may be s a i d to the c o n t r a r y . . To overcome these o b s t a c l e s some a s s i s t a n c e , some i n c e n t i v e , and perhaps some c o e r c i o n i n both Canada and Japan may need to be p r o f f e r e d . The only l o g i c a l i n i t i a t o r of any of these th ree o p t i o n s i s the F e d e r a l or P r o v i n c i a l Governments. A s s i s t a n c e would be i n the form of inc reased investment i n R&D i n the manufactured lumber i n d u s t r y i n c l u d i n g the development of some k i n d of c r e a t i v e design i n s t i t u t i o n that w i l l put an i n d e l i b l y Canadian stamp on the products to be marketed i n Japan. A s s i s t a n c e cou ld a l s o be o f f e r e d i n the form of a Canadian Trading C o r p o r a t i o n with o f f i c e s i n Japan, f o r the purposes of i n c r e a s i n g expor ts of manufactured products . I n c e n t i v e s may e n t a i l s u b s i d i z a t i o n of e x i s t i n g t r a d i n g f i r m s o p e r a t i n g i n Japan f o r the r i s k s and l o s s e s they may take i n market ing manufactured products i n that c o u n t r y . . Coerc ion would i n v o l v e both the c a j o l i n g of the Japanese Government to reduce or remove t a r i f f b a r r i e r s , as w e l l as p o s s i b l e enforcement of a t imber h a r v e s t i n g p o l i c y t y i n g t imber r i g h t s to the i n c r e a s e d export of manufactured lumber products by the l a r g e lumber e x p o r t e r s . . The manufactured lumber products i n d u s t r y i s not unworthy of s p e c i a l government a t t e n t i o n i n a l l these a reas . 1 3 5 There are proven successes i n the i n d u s t r y such as Pan-Abode. As w e l l , the development of v i a b l y marketable products made of lumber w i l l b e n e f i t from l i m i t e d i n t e r n a t i o n a l lumber s u p p l i e s and the high g u a l i t y of B .C . . lumber and r e s u l t i n products with a long marketing l i f e c y c l e and e q u a l l y long per iod of r e t u r n on investment . Few other s e c t o r s of the Canadian i n d u s t r y can boast of such f a v o r a b l e economic c i r c u m s t a n c e s . . 136 RECOMMENDATIONS In the l i g h t of the fo rego ing a n a l y s i s t h i s study makes two b a s i c recommendations. 1) P r o v i n c i a l and/or F e d e r a l Governments should enter i n t o n e g o t i a t i o n s w i th the r e p r e s e n t a t i v e s from the major B.C. lumber expor te rs to Japan to i n v e s t i g a t e the p o s s i b l e avenues f o r i n c r e a s i n g support f o r the market ing of manufactured lumber products i n Japan. These n e g o t i a t i o n s should r e v o l v e around the p o s s i b l e c o s t s and b e n e f i t s to a l l p a r t i e s of the p o l i c y f o l l o w i n g p o l i c y o p t i o n s : 1) s u b s i d i z i n g the e x p o r t e r s to market more manufactured lumber products i n Japan, 2) t y i n g t imber h a r v e s t i n g r i g h t s to the f u r t h e r export of manufactured or more f u l l y processed lumber p r o d u c t s , and 3) other p o s s i b l e means which would serve the same ends. 2) P r o v i n c i a l and/or F e d e r a l Governments should enter i n t o n e g o t i a t i o n s wi th the p r i n c i p a l r e p r e s e n t a t i v e s of the manufactured lumber products i n d u s t r y to determine the k inds of R&D support the l a t t e r r e g u i r e . One of the s u b j e c t s of d i s c u s s i o n should i n c l u d e the form and nature of a c r e a t i v e wood design i n s t i t u t i o n to a i d the development of products and processes that could be marketed i n Japan. 137 BIBLIOGRAPHY Adams, T . F . M . . a n d N . . K o b a y a s h i . . The World Of Japanese B u s i n e s s . Kodansha I n t e r n a t i o n a l L t d . Tokyo, 1969. A i r d , John B. Report On Canadian R e l a t i o n s With The C o u n t r i e s Of The P a c i f i c Reg ion . Queen's P r i n t e r 1 , Ottawa, March Anderson, P a t r i c i a . "Trading Company? W e l l , I t A l l Depends." i n The F i n a n c i a l P o s t . . V o l . . 4 , No. . 26, J u l y 5 , 1980, pp. 7. • •- "Cost C u t t i n g The Pre -Fab Way", B.C. , B u s i n e s s . , J . B . . Mar t in e d . . P a c i f i c Rim P u b l i c a t i o n s , V o l . . 8 , No. 3 , March 1980, pp. 2 7 - 3 0 . . "Changing Japanese And European Housing T r a d i t i o n s : P l a t f o r m Frame C o n s t r u c t i o n " , In B . c ; . Economic Development. Sp r ing 1980, pp. 1 8 - 2 1 . . B . C . , M i n i s t r y Of Economic Development. D i r e c t o r y Of A s s i s t a n c e Programs For B^C. B u s i n e s s . V i c t o r i a , (1979?) . . B . C . , M i n i s t r y Of F o r e s t s and M i n i s t r y Of Economic Development. The B r i t i s h Columbia F o r e s t I n d u s t r y : An Overview. Queen's P r i n t e r , V i c t o r i a , November 1979 . . B . C . , M i n i s t r y Of F o r e s t s . Forest And Range Resource A n a l y s i s : T e c h n i c a l Repor t . Queen's P r i n t e r , V i c t o r i a , March 1980? B . C . , Royal Commission On Fores t R e s o u r c e s . . Timber R i g h t s And Fores t P o l i c y In B r i t i s h C o l u m b i a . . 2 V o l s . . Peter Pearse , Commissioner. Queen's P r i n t e r , V i c t o r i a , 1976. B o l t ho , Andrea. Japan: An Economic Survey, .1953-1973 . J : Oxford U n i v e r s i t y P r e s s , Great B r i t a i n , 1975. . p Canada, M i n i s t r y Of I n d u s t r y , Trade And Commerce.. Program For Export Market Development. Queen's P r i n t e r , Ottawa, 1979. Canada, M i n i s t r y Of I n d u s t r y , Trade And Commerce.. Review of The Canadian F o r e s t Products I n d u s t r y . . Queen's P r i n t e r * Ottawa, November 1978. . Canada, M i n i s t r y Of Supply And S e r v i c e s . E n t e r p r i s e Development Program. Ottawa, 1977. Canada, M i n i s t r y Of I n d u s t r y , Trade And Commerce. Canada Yearbook Queen's P r i n t e r , 1979. 138 "Japanese Carpenters Bow To The T w o - B y - F o u r " , i n Canada Commerce.. S e p t . / O c t . , 1976, pp. 8 - 1 1 . . C o u n c i l Of Fo res t I n d u s t r i e s . . B r i t i s h Columbia Fores t Indus t r y S t a t i s t i c a l Tab les . COFI p u b . , Vancouver, A p r i l 1980. Dahlby, Tracy. "A R e l e n t l e s s Quest For O i l : Tokyo" , i n Far Eastern Economic Review. S e p t . . 28, 1979, p p . . 5 8 - 6 4 . . D a r r , David R. . and L i n d e l l , Gary R. . "P rospec ts For U . S . . Trade In Timber P r o d u c t s : The S e t t i n g " , i n The Forest Products J o u r n a l . . V o l . 30, No. . 3 , March 1980, pp. 1 7 - 2 1 . D a r r , David R. and L i n d e l l , Gary R . . " P r o s p e c t s For U . S . . Trade In Timber P r o d u c t s : I m p o r t s " , i n The Fo res t Products J o u r n a l . V o l . . 30, No. 4, A p r i l 1980, p p . . 1 6 - 2 0 . . D u s t i n g , N.R. . Report On A V i s i t To Japan January 1.979^ C o u n c i l Of Fo res t I n d u s t r i e s , Vancouver, February 1979. . D u s t i n g , N.R. B r i e f i n g Paper Re-Premier Bennett V i s i t To Japan: September 28 - October 9 C ~ 1979. C o u n c i l Of Forest I n d u s t r i e s , Sept . . 13, 1979. . Economic And Fore ign A f f a i r s Research A s s o c i a t i o n . . S t a t i s t i c a l Survey Of Japan 's Economy: 1979. . K e i z a i Gaiko Kenkyukai p u b . , Japan, March 1980. . Economic P lann ing Agency. . Economic Survey Of Japan 197 8 - 1 9 7 9 . . Economic P l a n n i n g Agency Japanese Government, Japan, 1978. ) - h "A Bet ter Deal For J a p a n ' s R a b b i t s " , i n The Economis t i Feb. 2, 1980, pp. 9 2 - 9 3 . , "Logging Across The Ocean", In The Economist; . . May 24, 1980, pp. . 4 3 - 4 4 . . F a r r i s , Char les W., et a l . Doing Bus iness In And With J a p a n . . American Management A s s o c i a t i o n I n c . , U . S . A . , 1 9 6 9 . . " Japan : S p e c i a l Repor t " , The F i n a n c i a l P o s t . . O c t . . 6 , 1979, pp. . S1 -S12. . "Bus iness And Economic F o r e c a s t s For 1980" , In Focus J a p a n . . JETRO p u b . , V o l . 7 , N o . . 1, J a n . . 1979, pp. 2 - 4 . F o r s t e r , Robert B. Japanese F o r e s t r y : The Resources , I n d u s t r i e s And M a r k e t s . . Canadian F o r e s t r y S e r v i c e , Department Of The Environment, October 1978. G r i f f i n , K e i t h . Underdevelopment In Spanish America; George A l l e n And Unwin L t d . , London, 1 9 6 9 . . 139 Hay, K e i t h A . J . . Japans Chal lenge And Opportun i ty For Canadian I n d u s t r y . . The Canadian Economic P o l i c y Committee, Canada, 1 9 7 1 . . Hay, K e i t h A .H . A Review Of Economic R e l a t i o n s Between Canada And Japan And Prospects To 1975. Canada-Japan.Trade C o u n c i l , Ot tawa, March 1974. Hay, K e i t h A . J . and S . R . . H i l l . . T r a n s p o r t a t i o n I m p l i c a t i o n s Of Canada's Trade With Japaiu . The Canada-Japan Trade C o u n c i l , Ottawa, March 1975. . Hay, K e i t h A . J . and H i l l , S .R. Canada And J a p a n 1 s Other P a r t n e r s . The Canada-Japan Trade C o u n c i l , Ottawa, A p r i l 1977. Hay, K e i t h A . J . and H i l l , S . R . . Canada-Japan Trade And Investment . The Canada-Japan Trade Counc i l* Ottawa, February 1979. . Hay, K e i t h A . J . e t a l . The Uncommon Market - Japan And North Amer ica . e d i t e d Proceedings Of A Symposium, The Canada-Japan Trade C o u n c i l , Vancouver, November 1979. . Hayash i , K i c h i r o . The Role Of The M u l t i n a t i o n a l E n t e r p r i s e In Canada-Japan R e l a t i o n s . . A Paper For The, Conference : Canadian P e r s p e c t i v e s On Economic R e l a t i o n s With Japan, U n i v e r s i t y Of Toronto-York U n i v e r s i t y , To ronto , May 9 -11 1979. . Haynes, R ichard W. and Adams, Dar ius M. " P o s s i b l e Changes In Reg iona l F o r e s t Product Output And Consumption During The Next 50 Y e a r s " , i n The F o r e s t Products J o u r n a l . , V o l . 29, No. 10, O c t . . 1979, Pp. 7 5 - 8 0 . . Holowacz, J . . " U . S . S . R . V , i n World Wood Rev iew. . J u l y 1979, p p . 2 3 - 2 6 . . I k u t a , Toyoak i . "Second O i l C r i s i s And Japan" in The O r i e n t a l Economist., . J u l y 1979, pp . 1 6 - 1 7 . . Japan Fores t Agency. . The Present S i t u a t i o n Of The F o r e s t And Fores t Indust ry In J a p a n . . Japan F o r e s t Agency, Japan, 1979. Japan Fores t Agency. . S t a t i s t i c s And Trends s t a t i s t i c a l sheet , cour tesy of the Japanese Consulate i n Vancouver, Japan, March 1 9 8 0 . . Japan Fores t T e c h n i c a l A s s o c i a t i o n e d . . F o r e s t r y And Forest Indust ry Of J a p a n . . Japan Timber Products Storage O r g a n i z a t i o n p u b . , Japan, March 1 9 8 0 . . " U . S . S . R . Logs Down 28% In F i r s t Quar t " , In The Japan Lumber J o u r n a l . . V o l . 2 1 , No. 1, J a n . 20, 1980, p p . . 1 , 2 , 1 2 . . 140 "American Timber Market P r i c e s " , In The Japan Lumber J o u r n a l . . V o l . . 21, N o . . 3, Feb. 20, 1980,~pp. . 9-117 . "Housing S t a r t s " , In The Japan Lumber J o u r n a l . V o l . . 21 , No. 3 , F e b . . 20, 1980, p p . . 1 2 - 1 3 . . " Imports Of American Timber By Reg ion" , In The Japan Lumber J o u r n a l . V o l . 2 1 , No. 5 , March 20, 1980, pp. 9 - 10. . "Housings For 1980 Decreasing To 1.33 - 1.37 M i l l i o n U n i t s " , i n The Japan Lumber J o u r n a l . V o l . . 2 1 , No. 5 , March 2 0 , 1980, pp. 15. "Timber Demand And Supply For 1979-1980" , i n The Japan Lumber J o u r n a l . V o l . . 2 1 , N o . . 8, Apr . 30, 1980, pp. 1 - 5 . " " : "Housing C o n s t r u c t i o n Spaces: 1979", i n The Japan Lumber J o u r n a l . V o l . . 21 , No. 8 , A p r . . 30 , 1980, p p . 7 - 9 . " Imports Of Fore ign Timber For 1979", i n The Japan Lumber J o u r n a l . . V o l . 2 1 , No . . 8, A p r i l 30 , 1980, pp. 10- 13. "American Timber P r i c e s A p r i l - M a y " , i n The Japan LUMber J o u r n a l . V o l . . 2 1 , N o . . 9 , May 2 0 , 1980, p p . . 1 0 - 1 1 . Jaakko Poyry And C o . . E v a l u a t i o n Of G l o b a l Fo res t Resources And Markets For Forest P r o d u c t s . . P a r t s I a n d ; I I , B . C . . Department Of Lands, F o r e s t s And Water Resources , 1975. Japan-Canada Businessmen.' s Conference Report . . To ronto , May 1979. Japan E x t e r n a l Trade O r g a n i z a t i o n . White Paper On I n t e r n a t i o n a l Trade. 1974 E d i t i o n , JETRO p u b . , Tokyo, 1 9 7 9 . . Japan E x t e r n a l Trade O r g a n i z a t i o n . White Paper On I n t e r n a t i o n a l Trade.. 1977 E d i t i o n , JETRO p u b . , Tokyo, 1 9 7 7 . . Japan E x t e r n a l Trade O r g a n i z a t i o n . White Paper On I n t e r n a t i o n a l Trade. 1979 E d i t i o n , JETRO p u b . , Tokyo, 1 9 7 9 . . Katsumata, H. " P r o d u c t i o n Upswing, Changes In Labor S i t u a t i o n " , i n The O r i e n t a l Economis t . . June 1980, p p . 4 - 5 . . "Japanese Indust ry And Envi ronmental Prob lems" , i n The Keidanren Review. . Keidan.ren (Japan F e d e r a t i o n Of Economic Organizat ions ) p u b . , No. 6 0 , Tokyo, Dec. 1979, pp .1 141 "FY '80 Economic Out look , P o l i c y Proposa ls Announced", in The Keidanren Rev iew. . Keidanren P u b . , No. 6 1 , Tokyo, Feb. 1980, pp. 7 - 1 2 . . Langdon, F r a n k . . Problems Of Canada-Japan Economic Diplomacy In The 6 0J.S And 1970 's : The Th i rd Opt ion . . A Paper For The Conference : Canadian P e r s p e c t i v e s On Economic R e l a t i o n s With Japan, U n i v e r s i t y Of Toronto -York U n i v e r s i t y * Toronto , May 9 - 1 1 , 1 9 7 9 . . L i n d e l l , Gary R. Log Export R e s t r i c t i o n s Of The Western S ta tes B r i t i s h C o l u m b i a . . U.S. Department Of A g r i c u l t u r e Fo res t S e r v i c e , Oregon, 1 9 7 8 . . L i n d e l l , Gary R. "World Softwood Lumber Trade: P a t t e r n s , Trends, And P r o s p e c t s " , i n The Fores t Products J o u r n a l . . V o l . . 27, No . . 7, J u l y 1979, p p . . 4 3 - 4 8 . . McDone l l , Bob . . " J a p a n : The Key (Market) To P e n e t r a t i n g The P a c i f i c R i m " , i n Canada Commerce. Apr./May 1980, pp. 6 - 8 . . "Japanese Economy", In M i t s u i Bank Monthly Rev iew. . M i t s u i Bank p u b . . V o l . 25 , N o . . 6 , June 1980, p p . . 1 -2. "Japanese Economy", i n M i t s u i Bank Monthly R e v i e w . . V o l . . 25, No. 4 , A p r i l 1980, ppT 1-2. . Monroe, Wi lbur F. and S a k a k i b a r a , E i s u k e . The Japanese I n d u s t r i a l S o c i e t y . U n i v e r s i t y Of Texas, Texas , 1977. Nakamura, Takafusa. "An Economy In Search Of S t a b l e Growth: Japan S ince The O i l C r i s i s " , i n J o u r n a l Of Japanese S t u d i e s . V o l . . 6, No. 1, S o c i e t y Of Japanese S tud ies pub . , Japan, Winter 1980, pp. 1 5 5 - 1 7 8 . . The New Zealand Expor t - Import C o r p o r a t i o n . . Pamphlet, 1980. O f f i c e Of The Prime M i n i s t e r . . Japan S t a t i s t i c a l Yearbook. . Japan S t a t i s t i c a l A s s o c i a t i o n p u b . , Tokyo, Sept.. 197-9. . O k i t a , Saburo. Japan In The World Economy. The Japan Foundat ion , Japan, 1975. "Japanese Economy S t i k e s An E q u i l i b r i u m " , i n The Or ien ta1 Economist . October 1979, pp. . 6 - 9 . . "Housing H e l l In Japan" , i n The O r i e n t a l E c o n o m i s t . . December 1979, p p . . 6 - 1 0 . . " S t a r t Of Age Of Moderate Wages", in The O r i e n t a l Economis t . . January 1980, p p . . 10 -14 . . "Government P r e d i c t s 4.8% Growth, N a t i o n a l Budget For 142 FY 1980", i n The O r i e n t a l Economist February 1980, pp. 4 - 5 . . " W i l l Good Business C o n t i n u e ? " , i n The O r i e n t a l Economist^. March 1980, pp. 14 -20 . " S t a t i s t i c s " , i n The O r i e n t a l E c o n o m i s t . , A p r i l 1980, pp. 4 6 - 5 0 . Ozawa, Terutomo.. M u l t i n a t i o n a l i s m ^ Japanese S t y l e . P r i n c e t o n U n i v e r s i t y P r e s s , P r i n c e t o n , New J e r s e y , 1 9 7 9 . . P e t e r s o n , R ichard S. and Akabane, Takeo . . "Economy In The 1980's - Japan And The O . S . " , i n The O r i e n t a l Economist May 1979, pp. . 14 -20 . . Proceedings Of The 1978 J o i n t Convention Of The S o c i e t y Of American F o r e s t e r s And The Canadian I n s t i t u t e Of F o r e s t r y . North American F o r e s t s : Gateway To O p p o r t u n i t y . . Soc iety Of American F o r e s t e r s pub . , U.S.A. , 1979. Report Of Proceedings Of B ^ C . Fo res t Indus t ry P l a n n i n g Conference March 1977. North American S o c i e t y Corporate P l a n n i n g I n c . . p u b . , Vancouver, 1979. Report Of The New Zealand Export - Import C o r p o r a t i o n For The Year Ended 3_1 March 1979. . W e l l i n g t o n New Zea land , 1979. Ruderman, F lo rence K. P r o d u c t i o n , P r i c e s , Employmwent And Trade In Northwest F o r e s t I n d u s t r i e s . . U . S . . Department Of A g r i c u l t u r e F o r e s t S e r v i c e , Oregon, 1978. . S a e k i , K i i c h i . " J a p a n ' s S e c u r i t y , Government I n i t i a t i v e Wanted", i n The O r i e n t a l Economist May 1980, p p . . 6 -10. . Sasges , Mike . " B . C . Lumbermen Hopeful Of Breakthrough In J a p a n " , i n The Vancouver S u n . . June 2, 1980, p p . , B 7 . . Sasges, M i k e . . " I n t e r i o r Lumber F i rms Wooing Export M a r k e t s " , i n The Vancouver S u n A p r i l 28, 1980, pp. . B7. . S e i k e , K i y o s h i . . Japanese Home In T r a n s i t i o n JETRO pub*, Japan, February 1979. . Shand, Eden Ar thur . . The Development Of 'The Japanese Market For P a c i f i c Northwest Lumber: A H i s t o r i c a l Survey. . M.B.A. Thesis Unpub l i shed , U n i v e r s i t y Of B r i t i s h Co lumbia , Vancouver, 1968. Shimaguchi , M i t s u a k i , and Rosenberg, L a r r y . . " D e m y s t i f y i n g Japanese D i s t r i b u t i o n " , i n The Columbia J o u r n a l Of World B u s i n e s s . V o l . XIV, No. 1, Columbia U n i v e r s i t y , New York, S p r i n g 1979, pp. , 3 2 - 4 6 . . 143 S h i o t a , Y . , Schn iewind , A . , Takaahash i , A . . a n d Tanaka C . . "Recent Trends Of The Wood Indus t r y Of J a p a n " , i n The Fores t Products J o u r n a l . May 1980, p p . . 2 8 - 3 4 . . Sopow, E l i . . "T iming Of Timber R e s t r i c t i o n P o o r " , i n The Vancouver P r o v i n c e . March 16, 1980, pp. D 5 i . T a k a h a s h i , Takeo . . "Economic P rospec ts For 1980 - E f f e c t s Of O i l - s p u r r e d I n f l a t i o n " , i n The O r i e n t a l E c o n o m i s t . . January 1980, pp. 6 - 9 . T a k e u c h i , H i r o s h i . . " W i l l O i l Crunch S p o i l Japanese Economy?", i n The O r i e n t a l Economis t ; . August 1979, pp . . 12 -16 . . T a y l o r , A l l e n ed. . P e r s p e c t i v e s On U .S . - Japan Economic R e l a t i o n s . . B a l l i n g e r P u b l i s h i n g C o . , U . S . A . , 1 9 7 3 . . "This Y e a r ' s I n d u s t r i a l Ou t look" , i n Toka i Monthly Economic L e t t e r . . The Tokai Bank L t d . , N o . . 17 , March 1980. "Consumer P r i c e s And Business In 1980", i n Tokai Monthly Economic L e t t e r . N o . . 18, The T o k a i Bank L t d . , A p r i l 1980, "The Economic S i t u a t i o n And Future T rend" , i n Tokai Monthly Eonomic L e t t e r . . No. . 20, The Tokai Bank L t d . , June 1 9 8 0 . . " J a p a n ' s Economy - I t s Present State And Future P r o s p e c t s " , i n The Tokyo F i n a n c i a l Review V o l . . 5 , No . . 1 , Bank Of Tokyo L t d . , May~1980, p p . . 1 - 5 . . " J a p a n ' s Balance Of Payments Adjustment To The Second O i l C r i s i s " , i n The Tokyo F i n a n c i a l Review. . V o l . . 5 , No. . 4 , Bank Of Tokyo L t d . , A p r i l 1980, p p . . 1 - 5 . . "Recent P r i c e Trends In Japan And A n t i - i n f l a t i o n a r y E f f o r t s " , i n The Tokyo F i n a n c i a l Review* . V o l . . 5 , No . . 5 , Bank Of Tokyo L t d . , May~1980, p p . . 1 - 3 . . Tsurumi , H i r o k i . "A Bayesian Test Of The Product Cycle Hypothesis App l ied To Japanese Crude S t e e l P r o d u c t i o n " , i n Jou rna l Of Econometr ics . . S p r i n g 1977. . Tsurumi , Y o s h i . . M u l t i n a t i o n a l Management: Business S t r a t e g y And Government P o l i c y . . B a l l i n g e r P u b l i s h i n g C o . , U . S . A . , 19777. U . S . . Subcommittee On Trade Of The Committee On Ways And Means, U .S . . House Of R e p r e s e n t a t i v e s . . Task Force Report On United S t a t e s - J a p a n Trade. . U.S. . Government P r i n t i n g O f f i c e , Washington, 1 9 7 9 . . " D e c l i n e In U.S. House B u i l d i n g H i t s 42%", i n The 144 Vancouver Sun.., May 17. 1980 r pp. C I . . Wr ight , R ichard W. Fore ign Investment Between Neighbors : Canada And J a p a n . . A Paper For The Conference: Canadian P e r s p e c t i v e s On Economic R e l a t i o n s With Japan, U n i v e r s i t y Of Toronto -York U n i v e r s i t y , Toronto , May 9 -11, 1979. Wr ight , R ichard W. " J o i n t Venture Problems In J a p a n " , i n The Columbia J o u r n a l Of World B u s i n e s s . , V o l . . X IV , No. 1, Columbia U n i v e r s i t y P r e s s , New York , Spr ing 1979, p p . 2 5 - 3 1 . . Yamashi ta , Isamu. "Changes In J a p a n ' s I n d u s t r i a l S t r u c t u r e " , i n Keidanren Review No . . 63 , Keidanren p u b . , June 1980, pp. 6 - 1 2 . . Yoshino , M.Y. Japan 's M u l t i n a t i o n a l E n t e r p r i s e s . Harvard U n i v e r s i t y P r e s s , U . S . A . , 1976. INTERVIEWS A l l a n B a t e s , S a l e s Manager: P a c i f i c Markets , MacMi l lan B l o e d e l L t d . . Vancouver, May 1980. Henrik B l i c h f e l d , Market ing Department, Eacom Timber Sales L t d . Vancouver, May 1980. C . J . . Cope land , C h i e f : Manufactured Wood Products D i v i s i o n , Department Of I n d u s t r y , Trade And Commerce, Ottawa, J u l y 1980 . . L o u i s F o u r n i e r , Genera l Manager, Orchardson F o r e s t Products Inc . Vancouver, September 1 9 8 0 . . Thomas T. Hamaoka, A s s i s t a n t General Manager, M i t s u i And Co. (Canada) L t d . Vancouver, May And J u l y 1 9 8 0 . . Steve H o l l e t t , A s s o c i a t e D i r e c t o r S e c t o r a l A n a l y s i s : F o r e s t r y , B.C. M i n i s t r y Of Economic Development, V i c t o r i a , March 1980. . Steve Kaufman, Managing D i r e c t o r , MacMi l lan Ja rd ine Japan L t d . * Vancouver, August 1980. E a r l L. K e l l y , C h i e f : Pr imary Wood Products D i v i s i o n , Department Of I n d u s t r y , Trade And Commerce, Ottawa* J u l y 1 9 8 0 . . John H. Lang, Reg iona l O f f i c e r , Department Of Industry* Trade And Commerce, Vancouver, September 1980 . . H a r t l e y L e w i s , Ch ie f Economist : S t r a t e g i c S t u d i e s D i v i s i o n , B.C. . M i n i s t r y Of F o r e s t s , V i c t o r i a , A p r i l 1980. . 145 Ken McKeen, D i r e c t o r , C o u n c i l Of Forest I n d u s t r i e s , Vancouver May 1980. Yoshinobu O h t s u k i , Manager: Vancouver O f f i c e , Sumitomo F o r e s t r y Co. L t d . , Vancouver, May 1980. Bob P a t e r s o n , A s s o c i a t e Pro fessor ( I n t e r n a t i o n a l T r a d e ) , F a c u l t y Of Law, O.B.C. Vancouver, J u l y , 1 9 8 0 . . Jan S o l e c k i , P r o f e s s o r Of Russian And S l a v o n i c S t u d i e s , O . B . C , August 1980. . David Thompson, Market ing Department, Pan-Abode B u i l d i n g s C o . , Vancouver, September 1980. A rv id Thors tensen , S t a t i s t i c i a n , C o u n c i l Of Forest I n d u s t r i e s , Vancouver, May, June 1980. L a i r d W i l s o n , Area Sa les Manager: A s i a , Seaboard Lumber Sa les L t d . , Vancouver, May 1 9 8 0 . . 

Cite

Citation Scheme:

        

Citations by CSL (citeproc-js)

Usage Statistics

Share

Embed

Customize your widget with the following options, then copy and paste the code below into the HTML of your page to embed this item in your website.
                        
                            <div id="ubcOpenCollectionsWidgetDisplay">
                            <script id="ubcOpenCollectionsWidget"
                            src="{[{embed.src}]}"
                            data-item="{[{embed.item}]}"
                            data-collection="{[{embed.collection}]}"
                            data-metadata="{[{embed.showMetadata}]}"
                            data-width="{[{embed.width}]}"
                            data-media="{[{embed.selectedMedia}]}"
                            async >
                            </script>
                            </div>
                        
                    
IIIF logo Our image viewer uses the IIIF 2.0 standard. To load this item in other compatible viewers, use this url:
https://iiif.library.ubc.ca/presentation/dsp.831.1-0094680/manifest

Comment

Related Items