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Log export restriction in British Columbia : an economic examination

University of British Columbia

The restrictions imposed on the export of unmanufactured forest products from British Columbia are examined from an economic standpoint. The subject is divided into two major areas: the level of restriction (the price protection afforded the domestic processing industry as a result of the policy) and the method of restriction (the structure of the regulatory system used to control the flow of exports). In the first area, the issue underlying the restriction/non-restriction debate is clarified; the way the policy works to assist the domestic processing industry is described; and the economic consequences of assisting the processing sector through export restrictions are identified. Most significantly, the opportunity cost imposed on the log producing sector is identified as negating some of the benefits achieved through the induced growth of the processing sector. It is concluded that these often unrecognized consequences are of substantial importance and should be considered explicitly in any examination of the restrictions. In the second area, the administrative procedures and timber tax charges that form the basis of the export control system are described. The system is found to be based on the arbitrary and unilateral view that domestic processing is the best use of the province's timber. The procedure for determining export eligibility is identified as being cumbersome, time-consuming, risk-inducing and expensive; the timber tax is identified as being inefficient, inequitable and counterproductive. It is concluded that the method of export regulation should be restructured to include incentives for economic efficiency. The revisions to the export control system proposed by the Royal Commission on Forest Resources are considered as an alternative to the administrative restrictions. The advantages of a system of export control that is tied directly to the export market, along with the possible constitutional and international questions that introduction of the proposed controls would raise, are discussed. Estimates of the early-round effects of the proposed controls and suggested tax rate on log exports, Crown revenue, timber utilization and timber harvests are presented. It is concluded that the proposed system of export regulation offers a viable alternative to the existing controls but that certain modifications to the Commission's proposal would be appropriate prior to the recommendation's implementation. In addition, the evolution of the policy in British Columbia is described and areas for further research are identified.

Text

2010-02-16

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http://hdl.handle.net/2429/20296

Forestry

University of British Columbia

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