Forestry Ink: Who benefits from a free log market?

Regular columnist Jim Hilton shares information and insights about log exports

Jim Hilton

Observer Contributor

My initial impression about log exports was similar to others who equated log exports to loss of jobs with the main reason for exports being the major tenure holders making good profit from exporting logs relative to milling lumber.

A number of reports and investigations has convinced me the log export phenomena is more complicated than my first impressions.

An article by Peter Pearse titled “Restrictions on B.C. log exports don’t make a lot of sense” appeared in the Province on January 19, 2019.

“Proponents of free trade in logs point out access to foreign markets hikes the demand and value of logs, which increases employment in forestry and timber production,” it states.

“In addition, logs are exported only when they bring prices higher than domestic sales, so exports advance the public interest in the economic return on our forest resources. Proponents of a free market for logs include the companies and contractors that harvest timber and the owners of forest land, including ranchers, woodlot owners and First Nations, who sell logs and consequently welcome foreign buyers. Nevertheless, in recent years, some 10 per cent of the provincial production of timber, drawn almost entirely from the coastal region, has been exported as logs to buyers in Asia — notably to China, Japan and South Korea — for prices often 50 per cent or more above local market prices.

“Over the years, our restrictions on exporting logs have been evaluated by researchers at the University of B.C. and other Canadian universities, the Stanford Research Institute and governmental reviews and commissions. Overwhelmingly, these investigations found restrictions on access to the export market for logs diminish the economic benefit we derive from our forest resources.”

A study from the Fraser Institute in 2014 by Joel Wood titled “Log Export Policy for British Columbia” has similar conclusions to the article by Pearse.

“Because of the restrictions on exports, logs sell for substantially less to domestic buyers on the Vancouver Log Market than those sold to foreign buyers,” it states. “In 2011, the average price of logs sold domestically on the Vancouver Log Market was $74.28 per cubic metre, while the average price of logs exported was $108.35 per cubic metre. Furthermore, the current export approval process, and the Surplus Test in particular, adds significant delays and uncertainty into the operations of logging companies.”

Wood concludes with the following: “One thing is exceedingly clear from the analysis: an outright prohibition on log exports from British Columbia, as advocated by many pundits, politicians and interest groups, is very costly compared to all alternatives. Both free trade in logs and a quota policy allowing limited log exports are preferable to a ban on exports. Although free trade in logs is not the preferred policy from a B.C. perspective, it certainly is from a global perspective. Chinese, Japanese, and Korean log consumers directly benefit from British Columbia allowing more log exports.”

It appears that the B.C. government is taking the advice of the economists, according to a July 2019 government report.

A new, targeted fee-in-lieu of manufacturing (tax) for exported logs harvested from a coastal BC Timber Sales licence will be dependent on the economics of individual stands. Stands containing high-value species and that are easily accessible will have a higher fee than stands with low-value species that are remote and difficult to access.

Forest communities in more remote areas of the B.C. coast will benefit from other changes government has made to allow the continued harvest of timber in uneconomical areas, which will help maintain jobs and make additional logs available to local mills.

So far, I have not seen any indication of what the economists see as a minimum number of domestic mills on our coast, but I guess that is not the job of the economists, but it is an ongoing balancing act by the governments in power.

Jim Hilton is a professional agrologist and forester who has lived and worked in the Cariboo-Chilcotin for the past 40 years. Now retired, Hilton still volunteers his skills with local community forests organizations.

READ MORE: Forestry Ink: Why can the Asian markets pay more for B.C. logs than our local mills?

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