New export opportunities for forest products producers are an obvious outcome of the Uruguay Round. Perhaps less obvious are the additional opportunities the Settlement will create in countries' domestic markets. An increase in domestic demand for wood products, strongly correlated with the increase in economic activity as a result of the overall Uruguay Round outcomes, should be anticipated. For example, the Uruguay Round agricultural settlement will result in an expansion of production and exports of agricultural goods from a number of Asia-Pacific countries. In turn this should increase the demand for packaging materials and stimulate farm investment in terms of, for instance, fencing, stock handling facilities, storage sheds and new processing plants. Increased export revenues will result in higher domestic spending thereby creating downstream effects in such areas as housing construction, industrial development and household items. These multiplier effects in a range of industries will impact on forest products usage particularly for packaging but also construction purposes.
Changes in tariff relativities across countries will create new opportunities in some markets and also act to increase competition in some countries' domestic markets. This section attempts a brief assessment of the impacts of tariff changes in the major countries involved in the forest products trade in the Asia-Pacific region - and the potential impacts for Asia-Pacific countries of changes in the two largest related markets - the European Union and the United States. A quantitative listing of tariff changes is provided in Appendix 1.
Australia is presently a net importer of forestry products, but moving rapidly toward a net export position. By 2010 Australia is expected to be a net exporter of forestry products. Table 4 details Australia's largest forest products export suppliers by product.
Table 4: Australian Imports of Forest Products - Major Suppliers (Year to June 1995) (Aust$'000)
Country |
Sawn Timber |
Panels |
Woodpulp |
Paper |
Miscell. Remanufacts. |
New Zealand |
222 732 |
84 027 |
73 870 |
192 000 |
20 850 |
United States |
90 383 |
4 767 |
30 460 |
238 100 |
16 577 |
Canada |
101 137 |
- |
39 200 |
47 900 |
- |
Malaysia |
80 239 |
6 146 |
- |
- |
61 587 |
Indonesia |
16 968 |
29 160 |
- |
34 700 |
25 909 |
Finland |
5 876 |
- |
1 400 |
264 200 |
- |
Germany |
- |
3 199 |
- |
143 400 |
1 763 |
Source: Abare 1996
In the year to June 1995 Australian forest products imports totalled A$2 642 million, of which 58 percent was comprised paper and paperboard imports. The value of products listed in Table 4 totals around 60 percent of Australia's imports, with the remainder being mainly paper imports from European countries and Japan.
The Australian forestry offer under the Uruguay Round is to bind most Chapter 44 items at 5 percent, although less-processed products, such as logs, are bound at zero. All pulp tariffs and newsprint are bound at zero. Paper tariffs are bound at 5-12 percent. For most products this equates to a modest tariff reduction. For example, pre-Uruguay Australian sawn timber tariffs were 5-9 percent, panel products tariffs ranged 5-12 percent, and paper products tariffs were 0-12 percent
New Zealand is easily the largest forest products exporter to Australia, supplying around 23 percent of Australia's forestry imports. New Zealand exports enter Australia duty free under the ANZCER Trade Agreement. Consequently, Australia and New Zealand can be regarded almost as a single market. New Zealand exporters under ANZCERTA provisions, similarly to Australian producers, retain a margin of preference over third country suppliers though given the tariff reductions noted above obviously this margin is reduced for most products. Tariff reductions will enhance the competitiveness of third country producers, thereby reducing any above-normal profits earned by the most efficient Australasian producers and eliminating the most marginal firms. In terms of Barbier's analysis, the difficulties of modelling the ANZCERTA provisions means the trade effects are probably overstated since the gains accruing to New Zealand would partially have been realised at the time of ANZCERTA's implementation. Barbier estimates trade creation impacts in Australia to be worth between US$13 million and US$16 million.
Australia's Uruguay Round forestry tariff commitments are not large and, with additional natural trade protection in the form of freighting costs and increasing Australian production, there are unlikely to be significant substitution opportunities into the Australian market. Countries such as Indonesia and Malaysia may, for example, seek to capture plywood and non-coniferous sawn timber market share at the margins; however, the opportunities are not substantial.
Australia is expected to be a net beneficiary from Uruguay Round trade liberalisations and the general stimulus this applies to the Australian economy should also provide some scope for forestry trade creation and particularly opportunities for Australasian producers of wood-based packaging products.
China is not a contracting party to the GATT. It was, however, a participant in the Uruguay Round. The Chinese offer bound forest products tariff rates at levels which generally range from 20 percent to 40 percent although there are a few items, most notably logs and woodpulp, at rates below 10 percent. The new Chinese bound rates are generally in the vicinity of the pre-existing applied rates, with tariff bindings on particleboard (20 percent) and some types of fibreboard (20-35 percent) being set marginally lower than the pre-existing applied rates, while tariffs on plywood (35 percent), veneer (9-35 percent) and many paper products (20-35 percent) are bound at levels slightly above the applied rates.
Barbier's analysis shows changes in China's tariffs will create an additional US$8 million in trade each year. More significant is likely to be the resolution of current negotiations for China and China-Taipei to become members of the WTO. In addition to delivering further significant tariff reductions such membership could also be expected to assist in removing a number of non-tariff barriers to trade such as statutory inspection, state pricing measures, import licensing and quota restrictions. The impacts of China's potential accession to the WTO are discussed later.
Even prior to the Uruguay Round settlement Hong Kong applied no tariffs to forestry products. Under the settlement Hong Kong agreed to bind tariffs at zero meaning the risk of tariff increases is removed in the medium term. The major unpredictable elements in terms of the Hong Kong market are in terms of its reversion to Chinese sovereignty. In 1997, Hong Kong will become a Special Administrative Region of China. While this will undoubtedly strengthen trade ties between Hong Kong and China, there should be little evident change to Hong Kong's institutional trade structures as a result of the change. It appears that under the terms of the agreement the main features of the Hong Kong economy are to be preserved for 50 years including the free-port system, the independent taxation system, and financial structures.
Most of the opportunities in terms of expanding exports to Hong Kong relate to its 1997 change of status, particularly as a gateway to China. Hong Kong itself presently operates mainly as a re-exporter of sawn timber with re-exports of wood panels also growing substantially since 1988. There may be some potential to increase exports of panel products and the Hong Kong paper and paperboard market has grown strongly over the past decade. However, in the interim the unchanged tariff structure means the Uruguay Round outcome will have little impact on this market.
Until recently India applied extremely high tariffs to forest products. For example, the 1986 base tariff rates for panel products ranges from 105 percent to 145 percent. Actual rates applied immediately pre-Uruguay round were considerably lower though escalatory, reaching 35 percent for some carpentry and furniture, 30 percent for fine papers and plywood, and 20 percent for other panel products.
The essence of the Indian tariff offer is to bind tariffs at slightly above the pre-Uruguay applied rates. Consequently most tariffs are bound at either 25 percent (including logs, woodpulp and newsprint) or 40 percent (including sawn timber, panel products and other paper and paperboard). Similarly to most of the other developing countries there are no immediate tangible benefits to this higher binding, but the historically high levels of Indian tariffs lend the bindings significant importance in market risk alleviation. The tariff bindings limit the degree to which India will be able to use tariffs to protect its domestic industry in the future. The relatively recent reductions in Indian applied tariffs also give evidence to the potential gains which can be achieved through the removal of trade barriers. For example, Barbier's analysis, based on 1991 tariff rates on sawn timber, show trade creation totalling almost US$1 million on a sawn timber trade valued at only US$11 million. These gains have actually been realised prior to the Uruguay settlement.
Indonesia, as a developing country, made few immediately tangible concessions on forestry under the Uruguay Round settlement. The Round is, therefore, unlikely to substantially alter forestry trade with Indonesia. The essence of the Indonesian offer is a ceiling binding of 40 percent on solid wood products and paper items (with the exception of newsprint). This is generally higher than the current applied rate. Pulp products and newsprint are bound at 30 percent (their present applied rate). As noted earlier, the major gain from tariff binding is a reduction of market risk. Indonesia was not included in Barbier's analysis.
Indonesia has a large, and rapidly developing forestry sector. There will be very limited opportunities to expand sales of forestry products into Indonesia in the foreseeable future. As Table 1 shows, 63 percent of Indonesia's 1994 forestry exports by value were in wood pulp. Rapid expansion of Indonesia's pulp and paper sector, including the 1995 start-up of the Riau Andalan BHKP mill, the world's largest single line pulp mill, suggests opportunities to export forestry products to Indonesia are diminishing rather than expanding.
Japan, the world's second largest single-country forest products importer and the dominant tariff-levying destination in the Asia-Pacific region was a focal target for forest products tariff reductions in the Uruguay Round negotiations. Japan resisted considerable pressure in forest products negotiations to accede to a zero-for-zero agreement on solid-wood products which would have meant substantive additional liberalisation of global trade in wood products. The non-participation of such an important player in the forest products trade may have led to most other countries withdrawing their support for zero-for-zero.
Japan's own solid wood tariff offer comprised a reduction in forestry tariffs by an average of 33 percent on a trade weighted basis. That is, Japan reduced its tariffs by one-third on the value of imports but retained discretion as to where the cuts were applied. Japan was also a signatory to the zero-for-zero agreement on pulp and paper products.
The importance of the Japanese market to a number of major forestry producing countries has placed the Japanese schedule of tariffs under considerable scrutiny. The structure of Japan's sawn timber tariff with variable rates dependent on timber species has been heavily criticised by several producers of Spruce-Pine-Fir (SPF) timber including Canada and New Zealand. The tariff is structured so that major tropical hardwood species and softwood species, with the exception of Larch and SPF timbers, do not attract tariffs. A narrow range of species held to be in direct competition with Japanese-grown species attract a tariff. In the late-1980's Canada brought an unsuccessful case against these tariffs to a GATT Panel.
Japan's Uruguay Round agreement on sawn timber reduces tariffs on planed and sanded SPF timber from 8 percent to 4.8 percent and from 10 percent to 6 percent for planed and sanded Larch timber. Rough sawn timber rates remain constant but are bound. This will have the impact of making exporters of these species more competitive in the export of more highly processed sawn timber relative to other producers. Countries which should benefit include Russia, Canada and New Zealand.
Japan's panel products reductions were quite substantive in terms of the proportionate elimination. The tariff applied to fibreboard was reduced from 5.2 percent for high density fibreboard and 3.5 percent for medium density fibreboard, to 2.6 percent for each. The applied tariff on particleboard was reduced from 8 percent to 6 percent, while tariffs on plywood and laminated veneer lumber were reduced from 10-15 percent to 8.5-10 percent for non-coniferous plywood; and 10 percent to 6 percent for coniferous plywood. Japan also made modest reductions to tariffs levied on processed solid wood items including mouldings, joinery and furniture.
Japan has applied a temporary zero tariff to all imports of woodpulp and newsprint since the late-1980's. However, agreement to sign the pulp and paper zero-for-zero meant some significant tariff reductions on other paper and paperboard products for which some tariff lines exceeded 4 percent.
Barbier's analysis is limited to assessing the impact of tariff changes on sawn timber and panel products. Trade creation effects for these products are estimated to be between US$74-US$112 million while trade diversion impacts amount to approximately US$16 million.
The Republic of Korea's status as the third largest forest products importer in the Asia-Pacific region confers considerable importance to its Uruguay Round tariff offer, and programme of tariff reductions. In terms of solid wood products Korea has been implementing a steady programme of tariff reductions which has resulted in single-figure tariffs at a largely uniform level (8 percent in 1993 reducing to 5 percent by 1996). Korea's Uruguay round offer bound solid wood tariffs at levels slightly higher than existing applied rates and was, consequently, of little immediate benefit to exporters to Korea.
Korea is, however, a participant in the pulp and paper zero-for-zero agreement and will consequently eliminate its pulp and paper tariffs by 2004 under the terms of this agreement. Prior to the Uruguay round settlement Korea applied a 2 percent tariff to woodpulp and an 8 percent tariff to paper.
Barbier's analysis shows trade creation effects of almost US$10 million arising from Korea's Uruguay Round tariff commitments on woodpulp and newsprint compared with 1991 levels.
Forest products imports by Malaysia are dominated by paper products. As Table 1 shows, in 1994 paper and paperboard comprised 83 percent of Malaysia's forest products imports. There is seemingly little potential to expand exports into Malaysia outside of this sphere.
Malaysia, like Indonesia, is a major producer of hardwood forest products. Malaysia's Uruguay Round offer varies considerably across forest products with most products being bound at the pre-Uruguay applied rate or slightly below. For solid wood products most tariffs are bound at 20 percent, with a notable exception being plywood which is bound at 35 percent. This is doubtless deemed necessary to protect Malaysian industry from an influx of Indonesian products. The impact of ASEAN-generated liberalisation on this sector could be significant if Malaysia is willing to expose its plywood manufacturers to a greater degree of competition. Wood pulp tariffs are bound at 5 percent while paper products are bound at a variety of rates ranging from zero to 25 percent.
The Uruguay Round concessions probably confer few realisable benefits to foreign exporters to Malaysia and are unlikely to provide many new opportunities. However, the Malaysian offer does provide tangible tariff reductions on a number of products which will assist market efficiency in Malaysia. Barbier estimates the trade creation effects of Malaysia's Uruguay Round commitments to be less than US$1 million.
New Zealand presently harvests 15 million cubic metres of wood each year. Over the next 15 years the annual harvest is expected to increase to almost 30 million cubic metres per annum. A large proportion of this additional production will need to be exported. Consequently the Uruguay Round Settlement, and its trade liberalisation implications, are of considerable importance to New Zealand processors. The Settlement provides opportunities to increase the range and value of New Zealand exports by improving New Zealand's international competitiveness and ensuring continued market access.
New Zealand's tariff offer on wood products will have a negligible effect for overseas suppliers to the New Zealand market. New Zealand's on-going programme of tariff reform means that for all Chapter 44 (wood products) items all of the reductions agreed to under the Settlement will be achieved by 1996, in line with scheduled reductions. Most of the rates in Chapter 44 are already below their bound offer levels.
For pulp and paper items New Zealand is committed to halving its 1986 applied rates by 2000 and eliminating all pulp and paper tariffs by 2004. The on-going reduction programme has already achieved the tariff halving. However, complete elimination will require further reductions in the period 2000-2004. These reductions will have no impact on pulp or newsprint production where the present tariffs are all effectively zero (hardwood pulp enters New Zealand duty free under a specific concession although formally the tariff is listed at 12 percent). However, there may be a need for some rationalisations in other paper and paperboard production where the tariff reductions will be substantive, with pre-Uruguay tariffs as high as 16 percent on some paper products.
The bulk of New Zealand's paper and paperboard production is sold competitively on export markets and consequently new opportunities for overseas suppliers are likely to be limited to a narrow range of speciality paper products, particularly fine papers for printing and writing which are presently produced in very limited quantities in New Zealand.
Barbier's analysis estimates trade creation effects from New Zealand's tariff reductions to be well below US$1 million.
Papua New Guinea was not a Uruguay Round participant and consequently its tariffs are unchanged as a result of the round. The major impacts for Papua New Guinea as a small supplier of processed products are likely to be detrimental, with its GSP advantages diminished in some markets. Given the current dominance of log exporting from Papua New Guinea, these impacts are likely to be minimal except to reduce at the margins the attractiveness of Papua New Guinea as a site for the establishment of processing facilities.
Prior to the Uruguay settlement tariffs in the Philippines were at relatively high levels. Sawn wood, veneer, moulded wood, and paper products had a 20 percent tariff applied in 1994, particleboard and fibreboard had 30 percent tariffs and plywood a 50 percent tariff. In common, again, with most developing countries the Philippines has bound tariffs at levels slightly above applied rates. However, the Philippines offer is less comprehensive than many of the other Asia-Pacific countries with no offer made on panel products, wooden furniture, or a range of paper products. The effects of the Uruguay Round on the Philippines were not examined by Barbier.
In the post-Uruguay period the Philippines has shown considerable willingness to liberalise tariffs with a number of Presidential Executive Orders detailing significant tariff reductions. While the Uruguay Round settlement will change little as far as exporters to the Philippines are concerned, these later tariff reductions may well provide substantive gains in the market.
Prior to the Uruguay Round settlement Singapore applied no tariffs on forestry products with the exception of furniture products which attract a 5 percent levy. Under the Uruguay Round Settlement Singapore has agreed to zero-for zero binding on pulp and paper products and has imposed a ceiling binding of 10 percent on all solid wood products except medium and high density fibreboard which will be bound at zero. However, Singapore is expected to continue to apply zero tariffs on all products and consequently there will be no direct trade diversion as a result of Singaporean tariff offers. Other countries tariff reductions, which make their own markets more attractive, could potentially divert small quantities of trade away from Singapore.
Opportunities for expansion of the Singaporean market appear limited. Singapore imports moderate quantities of logs, sawn timber and panel products but re-exports similar volumes, indicating solid wood consumption on the island is extremely modest. Hardwood imports (mainly from Malaysia) dominate. Apparent consumption of paper and paperboard in Singapore is around 3.5 million tonnes per annum while Singaporean imports of wood pulp are virtually non-existent. However, the Uruguay Round settlement is unlikely to create many new opportunities in Singaporean markets.
The magnitude of Thailand's Uruguay round commitments appear to be quite substantial. The most recent available Thai tariff schedule (1989) indicates substantial tariffs being applied to a range of products. Panel products were incurring rates of duty ranging from 40-70 percent, wood pulp had a 10 percent tariff levied on it, and tariffs on paper products ranged from 30-50 percent. Sawn timber tariffs ranged from 20-40 percent while manufactured wooden furniture had an 80 percent tariff applied. Although the best available information suggests it is likely Thailand had already commenced a programme of tariff reform between 1989 and 1994, nonetheless the Uruguay offer is a substantive improvement on the recent past.
Under the Uruguay settlement Thailand has bound sawn timber and veneer tariffs at 10 percent, panel products and wooden furniture tariffs at 20 percent, and paper tariffs at between 30-50 percent. Thailand is also listed in reports as expressing interest in participating in a solid wood products zero-for-zero agreement.
Barbier estimates the trade creation effects of the Uruguay Round forestry tariff reductions in Thailand to be valued at US$6.2 million.
The United States comprises the world's largest single country importer of forestry products and changes to its terms of trade are consequently of major interest to all exporting countries. Prior to the Uruguay Round the United States had very low tariffs on most forestry products so there existed generally only minor scope for improvement. The United States levied no tariff on logs, sawn timber, woodpulp, newsprint and a number of other paper types. Small tariffs were applied to moulded timber (0 - 4.5 percent), particleboard (4 percent), fibreboard (3 percent), other paper products (to 5.3 percent), and wooden furniture (2.5-6.6 percent). All of these tariffs were eliminated under the Uruguay Round settlement. The United States was also a major proponent of both the solid wood and pulp and paper zero-for-zero proposals.
The United States most notably retains tariff protection on plywood and laminated wood which for most types produced in Asia-Pacific the tariff is bound at the pre-Uruguay applied rate of 8 percent, and on a range of products grouped as builders' joinery and carpentry, with a maximum tariff of 4.8 percent.
The very modest US tariffs on wood products means trade creation effects resulting from their removal or reduction are relatively small. Barbier estimates trade creation effects to be valued at between US$24 million and US$49 million with very minor (less than US$1 million) trade diversion effects. A significant proportion (based on the relative volume of trade with Canada and Mexico) of the trade creation estimated in Barbier's analysis would already have been realised from the signing of NAFTA.
Forestry products imports by the countries of the European Union in 1994 totalled almost US$50 billion. Although much of the trade is between countries of the EU, the region still comprises 41 percent of global forestry imports and changes to its terms of trade are similarly important to those of the United States for exporting countries.
European Union forestry tariffs were at moderate levels prior to the Uruguay Round settlement. Tariffs on logs, rough sawn timber and wood pulp were at zero. Moderate tariffs were applied to planed (4 percent) and sanded (4.9 percent) sawn timber, moulded wood (3 percent), veneer (3-6 percent, other panel products (10 percent), newsprint (4.9 percent) and paper products (0-9 percent). The European Union was a party to the pulp and paper zero-for-zero agreement and also eliminated tariffs on sawn timber and moulded wood. Other panel tariffs were reduced to 7 percent and veneer to 2 - 4 percent.
The size of the European market and the extent of tariff reductions means there are considerable trade creation effects associated with tariff reductions. Barbier's methodology, however, is inclusive of intra-European Union trade and consequently includes trade creation and diversion effects already captured with the formation of the European Union.