TRENDS IN TRADE BARRIERS

Although trade barriers are conventionally separated into tariff and non-tariff measures, this rather simple categorization often obscures a very broad array of individual measures that are potential trade barriers. Bourke (1988) provides a more comprehensive classification of trade measures that are relevant to the global forest products trade:

· Specific limitations on trade - quantitative restrictions, export restraints, health and sanitary regulations, licensing, embargoes, minimum price regulations, etc.

· Charges on imports - tariffs, variable levies, prior deposits, special duties on imports, internal taxes, etc.

· Standards - industrial standards, packaging, labelling and marking regulations, etc.

· Government interventions in trade - government procurement, stock trading, export subsidies or taxes, countervailing duties, trade diverting aid, etc.

· Customs and administrative entry procedures - customs valuation, customs classification, anti-dumping duties, consular and customs formalities and requirements, sample requirements, etc.

Such a range of trade measures is clearly diverse. Whether any implemented measure actually is a fully fledged trade barrier - i.e. whether it intentionally or unintentionally leads to discrimination against or restriction of trade - will depend on the circumstances in which the specific measure is employed. This will clearly vary from country to country as well as from product to product, which makes it extremely difficult to analyze and quantify the potential effects on trade of the use of such measures.

The GATT and Trade Barriers

Since it was enforced on 1 January 1948, the General Agreement on Tariffs and Trade (GATT) has been the principal international instrument for reducing trade barriers. The GATT has had two main functions: first, it is a multi-lateral trade agreement involving binding commitments by it signatories, and second, it serves as a forum for negotiation and consultation to overcome trade problems and reduce trade barriers. A guiding principle of the GATT has been to confer Most Favoured Nation (MFN) status on all signatories, whereby favourable trade treatment of one contracting party by another must be extended to all contracting parties. The general exceptions to this latter condition have been the establishment of custom unions and free trade areas (e.g. the European Economic Community, and more recently, the North American Free Trade Agreement), and the UNCTAD Generalized System of Preferences (GSP) scheme, which allows developing country exporters preferential access to certain developed country markets for certain products.

Revisions and extensions to GATT have been conducted through lengthy processes of international negotiation called "rounds". There have been seven such GATT rounds negotiated and agreed previous to the Uruguay Round. It is generally recognized that the cumulative impact of the successive post-war GATT agreements has been to reduce protectionism substantially and expand world trade.

However, as the post-war GATT negotiations have achieved increasing success in reducing the most visible of trade barriers - import tariffs - many countries have tended to shift increasingly to the use of non-tariff measures as barriers to trade, precisely because the latter are less visible, more varied and more easily implemented and altered than internationally formalized tariff schedules. Changes in the trade barriers facing forest products have also followed this general trend.

As a consequence, it has proven difficult to determine both the full extent of the barriers facing the global trade in forest products as well as the impacts on the trade of successive GATT round negotiations and other international agreements of the progress in reducing tariff barriers. Previous analyses have generally separated out a quantitative assessment of the trade effects of reductions in ad valorem tariffs in key import markets from a qualitative assessment of the trends in non-tariff barriers in these markets. The same approach is adopted out of necessity in this report. However, before assessing the likely implications of the Uruguay Round for the trade in forest products, it is important to examine the main trends in forest products tariff barriers leading up to the latest GATT agreement.

The Tokyo Round and Forest Products

The decline in tariff barriers to trade as a result of successive post-war GATT negotiations has also benefitted the global trade in forest products. However, the greatest progress in reducing tariff barriers has occurred since 1979 with the conclusion of the Tokyo Round of GATT negotiations.

Despite the overall tariff reductions implemented in the Tokyo Round, the agreement did not change the tendency for tariffs and the rates of protection in industrialized markets to escalate; that is, they remained lowest on unprocessed products and rose with increased processing. In the case of developing countries, post-Tokyo import tariff levels for wood products stayed relatively high, and were also subject to escalation. The degree of tariff escalation for forest products has been cited frequently by many developing country exporters as a rationale for explicit government intervention and subsidies for the promotion of value-added processing for export, in order that such higher valued forest products can "compete fairly" in developed country import markets.

Trends in Non-Tariff Barriers

While tariffs applied to global forest products trade may have been declining as a result of the Tokyo Round negotiations and during the lead up to the Uruguay Round, non-tariff measures have proliferated. Table 1 indicates the extent to which the general direction of movement in non-tariff trade barriers to forest products has been the opposite to the reductions in tariff barriers. Most alarming is that, although many non-tariff import barriers were generally static or declining in the 1979-85 period just after the Tokyo Round, since 1985 there has been a general increase in the use of such barriers. However, whether the recent trend of increasing non-tariff import measures has had a significant impact on the forest products trade has again proved difficult to determine. Some of the more important measures include:

· The use of tariff quota/ceiling system by the European Economic Community (EEC) and Japan. The EEC quantitative restrictions were applied to a wide range of forest products, including newsprint, fibre-building boards, plywood (separate ones for coniferous and non-coniferous), builder's woodwork and some furniture items. A number of quality controls and quantitative restrictions have been applied to plywood and veneer in Japan.

· EEC phytosanitary standards. Imports of all green coniferous softwood were prohibited to most EEC countries unless they were either kiln-dried at 56^o C or received a phytosanitary certificate.

· US countervailing duties on Canadian softwood lumber. In July 1992 the US International Trade Commission determined that Canadian softwood lumber was being subsidized through low stumpage prices for logs and export restrictions in British Columbia, prompting a countervailing duty of 4.61%.

As shown in Table 1, the application of export restrictions to forest products trade has been on the increase since the 1960s. This has involved mainly developing countries employing tropical log taxes and bans as an incentive to expand domestic processing and capture market share for value-added products. However, there have been some notable uses of such restrictions in developed countries as well, such as the Washington state log-export ban instigated in the United States (Barbier 1994). The significance of increasing export restrictions on the forest products trade will be discussed in more detail in a subsequent section.

Conclusion

Tariff barriers to forest products trade have continued to decline in recent years, particularly in the post-Tokyo Round era. The extent of the decline in tariffs differs with the market and product. In developed country markets tariff rates had fallen generally to very low levels even before the Uruguay Round schedules were agreed. However, tariff escalation has continued in most developed countries, with specific products such as wood-based panels, builders' joinery, coated and corrugated paper, kraft, and furniture generally receiving relatively higher rates.

Compared to developed country markets, tariff rates have consistently been higher in developing country markets. Although tariff escalation is a feature in most markets, some developing countries have preferred a high uniform rate to applied across all forest products.

One important impact of the decline in tariff rates for forest products in developed country markets is that the tariff differential between MFN and GSP rates has been reduced significantly. Most tariff reductions have led to a general decline in the MFN rate, while the GSP rate has been left largely unchanged. This suggests that exporters facing the full MFN rates may have gained more from falling forest products tariff rates than developing countries that previously benefitted from GSP and other preferential schemes. This effect is examined explicitly in the analysis of the effects on the forest products trade of the Uruguay Round tariff reductions in Section 4.

Table 1. Trends in the Incidence of Trade Barriers Affecting Forest Products

N.A. = little or no importance.

Source: Barbier et al. (1994), adapted from a subjective assessment by Bourke (1988 and 1992a) based on a review of available information. The assessment does not involve any weighting by the volume of trade.

In recent years the most common non-tariff measures appear to have been quantitative restrictions and/or quality controls that have been targeted at specific products, wood species and even individual exporters. However, a diverse range of non-tariff measures have been employed, and as indicated in Table 1, their use has been both prominent and increasing for some products in the period leading up to the conclusion of the Uruguay Round.