The subsequent sections introduce the historical developments of mostly European wood-related industries, as well as changes of consumer attitudes over time. The discussion draws from the forest transition model (strongly associated with work by Mather and Needle (Mather, 1992, 2001; Mather &
53 Instead, industry experts believe that the demand for the certification/labelling of tropical logs and wood products, including the verification of origin, has largely to be driven by consumers in the North. For example the American Forest and Paper Associations (2004, p. 139, emphasis added) notes, “In China, there are exactly two very small forest properties that have been certified, and only 66 companies have chain-of- custody from FSC for producing products (all for export, of course)". This topic will shortly be revisited in Chapter 9 of this thesis.
Needle, 1998, 1999), as well as Rudel (Rudel, 1998; Rudel et al., 2005), which describes the changing patterns of wood utilisation and forest resource exploitation. In more detail, "The phases are differentiated by the nature and diversity of goods and services sought from the forest, the importance given to wood production as a management goal and the legitimacy given by the public to differing approaches to forest management” (Bazett, 2000, p. 1). Additionally, other important changes in the global industry are highlighted that shed further light on the structural changes of European wood processing industries.
4.3.1 THE FOREST TRANSITION MODEL
During the pre-industrial phase of economic development in the North forest areas were predominantly used for grazing, the collection of fodder, fuelwood and non-wood forest products, as well as for timber extraction. Put differently, until some time in the 18th century, forests were a hybrid of agricultural as well as timber production (Victor & Ausubel; Williams, 2000). During the following industrial phase, trees were ‘mined’ until depletion in most parts of the North through an expansion of the extensive margin (Bazett, 2000; Hyde & Sedjo, 1993; Mather 1992). Given the economic value of timber and the increasing scarcity of forestland, forests were increasingly geared towards the specific production of timber over the ensuing years. This change was accompanied by the emergence of scientific research and resulted in the application of a sustained-yield management system of forests. The new forest management system accordingly required new forms of ownership, i.e. more and more forest areas were privately owned enclosures, thereby replacing communal forests of the past (Humphreys, 2006; Mather, 2001).
Nonetheless, timber shortages persisted in Europe and later in its ‘newly depleted’ outposts in North America (Bazett, 2000; Hyde & Sedjo, 1993). Instead, colonies in Africa and Asia were drawn on to fill the domestic wood gaps, i.e. colonies were often treated as so-called resource taps (Jorgenson, 2008). Much of the tropical deforestation of the late 19th and early 20th century can thus be attributed to export-directed logging activities. It also seems that the ‘modus operandi’ of the forestry industry had been adopted in tropical countries, where the overwhelming majority of logging took place through an expansion of the extensive margin. Additionally, property right regimes had been ‘exported’ to the former colonies, whereby forests increasingly came under state authority for its primary objective of timber extraction, which consecutively led to similar changes in ownership as documented for Europe,
i.e. a strong reduction of common property systems (Humphreys, 2006; Keal, 2003; White & Martin, 2002).
As of the 1950s, the forest transition towards the post-industrial phase manifested itself through changes in the perceptions of the purpose of forests, corresponding changes in forest management systems and an expansion of forest area cover mainly in the North (Mather & Needle, 2000; Westoby, 1987). Most importantly, societal perspective on the functions of forests began to change, where an increasing number of affluent people living in cities exerted pressure on foresters to cater to their needs for recreation and regeneration, and through pressures from environmental advocacy groups denouncing the loss of biodiversity (Bazett, 2000; Mather & Needle, 1999, 2000; Nilsson, 1996). At the same time, urban migration created a labour scarcity in rural areas that, combined with technology- induced yield increases in agriculture and forestry, led to an abandoning of land thus made available for forest expansion (Ewers, 2006; Kauppi et al., 2006; Rudel et al., 2005).
One can thus observe a clear shift away from the previous ‘timber primacy’ towards a better understanding and recognition of the forests’ multiple functions in the North.Forest functions are i) forest services such as biodiversity and watershed protection, carbon sequestration, and recreational spaces, as well as ii) non-wood forest products like food, fodder, botanical medicines and building materials (FAO, 2006b; UNCSD, 1998). The new ideas of what forests are ought to be, as well as how products and services are supposed to be delivered, are also reflected in policies and management practices. With respect to the latter, there is a trend away from old growth sustainable-yield exploitation towards sustainable forest management54 (SFM) of (planted) forest ecosystems (Bazett, 2000; Sohngen et al., 1997). Furthermore, researchers observed changes in the associated values and attitudes of people towards forests, as well as the emergence of a transparent and consultative administrative system, for example, an effective enforcement of forest law and community participation (Kauppi et al., 2006; Mather & Needle, 2000). In short, the forest transition model is based on the observed return of the forests in the North, which is attributed to economic development,
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A universally accepted definition of SFM does not exist. The ITTO defines it as "the process of managing forest to achieve one or more clearly specified objectives of management with regard to the production of a continuous flow of desired forest products and services without undue reduction of its inherent values and future productivity and without undue undesirable effects on the physical and social environment"; whereas the FAO states that it is "the stewardship and use of forests and forest lands in a way, and at a rate, that maintains their biodiversity, productivity, regeneration capacity, vitality and their potential to fulfil, now and in the future, relevant ecological, economic and social functions, at local, national, and global levels, and that does not cause damage to other ecosystems" (as cited in UNEP, 2003, p. 3; see also World Bank, 2004).
industrialisation and urbanisation, complemented by democratic political systems and changes in recognition of non-monetary values of forests.
4.3.2 SELECTED GLOBAL INDUSTRY CHARACTERISTICS
Intensively managed plantations, or so-called wood fibre farms, are the single dominant innovation of the Northern forest industry after the introduction of chain saws at the end of World War II (Sedjo, 1997). Driven by financial constraints (high production and environmental costs, rising tropical log prices and price competition) the new plantations increasingly resemble systems of agricultural production, i.e. control of species and location, tree growth, tree and fibre quality, as well as the strategic application of technological and biological innovations (Bull, 1999; Carle & Holmgren, 2008; Sohngen et al., 1997). Whereas these innovations first occurred in the North, low-cost producers in tropical countries such as Brazil, Indonesia, Chile and Thailand are entering the market, too, albeit with a comparative advantage of shorter rotation cycles and higher yields than the North (Bazett, 2000; Bowyer et al., 2004).
Given the changing nature of wood products from second-growth and plantations, the industry is continually adjusting to smaller log diameter sizes and changing fibre quality (Bazett, 2000; Sedjo, 1997). At the same time, upgrading of wood products and processing methods has allowed the inclusion of a broader range of tree species into industrial production. This also includes the possibility to substitute (tropical) non-coniferous for coniferous wood products, hence allowing a reduction of tropical log consumption. Additionally, new products such as engineered laminated veneer lumber (LVL) and I-beams can now be produced using fewer inputs, including what would have been residuals in the past (Victor & Ausubel, 2000). Lastly, advances in the degree of recycling have eased some of the previous supply pressures (Bazett, 2000; Sedjo, 1997).
In contrast to these technical innovations in the North, the low capital requirements needed for the extraction and conversion of tropical logs often into sawnwood allow many small-scale sawmills, albeit still relatively inefficient in its production, to exist in many developing countries (Section 4.1). Here, the tropical forestry industry is relatively fragmented, often located near forests and serving domestic markets (Bazett, 2000) thus failing to achieve economies of scale and to utilise the resource base in a more productive way as demonstrated for most Northern industries and some (plantation-based)
industries in selected developing countries. Yet, partly because of the existence of scale economies, there is some concentration of transnational companies in the Northern non-tropical primary processing industry, and to a higher degree in the capital-intensive non-tropical secondary processing sectors (especially in pulp and paper). According to a publication by WWF (n.d.-a) the top 50 international processors may have consumed up to 43% of the global annual roundwood harvest.
Transnational companies often have a long history of logging and processing activities also in the tropical South, for instance, European companies in Africa or US companies in the Philippines (Sizer & Plouvier, 2000). The extractive activities have often had negative environmental and socio-economic consequences due to the short-term profit orientation, as well as lack of governance and weak enforcement capacities of the host country (Dudley, 1995; Dudley et al., 1995; Forests Monitor, 2001). In fact, both empirical studies and field reports argue that international companies may operate in developing countries exactly because of their weaker socio-economic and political situation. Jorgenson and Clark (2008) state that partly due to lax or absent environmental regulations foreign TNCs outsource labour and portions of their environmental costs associated with extraction and production activities to developing countries.
Since the late 1990s, the origin as well as to some degree the patterns of foreign capital is changing towards more frequent instances of ‘South-South’ investments. According to Sizer & Plouvier (2000), particularly Malaysian and Indonesian companies actively seek new investment opportunities in the extractive sector in all three tropical regions, i.e. countries like Papa New Guinea, Suriname, Cameroon and Gabon. These investments are usually driven by domestic/regional wood shortages but growing domestic processing industries with increasing log requirements. While the logging operations are often similar in its patterns to traditional investors, i.e. driven by resource needs and competitive pressures, the ‘Asian’ investors seem to be more mobile in their capital deployment (especially in Africa) and use relatively large numbers of imported labour. The new investors often are believed to ignore global industry trends towards sustainable forest management practices. Information on Chinese investors in tropical forest countries is mounting ranging from case studies in Papua New Guinea to several African countries (Böhringer et al., 2007; Canby et al., 2008; Greenpeace, 2005), thus suggesting a significant recent influx of Chinese businesses, i.e. ‘third-wave’ investments following Northern and Malaysian/Indonesian producers.