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Thanks to the ever-increasing availability of information through technological connectivity, the globalization of industry was all but guaranteed. Still, as countries advance their political and economic power at varying speeds, some nations become particularly vulnerable to malicious international trade practices such as dumping and subsidies. To counteract these unfair practices, oftentimes, temporary trade barriers, otherwise known as TTBs, are employed. However, when it comes to the factors that influence the implementation of TTBs in the global forest products industry and how those barriers impact the domestic industry, there was, until recently, a lack of information.
Dr. Changyou "Edwin" Sun, professor of forest economics, began parsing through the decades' worth of international trade and intervention data compiled by the World Bank Database to understand the trends and address the disparity in information.
"This study measures the extent, pattern, and degree of temporary trade barriers that are being implemented in the forest products industry around the globe. To my knowledge, no one has documented TTBs on forest products at this scale before," Sun said.
Once a mass of relative trade data was gathered, the researchers employed two statistical models to analyze the underlying patterns. The first model, known as a two-step sample selection model, assessed the correlation between TTBs in developed versus developing countries, while the second model, known as a probit model, honed in more specifically on factors including industry employment, forest coverage rate, inflation, and imports/exports surrounding paper and non-paper forest products.
Among developing countries, the use of TTBs declined as imports increased, forest coverage rate expanded, and the inflation rate improved. In developed countries, the same was mostly true, though developed countries proved more likely to increase TTBs to protect the domestic forest products industry as exports increased. Despite these commonalities, the analysis revealed many trends and complexities surrounding temporary trade barriers, making it difficult to cite a single, dominant factor as to why TTBs are enforced.
"What we can learn from this study is that global competition in the forest products industry is complicated and that countries and individual corporations will implement whatever solutions are available to them when they have a problem, even if it means temporarily banning trade with individuals. Even in Mississippi, landowners and manufacturers need to understand the global competition. They're not untouched by it," Sun said.
Alongside Sun, the research team included Dr. Xufang Zhang, a 2018 MSU Ph.D. graduate who conducted this study as part of her dissertation and now works at Texas A&M Forest Service as a forest economist. Zhang played a crucial role in both data collection and dissemination of the research and shared how the implications of this study highlight the potential misuse of TTBs.
"Countries with a large capacity in the forest products industry, such as high employment or a high GDP per capita for forest products, may be more inclined to utilize TTBs to protect their domestic forest product industry. Thus, domestic firms may be more concerned with proving unfair trade actions of forest exporters rather than improving their own efficiency, which would create economic tension not only globally but domestically as well," Zhang said.
With the potential tensions that could arise from the misuse of TTBs, research that strives to understand both the factors that encourage their adoption and the ramifications of their adoption is more important than ever.
"For those of us directly invested in our domestic forest products industry, this research provides insights about the patterns that influence the participation and demand for trade barriers. Having a deep understanding of these patterns is one of the best ways for our forest products firms to stay both prosperous and ethical, especially in this competitive global market," Zhang said.
This research was funded in part by the USDA Forest Service, Pacific Northwest Research Station, and Southern Research Station.
