|Downloaded from the National Library for the Environment*|
Restricting Softwood Log Exports:
a. Chips include both hardwood and softwood, because the data do not distinguish between them prior to 1989. Hardwood chip exports have grown, to 64 percent of the volume of chip exports in 1992; the volume of softwood chip exports, however, has declined, at least since 1990.
b. Chip exports were converted from metric tons to cubic meters at an average of 2.4 cubic meters per metric ton, based on: David A. Hartmann, et al. Conversion Factors for the Pacific Northwest Forest Industry. Seattle: Univ. of Washington, Inst. of Forest Products, n.d. p. 47, 50.
SOURCE: U.S. Dept. of Agriculture, Foreign Agricultural Service. Wood Products grade and Foreign Markets: Annual Statistical Trade Issue. Circular Series, WP 1-93. Washington, DC: U.S. Govt. Print. Off., March 1993.
Table 2. Value of Major Softwood Product Exports
(in million dollars)
a. Chips include both hardwood and softwood, because the data do not distinguish between them prior to 1989. Hardwood chip exports have grown, to 58 percent of the value of chip exports in 1992; the value of softwood chip exports, however, has declined, at least since 1990.
SOURCE: U.S. Dept. of Agriculture, Foreign Agricultural Service. Wood Products Trade and Foreign Markets: Annual Statistical She Issue. Circular Series, WP 1-93. Washington, DC: U.S. Govt. Print. Off., March 1993.
2. Lumber Exports
Lumber is the second most important category of softwood exports. After fluctuating around 4 million cubic meters annually through 1986, softwood lumber exports rose to nearly 8 million cubic meters in 1989. The subsequent decline is probably due to weak economies around the Pacific Rim. As with log export values, rising lumber prices have kept the total value of softwood lumber exports relatively stable; average lumber export values have risen from $140 per cubic meter, from 1983 to 1985, to $222 per cubic meter in 1992.
As with logs, Japan is the largest export market for U.S. softwood lumber. However, Japan accounts for less than 40 percent of lumber exports, compared to 66 percent of the volume and 78 percent of the value of log exports. The European Community (EC), Mexico, and Canada are also significant markets for U.S. softwood lumber; the average value of lumber exports to the EC is the highest among these four markets, at $303 per cubic meter in 1992, compared to $191 for Canada, $210 for Japan, and $218 for Mexico. Douglas-fir lumber is exported to most of these markets, although hemlock lumber is also shipped to Japan, Southern pine lumber to the EC, and other pine lumber to Mexico.
Table 3. destination of major Softwood
(in million cubic meters and million dollars)
SOURCE: U.S. Dept. of Agriculture, Foreign Agricultural Service. Wood Products Trade and Foreign Markets: Annual Statistical lade Issue. Circular Aries, WP 1-93. Washington, DC: U.S. Govt. Print. Off., March 1993.
3. Plywood Exports
Plywood exports account for a relatively small fraction of the volume of softwood exports, but their high unit value makes them an important product for export. Plywood exports have risen substantially since the mid-1980s, due to declining tariffs and non-tariff barriers. However, average softwood plywood export values fell from an average of $265 per cubic meter (1982-1985) to $209 per cubic meter in 1989, before recovering to $239 per cubic meter in 1992.
The dominant market for softwood plywood exports is the EC, accounting for more than two-thirds of the volume and value exported in 1992. Mexico, Canada, and the nations around the Caribbean Sea are also important markets for U.S. softwood plywood exports. Except for Douglas-fir plywood exported to Canada, Southern pine and other pine plywood are the principal types of softwood plywood exported.
4. Wood Chip Exports
Exports of wood chips are an important and growing segment of U.S. wood trade. Chip exports have grown steadily since 1985, although data available since 1989 indicate that most of the growth has been in hardwood chip exports, and that softwood chip exports have declined, at least since 1990. The volume of chip exports has grown rapidly, and nearly equaled softwood log exports in 1992. However, chips have much lower average values, ranging from about $33 per cubic meter (1983-1987) to about $40 per cubic meter since 1989. Thus, the value of wood chip exports is not much greater than the value of softwood plywood exports.
The vast majority of softwood chip exports were destined for Japan in 1992. Japan accounted for 86 percent of the volume and 92 percent of the value of softwood chip exports, while Canada accounted for most of the remainder. Japan is also the primary market for hardwood chip exports, accounting for 78 percent of the volume and 85 percent of the value of hardwood chip exports. Canada is also a significant market for hardwood chip exports, but is not as large a market as Taiwan and Korea are. The average value of hardwood chip exports in 1992 ($35 per cubic meter) was lower than the average value of softwood chip exports ($45 per cubic meter).
Many interests, particularly in the Pacific Northwest, argue that exporting logs is the economic equivalent of exporting jobs. They typically suggest that domestic processing, either for domestic consumption or for products to export, would increase timber industry employment and generally benefit the economy. Others counter that the estimated benefits are greatly overstated and that such government interference in international trade is both unwarranted and ineffective in providing additional employment.
Estimating the employment that could result from domestic processing of exported logs is not easy. Average timber industry employment per million board feet (MMBF) of timber harvested varies from State to State and over time. From 1982-1991, timber industry employment averaged 6.4 (5.6-7.7) jobs per MMBF in Washington, 8.5 (7.3-10.4) jobs per MMBF in Oregon, and 14.7 (13.6-18.5) jobs per MMBF in California. This variation results from several factors. For example, exporting logs lowers the average, because log exports generate only logging and shipping jobs (no milling jobs); Washington thus has a lower average, because about two-thirds of log exports are from ports in the State of Washington. Another factor is secondary processing; more secondary processing resulting in a higher averaged The average in California is higher, because about 60 percent of its timber industry employment is in secondary processing sectors, compared to about 20 percent in Washington and Oregon. Thus, using an average industry employment figure would probably provide a poor estimate of the jobs that might have been created, even if all exported logs were processed domestically.
An alternative approach is to use an estimate of primary processing jobs to calculate the "job opportunity" cost of log exports. A 1991 Wilderness Society study reported an average of 1.16 logging jobs per MMBF, plus 4.7-5.1 mill jobs per MMBF. These data (5.9-6.3 total direct jobs per MMBF) are consistent with a recent study funded by the timber industry, which identified 6.1 direct timber jobs per MMBF of timber harvested. Thus, the maximum "job opportunity" cost is about 5 sawmill jobs per MMBF of logs exported.
Fewer jobs than suggested by this "job opportunity" cost would probably be created by terminating log exports. These jobs might all be created only if all exported logs were processed domestically and all the products then exported. If any of the products were used domestically, or if any of the log importers chose not to import the products, there would be some loss of shipping jobs; how many is unclear, because there are no published estimates of shipping jobs per MMBF of logs exported. Furthermore, if any of the landowners chose not to sell to domestic mills (i.e., to simply let the timber grow), there would also be some loss of jobs in the logging sector, although again, how many is unclear. It seems likely that domestic mills would be willing and able to process most of the logs currently exported, at least in the Pacific Northwest, since the decline in Federal timber harvests from 1988 peak production levels exceeds the current volume of log exports. Restrictions on log exports, therefore, amount to a potential tradeoff between more mill jobs and fewer logging and shipping jobs. Whether the additional mill jobs exceed the lost logging/shipping jobs depends on whether log importers would buy other wood products and on whether the landowners would sell to domestic processors.
1. Would Log Buyers Import Products?
The essential question is whether the importers of U.S. jogs, especially the Japanese, would shift from log imports to imports of U.S.-produced lumber and other products. Some shift would undoubtedly occur. Japan is already the largest market for U.S. softwood lumber exports, and few alternative softwood log suppliers exist. Russia is the only country with much potential to export logs, but (1) Japan finds the dominant Russian tree species (larch) generally undesirable; (2) Russia's port and internal transportation systems are inadequate to meet Japan's demand; (3) Russia has not proven to be a consistent supplier; and (4) Russia and Japan are still at odds over the ownership of the Kurile Islands. However, the traditional construction methods and internal distribution systems in Japan hinder the shift to increased imports of lumber and other products. It is unclear whether these problems are significant for shifting to U.S. lumber and other wood product exports to other log importers.
Japan might shift from importing U.S. logs to importing lumber and other products from other producers. Canada is the only country with sufficient wood product exporting capacity to substitute for U.S. log exports, but the United States is currently Canada's largest market, and Canada probably cannot expand production. Thus, increasing Canadian lumber exports to Japan would likely require decreasing Canadian lumber exports to the United States. Whether this shift -- Canadian lumber exports to Japan displacing U.S. log exports, and more U.S. wood processing for the domestic market -- would result in any net gains in domestic employment or in our balance of trade is unclear.
2. Would Landowners Sell Domestically?
Some landowners would probably sell their timber in the domestic market if foreign markets were unavailable. However, export prices are substantially higher than domestic timber prices. Precise price comparisons are not feasible, because of quality differences, but table 4 compares Forest Service sale values of Douglas-fir from western Washington and Oregon (which cannot be exported) with export values of Douglas-fir from ports in Washington and Oregon. The table clearly shows export values exceeding the average Forest Service sale value, although the difference and the percentage difference fluctuate widely. This comparison may be imprecise for measuring the price differential between the domestic and export markets, but strongly suggests that export prices continue to be substantially higher than domestic prices. The likely decline in landowner revenues if log exports were restricted could lead some landowners to not harvest their timber, depending on the growth rate of the timber, the landowners' needs for cash income, and the profitability of domestic sales. (The recent price rise for Forest Service timber suggests that domestic sales may be more profitable than they were in the mid-1980s.) The landowners might also choose to postpone their timber harvests, if they believed that the restrictions might be reversed or that they might receive some compensation for the loss of value due to the restrictions. Nonetheless, it seems likely that restrictions on log exports would increase domestic supply and depress log prices, thus costing landowners and benefitting mill owners.
Table 4. Average Values for Douglas-fir Timber
(in dollars per thousand board feet)
|USFS Salesa||Average Exportsb||Difference||Percent of
a. U.S. Forest Service timber sales of Douglas-fir from the
west side of Region 6 (i.e., west of the Cascade crest in
Washington and Oregon).
b. Average value of Douglas-fir exports from ports in Washington and Oregon.
c. First 6 months of 1992.
SOURCE: Debra D. Warren. Production, Prices, Employment, and Trade in Northwest Forest Industries, Second Quarter 1992. Resource Bulletin PNW-RB-194. (quarterly series.) Portland, OR: U.S. Dept. of Agriculture, Forest Service, 1992.
As noted above, the export of timber from Federal and State-owned lands is extensively regulated. Some have suggested that similar regulation could be extended to timber cut from private lands. Two basic types of restrictions on log exports have either been imposed or are under discussion: (1) an export tax, tariff, or duty, and (2) a quantitative restriction, either a quota or a ban. Each of these approaches, however, raises a variety of constitutional or international law issues.
1. Export Regulation and the Constitution
a. Export Bans or Quotas and the Constitution
Article I, Section 8, cl. XX of the Constitution provides that Congress shall have the power to regulate commerce with foreign nations and among the States. The power of Congress to prohibit the flow of commerce between the United States and a foreign political entity arises from the Commerce Clause of the Constitution, and has been described by the courts as "plenary" or absolute. Consequently, Congress would appear to have the power to regulate, restrict, or ban log exports, even from private lands.
b. Export Taxes and the Constitution
Congress's power to impose export duties is addressed separately from the Commerce Clause. The Constitution specifically prohibits Congress from the direct imposition of export duties on goods exported from individual States. States, however, are allowed to impose export duties that Congress has authorized, provided that all the proceeds from such duties are remitted to the U.S. Treasury. Thus, there is clear textual support for the proposition that the Federal Government can authorize States to impose export duties on exports from that State.
A question arises, however, as to what steps the Federal Government can take to encourage a State to impose export taxes. Although the Federal Government cannot generally require States to pass specific legislation, the Federal Government has in the past conditioned a State's participation in a Federal program upon the State undertaking a particular action related to the purposes of the program. With State export taxes on log exports, however, Congress is seeking to achieve a result which it is specifically prohibited from imposing directly. The Supreme Court has noted that Congress cannot avoid a constitutional restriction, such as the prohibition on export taxes, by passing legislation that indirectly achieves the same result. Consequently, a Court might look closely at an attempt to link the imposition of an export tax with receiving the benefit or avoiding the burden of a Federal program; for instance, a proposal to restrict the export of timber from a State unless export taxes were imposed by that State might be deemed an indirect imposition of a Federal export tax.
An argument could be made, however, that the restriction on Congress's ability to tax exports was imposed to prevent Congress from inhibiting the trade of one region at the expense of another; evidence of this is that the Constitution does allow States to so burden themselves with congressional approval. Consequently, a legislative scheme that did not discriminate among States, but that instead offered participating States the opportunity to recoup some of the export taxes which they imposed, might pass constitutional muster. Although all funds from State export duties must be deposited in the U.S. Treasury, it appears that such monies could be redirected to the States, by establishing a trust fund in Treasury, which could then be distributed back to a State either through recurring or permanent appropriations.
2. Export Regulation and the GATT
As with most international economic compacts, the General Agreement on Tariffs and Trade (GATT) is not a treaty ratified by the Senate, but an executive agreement entered into by the President, as authorized by Congress. As the President has the apparent power to enter this agreement, the States might be prohibited by the Supremacy Clause of the Constitution from unilaterally violating the provisions of GATT. Congress, however, does appear to have the constitutional authority to impose legislative restrictions on exports that would supersede the GATT, and could theoretically authorize a State to do so. As any such export regulations might be challenged under the GATT, however, it is important to determine what export regulations the GATT forbids and which it allows.
a. Export Bans or Quotas and the GATT
Article XI of the GATT provides that no contracting party may impose an export ban or an export quota on products exported from one contracting party to another. Article XX, however, provides a series of exceptions from the provisions of the GATT. These exceptions, which may not be used to discriminate between contracting parties or to disguise restrictions on international trade, include two measures of possible application to U.S. log exports: 1) measures "relating to conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption" (the conservation exception), and 2) measures "essential to the acquisition or distribution of products in general or local short supply; Provided, that any such measures shall be consistent with the principle that all contracting parties are entitled to an equitable share of the international supply of such products, and that any such measures, which are inconsistent with the other provisions of this Agreement shall be discontinued as soon as the conditions giving rise to them have ceased to exist . . . (italics in original)" (the short supply exception).
Various arguments have been made that these exceptions would apply to the export bans on unprocessed logs from Federal and State lands, based on the economic difficulties of local mills to obtain sufficient domestic timber supply. However, for a variety of reasons, neither of these two GATT exceptions appear to apply to the proposed log bans, unless timber projections were to indicate that the national or local timber supply was in immediate or long-term danger of being depleted. As the above-cited exceptions appear to be intended for application where resource reserves are in actual decline, it would appear to be necessary to establish this factual basis in order to invoke the exception. A further difficulty with the use of these exceptions is that the primary purpose of such a ban apparently cannot be merely to prevent price disruption within a market which prevents domestic manufacturers from obtaining resources.
i. Article XX(g) -- The Conservation Exception
To show that a timber export ban qualifies for the "conservation" exception of GATT, the United States would apparently have to establish that timber is an "exhaustible" natural resource, and that measures restricting domestic production and consumption of timber have been or will be established. Under a recent GATT ruling, it would also appear that the United States would have to show that the legislation did not merely "relate to" conservation measures, but rather was "primarily" aimed at the conservation of an exhaustible natural resource.
In an opinion adopted in 1988, a GATT Panel requested by the United States ruled against Canada with respect to Canadian restrictions on the export of unprocessed fish. The Canadian government admitted that the export regulations violated Article XI, but argued that the conservation exception applied.[4l] Canada asserted that the export controls were an integral and long-standing component of Canada's overall West Coast fisheries conservation and management regime and thus were permitted under the conservation exception of Article XX(g) 
The Panel agreed with both parties that salmon and herring stocks were an "exhaustible natural resource". However, the Panel rejected Canada's argument that to qualify for an exemption, the measures need only serve some environmental purpose, holding instead that a measure must be primarilyaimed at the conservation of an exhaustible natural resource. In addition, the Panel held that such measures would only be held to be imposed "in conjunction with" domestic restrictions on production or consumption, as required by the exception, if the measures were primarily aimed at rendering domestic restrictions effective. Thus, it would appear that export controls must supplement domestic conservation controls.
Based on this GATT Panel decision, it would appear that an export ban on U.S. logs would be difficult to justify based on the conservation exception. To qualify for this exception, the ban cannot be related to job protection, but must have a "primary" purpose of conserving timber. As the conservation purpose could be achieved by not allowing the trees to be cut, the export ban would not appear to be necessary to the conservation of timber. Further, it is not clear what, if any, domestic restrictions on timber use the export ban was intended to supplement. It is not even clear that domestic processing of timber would be restricted; rather, the apparent intent of the export ban would be to increase the amount of timber processed domestically. Consequently, there does not appear to be a strong argument that the conservation exception would apply.
ii. Article XX(j). -- The Short Supply Exception
Although the term "short supply" is used in various international and domestic contexts, there does not appear to be an agreed-upon meaning as to what level of scarcity, based on what criteria, constitutes a "short supply". Further, there does not appear to be a significant amount of materials, either in the form of GATT Panel decisions or negotiating records, which define what would constitute a "short supply" under Article XX(j) of the GATT.
There are indications, however, as to what type of export controls were rejected during the GATT negotiations as not qualifying for the short supply exemption. For instance, one delegation suggested that restrictions on exports should be permissible for safeguarding living standards, facilitating industrial development, and stabilizing domestic prices so as to achieve balance in a party's economic development. However, after discussion of this proposal by a GATT preparatory committee, it was agreed that these concerns should be addressed by a chapter relating to restrictive business practices, and not the short supply provision. Consequently, it appears that safeguarding living standards, facilitating industrial development, and stabilizing domestic prices are not permissible goals under the short supply exception. To the extent that the export controls are used as means of stabilizing domestic prices, they appear not to qualify for the short-supply exception. Only if an export control was "essential" to cope with an actual "short supply" of timber would this exception be available.
Thus, the application of Article XX(j) to a timber export ban would appear to require that the United States have a factual predicate that the resources are inadequate to meet U.S. timber consumption needs. It does not appear that higher timber prices would be the functional equivalent of a timber shortage; for instance, an export ban on timber intended to allow domestic mills access to lower-cost timber would appear to fall outside of the short-supply exception. It would also appear that the short supply exception requires that the export prohibition be made in response to a temporary emergency situation, and that there was an actual shortage of the materials which were being affected by the ban. As noted previously, it would be necessary to establish that the current timber projections indicated that the United States or a locality is in immediate or long-term danger of timber depletion. Absent the establishment of the these facts, it would appear that the short supply exemption of Article XX(j) could not be invoked under current conditions.
b. Export Taxes and the GATT
Although the GATT contains provisions which could possibly be used as a basis to negotiate fixing or eliminating export duties, this avenue has not yet been exploited by the signatory countries. During a recent round of GATT negotiations, an agreement was concluded regarding export restrictions and charges. This understanding, however, merely concluded that there was a need to reassess the relevant GATT provisions regarding exports. While the use of export taxes for discriminatory purposes is restricted, an even-handed export tax would not appear to be prohibited. Thus, if a federally-sanctioned State duty was imposed on the export of unprocessed logs, and the tax applied to exports going to all foreign countries, it appears to not violate the GATT.
No programs are specifically targeted at promoting log exports. However, general export assistance programs and tax expenditures to encourage exports may assist companies and landowners that export logs. No quantitative data exist on the use of these programs by log exporters or on the amount of assistance provided, and thus it is unclear whether these programs are significant for log exports.
1. Export Assistance Programs
The principal agricultural export promotion programs available to wood products are: 1) export credit guarantee programs; 2) P.L. 480; and 3) the Market Promotion Program (the successor to the Targeted Export Assistance Program). The Export Enhancement Program (EEP) only became available for wood products when it was expanded beyond the use of Government-owned agricultural surpluses in November 1991 to permit cash payments; however, it may be of minor assistance for log exports, because it targets markets where U.S. exports have lost market share to highly subsidized competition, which is not a problem for U.S. log exports. In addition, U.S.D.A.'s Foreign Agricultural Service maintains a cooperator program, where cooperators (usually trade or industry groups) can receive technical and financial assistance for developing exports. However, because of its strong technical component, the program is probably more useful to exporters of processed wood products than it is to log exporters.
2. Export Tax Expenditures
Tax expenditures that may assist log exporters are less easy to discern. Four specific tax expenditures appear to benefit log exporters: 1) Foreign Sales Corporations (FSCs), that may exclude some export revenues from domestic taxable income; 2) Domestic International Sales Corporations (DISCs), that have lower taxes for qualified exports; 3) the title-passage rule, that defines the location of income from personal property sales for tax purposes; and 4) the deferral of foreign base company sales income, that raises taxes for foreign buyers of personal property. Other tax expenditures that assist log exporters may exist, but these tax expenditures (especially the FSC and title-passage rule) appear to be the principal ones of value to log exporters.
Various legislation regulating or restricting log exports have been proposed or passed in the past or in the current Congress. These include: (1) amending the 1990 Forest Resource Conservation and Shortage Relief Act; (2) preventing the use of export tax expenditures for log exports; (3) granting tax incentives for domestic timber processing; (4) imposing or authorizing quantitative restrictions; and (5) authorizing States to impose export taxes.
A portion of the Forest Resources Conservation and Shortage Relief Act was held unconstitutional by the United States Court of Appeals for the Ninth Circuit in Board of Natural Resources of Washington v. Brown. The Act contained two provisions which directed the States to administer certain aspects of the timber export program. The Court held that, under the Tenth Amendment, Congress could not require a State to administer such a program. The Court did not, however, preclude States from being authorized by the Federal Government to administer a Federal export ban program, as long as such State regulations were not mandated.
As the Court refused to stay its ruling to allow the case to be appealed, Congress acted quickly. Companion bills -- H.R. 2343 and S. 1084 -- were introduced to amend the Forest Resources Conservation and Shortage Relief Act of 1990. These bills directed the Secretary of Commerce to: (1) prohibit through 1995 the export of unprocessed timber from State and other public lands, or the purchase of such timber as a substitute for exported private land timber; and (2) administer such prohibitions. However, the bills also authorized a State, upon approval of the Secretary, to implement and enforce State export regulations, which would then take effect in lieu of the Federal one; it was anticipated that such State regulations would be implemented in order to avoid the potentially more onerous Federal regulation. The House bill was ordered reported by the Committee on Foreign Affairs on June 10, 1993, and passed the House on June 14. The bill passed the Senate without amendment on June 17, and was signed into law (P.L. 103-45) by the President on July 1, 1993.
Bills to prevent the use of export tax expenditures for the export of logs have been introduced. After no action on H.R. 4208 in the 102nd Congress, it was reintroduced as H.R. 1542 in the 103rd Congress. These provisions were also included in H.R. 1997, and were introduced in the Senate in S. 894. These provisions were also passed by the Senate as §8239 of H.R. 2264, the Omnibus Budget Reconciliation Act of 1993 on June 24, 1993. The conference committee agreed to retain these provisions, and the conference report (H.Rept. 103-213) was accepted by the House on August 5 and by the Senate on August 6.
Several bills have been introduced to reduce taxable income for capital gains on timber by 2 percentage points (generally to a maximum of 50 percent) for each year the timber is held, if the timber seller has provided satisfactory assurances that substantially all the timber processing will be done domestically. This provision was introduced in H.R. 3413 in the 102nd Congress, and was included as Title IV of H.R. 3432 and of S. 1536 -- two old-growth forest bills of the 102nd Congress. It was reintroduced as H.R. 664 in the 103rd Congress, and then combined with the restrictions on log export tax expenditures in H.R. 1997; the latter bill limits the reduction to 30 percent of taxable income.
Bills were introduced in the 102nd Congress to authorize the States to restrict log exports from private lands within the State. Title III, Subtitle A, of S. 1536 would have authorized States to impose quantitative restrictions on log exports, and a similar provision was included in S. 2895, another old-growth bill of the 102nd Congress. In contrast, H.R. 5519 would have directed the U.S. Commerce Department to monitor domestic supplies and log exports, and to restrict log exports when critical shortages occurred, although the bill included no standards or criteria for identifying critical shortages.
One bill introduced in the 102nd Congress, H.R. 3413, would have authorized the States to impose export taxes on log exports. The tax revenues would have been deposited in a Timber Trust Fund in the U.S. Treasury, and the deposits would have been permanently appropriated for specific types of projects, with the money spent in each State being proportional to the tax revenues collected from that State.
The several legislative proposals that would directly alter the incentives and opportunities to export unprocessed wood products have different implications for the various sources of logs for export and for the major destinations of the logs.
Data on log exports by State of origin are only readily available for the Pacific Coast States. More than 1.8 billion board feet (BBF) of softwood logs were exported from ports in Washington in 1991, 57.5 percent of the Pacific Coast softwood log exports. The exports from Washington ports were more than 35 percent of the timber harvested in Washington in 1991. Oregon exported 0.7 BBF (23.1 percent); these exports amounted to 13 percent of Oregon's 1991 timber harvest. Alaska exported 0.5 BBF (16.8 percent) and California exported the remaining 0.1 BBF (2.6 percent) of 1991 softwood log exports from Pacific Coast States. In 1990, more than 55 percent of Alaska's timber harvest was exported as logs, but less than 3 percent of California's timber harvest was exported without processing.
Concern over log exports from the Pacific Coast States suggests that they dominate U.S. log exports, but data from the Lake States and the Northeast are not readily available for comparisons. It seems likely that a substantial portion of the relatively low-value spruce log exports to Canada are from these other areas, since Canada was the destination for nearly 10 percent of U.S. softwood logs exported in 1991, but for less than 1.5 percent of the softwood logs exported from the Pacific Coast States. Thus, while many of the efforts to reduce log exports are primarily intended to reduce the log exports from the Pacific Coast to Japan, China, and Korea, they may affect log exporters in New England and the Lake States.
It is also seems likely that corporate timberland owners would be most directly affected by legislation on log exports. Except for selected species and grades, log exports from Federal lands in the West, where most of the Federal timberlands are, have been restricted or prohibited for 25 years. Similarly, log exports from western State lands have been intermittently prohibited by State or Federal law; it is not known whether there were significant log exports from State lands in the Lake States or the Northeast prior to being prohibited by the 1990 Forest Resource Conservation and Shortage Relief Act. Finally, the non-industrial forestland owners are unlikely to be major exporters, because few have sufficient assets to become significant exporters, and in contrast to the veneer-quality hardwood log market, relatively few non-landowner firms exist to acquire and export softwood logs. Thus, the major corporate timberland owners -- Weyerhaeuser, International Paper, Champion International, Plum Creek ( Burlington Northern) and others -- would probably be affected more greatly by legislation on log exports than other timberland owners; which firms are most affected cannot be identified from readily available information.
Because Japan is the largest importer of U.S. logs, it is generally seen as the principal target for log export restrictions. However, China and Korea would probably be more seriously affected, since logs are a much larger share of their wood imports from the United States. Japan has already demonstrated some ability to adapt to U.S. lumber and plywood, but market penetration of these products has been, and continues to be, slow. The General Accounting Office has noted that some of this slowness is due to current emphasis on U.S. sellers' interests, and not Japanese customers' needs. Because there are few alternative sources of logs, log export restrictions might encourage a shift to more softwood lumber and plywood exports, but restrictions do not encourage the necessary customer focus. They may be interpreted as "Japan-bashing," and lead to retaliation, either through the international legal system (under GATT et al.) or through some bilateral action.
Canada is probably not a target for log export restrictions, because the value of softwood log exports to Canada less than a quarter of total softwood exports to Canada. In addition, many firms in the wood products industry, including major timberland owners, operate in both countries. Most of the legislative proposals to restrict log exports would probably inhibit softwood log exports to Canada, but it may be possible to exempt log exports to Canada from the restrictions.
1. "Softwood" timber, produced from pines and other coniferous trees, is widely used in construction, while "hardwood" timber, including oaks and maples, is usually used in high-value finished products (e.g., furniture) or low-grade, unstandardized uses (e.g., pallets for shipping freight). Trade debates focus on softwoods, because they dominate domestic consumption and trade, but many issues are relevant to hardwood trade, as well.
2. Judith A. Hines. Log Export Restrictions of the Western States and British Columbia. Gen. Tech. Rept. PNW-GTR-208. Portland, OR: U.S.D.A. Forest Service, 1987. (Hereafter referred to as: Hines, Log Export Restrictions.)
3. Hines, Log Export Restrictions, p. 2.
4. See, e.g., Cal. Public Resources Code §4650.1 (1973) (timber from State forests shall not be sold to any primary manufacturer...who makes use of such timber at any plant not located within the United States unless it is sawn on four sides...); Idaho Code §58403 (1958)(...land commissioners are hereby required when contracting for the sale of timber on lands owned by the State to prescribe that the timber cut from said lands under said contract shall be manufactured into lumber or timber products within the State of Idaho...); See also Oregon Code §526.805 (1985)
5. South-Central Member Development, Inc. v. Wunnicke, 467 U.S. 82 (1984). In Wunnicke, the Supreme Court struck down an Alaska State law which imposed a "primary manufacture requirement" on all contracts for the sale of State timber, a provision that required that timber bought from the State be partially processed in the State prior to export. While most of the States ceased enforcing their log export restrictions, the California attorney general's office directed continued enforcement of the State law until it was successfully challenged in court. Hines, Log Export Restrictions, pp. 8-10.
6. The implication of the Wunnicke case would seem to be that, although a State may not unilaterally bar exports, a State might ban the export of certain goods without violating the U.S. Constitution if there is a clear expression of congressional intent to allow the State to do so. Courts have found few limitations to the congressional commerce power, and there is reason to believe that the courts are even less likely to restrict congressional power over foreign commerce than over interstate commerce. Brolan v. United States, 236 U.S. 216, 222 (1915); Champion v. Ames, 188 U.S. 321, 373-74 (1903).
7. Hines, Log Export Restrictions, p. 5.
8. In 1988, 58 percent of the total timber harvested from Washington State lands was exported without domestic processing. Thus, the limitation was expected to reduce log exports from State lands by more than half.
9. Board of Natural Resources of Washington v. Brown. 1993 U.S. App. LEXIS 10165 (May 4, 1993).
10. Calculated from data in: Debra D. Warren. Production, Prices, Employment, and Trade in Northwest Forest Industries, Second Quarter l992. Res. Bull PNW-RB-194. Portland, OR: U.S. Dept. of Agriculture, Forest Service, 1992.
11. The solid wood products industry includes not only logging and lumber and plywood production, but secondary processing, such as millwork and cabinetry, mobile homes and prefab wood buildings, and wood preservative treatment.
12. H. Michael Anderson and Jeffrey T. Olson. Federal Forests and the Economic Base of the Pacific Northwest A Study of Regional Transitions. Washington, DC: The Wilderness Society, Sept. 1991.
13. The jobs per MMBF of lumber are adjusted to jobs per MMBF of logs; one MMBF of logs typically produces 1.1-1.2 MMBF of lumber (and up to about 1.5 under certain circumstances), because the log rules used to estimate volumes were developed decades ago assuming then-current technology.
14. Benjamin H. Stevens. Final Report on the Comparative Evaluation of Two Major Studies On the Employment Impacts of the ISC Northern Spotted Owl Conservation Strategy on Washington, Oregon, and California. Tech. Bull. No. 91-11. Washington, DC: American Forest Resource Alliance, 1991.
15. See: U.S. Library of Congress, Congressional Research Service. The Clinton Administration 's Forest Plan for the Pacific Northwest. [by Ross W. Gorte.] CRS Report for Congress 93-664 ENR. Washington, DC: July 16, 1993.
16. U.S. General Accounting Office. Agricultural Marketing: Export Opportunities for Wood Products in Japan Call for Customer Focus. GAO/RCED-93-137. Washington, DC: May 1993.
17. Canada has substantial inventories of softwood timber, but harvests are already near or above sustainable levels and the provincial governments (which own 95 percent of the timberland in Canada) generally prohibit the export of logs.
18. Much of the information in this section is taken from: U.S. Library of Congress, Congressional Research Service. Regulation of Timber Exports: Legislative Options. [by Kenneth R. Thomas.] CRS Report for Congress 89-617 A. Washington, DC: Nov. 14, 1989.
19. The imposition of State export taxes on unprocessed logs has been looked upon by some as a method of achieving either of two goals: (1) raising revenue which could then be used to alleviate economic hardships created by the difficulty of domestic mills to obtain sufficient unprocessed timber to maintain production, or (2) reducing foreign demand for unprocessed logs to increase the ability of domestic mills to obtain such logs.
20. U.S. Const. Art. I, §8, cl. 3.
2l. Buttfield v. Stranahan, 192 U.S. 470, 493 (1904); Katzenbach v. McClung, 379 U.S. 294 (1964); Louis Henkin. Foreign Affairs and the Constitution. Mineola, NY: The Foundation Press, 1972. p. 69-70.
22. U.S. Constitution, Art. I, §9, cl. 5 provides that: "No Tax or Duty shall be laid on Articles exported from any State". In general, the Supreme Court has struck down even minor taxes on exports, except fees to recover administrative costs or fees that are part of larger, general regulatory schemes that are not specific to exports. Fairbank v. United States, 181 U.S. 283 (1901).
23. U.S. Const.. Art. I, §10, el. 2 provides that:
No State shall, without consent of Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection Laws; and the net produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Control of the Congress.
24. More generally, a leading commentator has stated that, under the Commerce Clause, Art. I, §8, cl. 3, Congress can authorize the States to "exclude foreign commerce, to discriminate against it, to impose heavy burdens on it, to satisfy minor local interests at the price of major obstacles to such commerce, to establish a patch-quilt of local idiosyncracies." L. Henkin, Foreign Affairs and the Constitution, p. 237. Henkin goes on to note, however, that "such concessions to localisms are infrequent domestically, and are rare as regards foreign commerce." In fact, it is not clear that the Congress has specifically authorized any States to impose export taxes on goods leaving their ports.
25. Coyle v. Oklahoma, 221 U.S. 559, 565 (1911).
26. See, e.g., 23 U.S.C. §408(f)(6)(Cum. Supp. 1989)(highway grants made available to States which have imposed a minimum drinking age of 21).
27. Fairbank v. United States, 181 U.S. 283, 291(1901).
28. Knee, e.g., 16 U.S.C.A. §4212 (1989 Cum. Supp.)(establishment of African Elephant Conservation Fund) and 16 U.S.C. §4601-4 to 4601-11 (the Land and Water Conservation Fund).
29. Existing examples of permanent appropriations include the Reforestation Trust Fund (16 U.S.C. §1606a), the Knutson-Vandenberg Fund (16 U.S.C. §576), and Forest Service Payments to States (16 U.S.C. §500). For a discussion of trust funds in the Forest Service land management, see: U.S. Library of Congress, Congressional Research Service. The Forest Service Budget: Trust Funds and Special Accounts. [by Ross W. Gorte and M. Lynne Corn.] CRS Report for Congress 89-75 ENR. Washington, DC: Jan. 27, 1989.
30. Edmond McGovern. International Trade Regulation: GATT, the United States and the European Community. Exeter, U.K.: Globefield Press, 1982. §2.233. (Hereafter referred to as McGovern, International Trade Regulation.) The GATT, rather than being a single agreement, if composed of more than one hundred agreements and protocols relating to international trade. John H. Jackson and William J. Davey. Legal Problems of International Economic Relations: Cases, Materials and Text on the National and International Regulation of Transnational Economic Relations. St. Paul, MN: West Publishing, 1986. p. 296. (Hereafter referred to as Jackson, International Economic Relations.)
31. Jackson, International Economic Relations, p. 309.
32. Jackson, International Economic Relations, p. 309. Other member countries could then, however, ask that a GATT panel be appointed to determine if such legislation was in fact violative of the GATT. Although there have been few panel decisions regarding challenges to export restrictions over the past forty years, the United States has obtained a successful panel ruling against restrictions on the export of unprocessed fish imposed by Canada. See: GATT, Canada - Measures Affecting Exports of Unprocessed Herring and Salmon ( 1987). This decision determined that a Canadian law requiring that certain fish caught in Canadian waters could not be exported until processed violated the GATT.
33. General Agreement on Tariffs and Trade, Art. XI, 61 Stat. part (5) and (6); TIAS 1700; 4 Bevans 639; 55-61 UNTS (hereinafter GATT). Subsection one of Article XI of the GATT provides that:
No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.
34. GATT at Art. XX.
35. GATT at Art. XX(g).
36. GATT at Article XX(j). GATT also contains an exception for restrictions on exports of domestic materials necessary to assure essential quantities of such materials to a domestic processing industry This provision, however, can only be applied enduring periods when the domestic price of such materials is held below the world price as part of a governmental stabilization plan". Although some timber from Federal lands has arguably been sold at less than the market value (see: Hanna J . Cortner and Dennis L. Schweitzer, "Below-Cost Timber Sales and the Political Marketplaces Environmental Management, v. 17 (1993): 7-14), there does not appear to be an existing governmental price stabilization plan for unprocessed timber, and consequently this exception would not appear to be applicable.
37. Since the Forest Service establishes long-term plans for managing the national forests, assisting private landowners, and conducting forestry research under the Forest and Rangeland Renewable Resources Planning Act of 1974 (P.L. 93-378), and since the restrictions on log exports from Federal lands have been justified primarily on the needs of the domestic timber industry, it would seem difficult to argue for the applicability of the conservation exception or short supply exception for quantitative restrictions on U.S. log exports.
38. An argument can be made that the national forests are regarded by the United States as "renewable" resources, and are not "exhaustible" resources. 16 U.S.C. §1600-1687 (1982), which sets forth the Forest and Rangeland Renewable Resources Planning Act of 1974, refers repeatedly to the "renewable" resources of the national forests, referring to most Federal timber. To establish that timber was actually an "exhaustible" natural resource might require some evidence that Federal timber stocks were in danger of depletion and in need of conservation measures.
39. GATT at XX(g).
40. The regulations which were challenged provided that no person could export specific species of salmon or herring from Canada unless the fish had been "canned, salted, smoked, dried, pickled or frozen". GATT, Canada - Measures Affecting Exports of Unprocessed Herring and Salmon (1989) (hereinafter 1988 GATT Panel Report).
4l. Canada noted that the provinces had imposed some form of export regulations on fish, specifically herring and salmon, since 1908. (Canada Gazette, Part II, May 2/84, p. 1693 as cited in 1988 GATT Panel Report, p. 3. It should be noted that the United States argued that the specific measures under consideration, which had been promulgated under a 1970 statute were not justified under the "existing legislation" clause. The Canadian government did not appear to respond to this argument, and the GATT panel made no ruling thereon.
42. 1988 GATT Panel Ruling. Canada made factual arguments that the conservation management scheme relied upon a detailed catch reporting system, which was provided by on-shore processing facilities in Canada. Canada also pointed to the dwindling catch in the affected species, and the fact that virtually no surplus to the Canadian processing capacity was available to foreign users of either salmon or herring. The United States disagreed that the trade measures imposed were required for conservation of the fish involved, and pointed out that other fish species in Canada with similar resource depletion problems were not so limited. The United States further argued that the United States also gathered data on landed fish, and that the sharing of this data could be accomplished without the export restrictions.
The United States also argued that whereas the Canadian fish processor could achieve longer production runs and economies of scale by purchasing these restricted species from the United States, the United States fish processors foreclosed this advantage by the export restrictions. Thus, it was argued, the purpose and effect of the export restrictions were not to conserve resources, but rather to protect Canadian processors and maintain employment in Canada. This interpretation was supported by previous Canadian government pronouncements that the export restrictions were in place for the purpose of promoting jobs for Canadians. The United States argued that such a purpose was in violation of the GATT, quoting a 1950 Working Party Report on Quantitative Restrictions:
...the Agreement does not permit the imposition of restrictions upon the export of a raw material in order to protect or promote a domestic industry, whether by affording a price advantage to that industry for the purchase of its materials, or by reducing the supply of such material available to foreign competitors or by other means.
GATT/CP.4/33./Add.1, page 4, as cited in 1988 GATT Panel Report, p. 7
Canada responded that the regulations were multi-purpose, and that the protection of Canadian jobs did not exclude the possibility that the measures were also designed for conservation measures be "necessary" to conservation, but merely "related to" conservation.
43. The Panel rejected Canada's argument that the export prohibitions were entered into to improve statistical monitoring of fish, noting that the statistics could be obtained without the export restrictions. 1988 GATT Panel Report, p.22. The Panel noted further that the measures did not directly impact on the conservation of the species, as the regulations did not limit access to these fish generally, but only to those fish in an unprocessed form. Consequently, the panel found that the prohibitions were not aimed at conservation, and were not justified under XX(g).
44. For example, under the short supply controls of the Export Administration Act, the President has the authority to prohibit the exportation of goods "where necessary to protect the domestic economy from the excessive drain of scarce materials and to reduce serious inflationary impact of foreign demand." 50 U.S.C. App. §2406 (1982) incorporating 50 U.S.C. §2402(1)(C) (1982). it should be noted that the Export Administration Act Amendments of 1979 imposed a ban on unprocessed western red cedar logs from Federal and State lands under the short supply provisions of 50 U.S.C. App. §2046(i)(Supp.III 1985). A committee report on the legislation stated that red cedar was a non-renewable resource, noting that there appeared to be only a 10-year supply of red cedar remaining at the then-current harvesting rates, and that the 200-300 year maturation rate for red cedar made reforestation impracticable. U.S. Congress, House, Committee on Foreign Affairs, Export Administration Act Amendments of 1979, H. Doc. No. 200, 96th Cong., 1st Sess. (Washington, DC: U.S. Govt. Print. Off., 1979), p. 26.
45. U.N. Doc. E/PC/T/33, at 12
46. Id. The chapter titled "Restrictive Business Practices" referred to by the Preparatory Committee was a preliminary attempt to address the issue of whether or not practices which restrained competition, limited access to markets, or fostered monopolistic controls were an acceptable method of introducing stability into industries and establishing new industries in less industrialized countries. The draft chapter offered little in the way of standards regarding these practices, but instead proposed that a complaint mechanism be established, and that non-binding reports be issued in response to specific complaints. Ultimately, some provisions regarding monopolistic behavior were incorporated into the GATT; see, e.g. GATT at Art. II(4) (monopolization of the imports of a product); GATT at Article XVII (state trading enterprises); GATT at Article XX(d)(exception for laws consistent with Art. II(4) and XVII). However, there is no indication that the short supply provision was enacted as an outgrowth of the draft chapter referred to by the Preparatory committee.
47. Further support for this argument is that another GATT exception, which is otherwise inapplicable here, does allow restrictions on exports of domestic material necessary to assure essential quantities of such materials to a domestic processing industry; see GATT XX(i)(trade restrictions applicable during periods of price control). Arguably, this exception, which is limited to resources under some price control program, would be meaningless if the short supply exception, GATT XX(;), was invoked anytime a domestic processing industry required raw material Thus, to construe exceptions XX(i) and (j) in such a way as to give meaning to them both, the short supply exception cannot be extended to provisions meant to ensure a supply of raw materials to a domestic industry.
48. McGovern, International Trade Regulation, §5.13. Article II of the GATT provides for a schedule of import duties, but does not appear to address export duties.
49. McGovern, International Trade Regulation, §5.13.
50. Apparently, one reason that negotiations over export taxes have been difficult is because of questions concerning national sovereignty over natural resources. Jackson, International Economic Relations, p. 889.
51. McGovern, International Trade Regulation, §5.13.
52. See: U.S. Library of Congress, Congressional Research Service. Wood Export Promotion. [by Susan B. Epstein and Ross W. Gorte.] CRS Report for Congress 90-94 ENR. Washington, DC: Feb. 15, 1990.
53. 1993 U.S. App. LEXIS 10166 (May 4, 193).
54. 16 U.S.C. §620c(d)(3)(A) requires affected States to issue regulations to carry out the purpose of that portion of the Act relating to State timber. Those States whose annual timber sale volume exceeds 400 million board feet, which includes only Washington State, may export 25 percent of their annual sales volume. 16 U.S.C. §620(c)(b)(2). To do so, however, a State must issue regulations determining the species, grade and geographic origin of such timber. 16 U.S.C. §620c(d)(2).
55. In New York a. United States, 112 S.Ct. 2408 (1993), the Supreme Court struck down a provision of the Low Level Radioactive Waste Policy Amendments Act of 1985 which required that all States either provide for the disposal of all low level radioactive materials or that they take title to such materials The Court noted that, under the Tenth Amendment, the Federal Government may not "commandeer the legislative processes of the States by directly compelling them to enact and enforce a federal regulatory program," and that compelling a State either to regulate its low-level waste or to take title to it was merely providing the State with two options, one onerous and the other coercive. Consequently, the Court struck down the provision of the statute requiring the States to regulate low-level waste.
Similarly, in Brown, the Ninth Circuit found that the State of Washington was faced with two options -- the State could either stop selling timber from its public trust lands, and violate its trust responsibilities, or it could administer the timber export program. As the first was not a legally viable option, the State was being coerced to regulate timber exports. Consequently, the Court held that these provisions of the Act violated the Tenth Amendment, and that the section which restricted the export of timber cut from State lands was invalid. The Court did hold, however, that the portion of the statute which imposed restrictions on the export of timber from Federal lands could be severed from the portions of the Act relating to State lands; consequently, the court found that restrictions on the export of timber from Federal land could be enforced.
56. This potential problem had been recognized in the 102nd Congress. H.R. 3489 would have amended the Forest Resource Conservation and Shortage Relief Act to require the U.S. Customs Service to restrict log exports from State lands, but this bill was not enacted.
57. Tax expenditures are provisions that permit special treatment, usually lower tax rates, for particular products or circumstances. Tax expenditures, therefore, reduce Federal income tax collections, but do not require Federal expenditures.
58. The data also cannot readily be compared with total U.S. log exports that are typically measured in cubic meters. The conversion of board feet to cubic measures is highly dependent on the diameter of the logs being measured; the conversion can be as little as 3.65 board feet per cubic foot for a 6-inch log to as many as 7.88 board feet per cubic foot for a 50-inch log. See: David A. Hartmann, et al., Conversion Factors for the Pacific Northwest Forest Industry (Seattle, WA: Univ. of Washington, Inst. of Forest Products, n.d.), p. 11.
59. U.S. General Accounting Office. Agricultural Marketing: Export Opportunities for Wood Products in Japan Call for Customer Focus. GAO/RCED-93-137. Washington, DC: May 1993.