Executive Summary
Reports that a substantial proportion of wood raw materials, used by Chinese and Vietnamese manufacturers, are from illegal sources have drawn concern from major consumer countries who recently implemented timber legality regulations. These regulations, which include the Japanese ‘Goho-wood’ policy, the U.S. Lacey Act, the EU Timber Regulation and the Australian Illegal Logging Prohibition Act restrict the import of illegally harvested wood and are expected to have a direct impact on major wood processing countries, such as China and Vietnam.
 
This study focused specifically on the wood products industry and business practices in these two processing countries, targeting individual furniture and flooring manufacturers and wood products traders, as a way to clarify and evaluate the effects of timber legality regulations.
 
Surveys were conducted at trade shows in Ho Chi Minh, Shanghai and Guangzhou in 2013 and 2014 to assess how these regulations influence attitudes and perceptions regarding regulations, firms’ use of chain of custody certification, and impacts on the material sourcing and export market decisions of industry managers. Survey responses were evaluated using descriptive statistics, regression analyses, cluster analysis, non-metric multidimensional scaling and analysis of similarity.
 
The analysis showed that as firms increase in size they reduce domestic sales and show increased awareness and support for regulation, and that firms’ awareness of timber legality regulations plays a significant role in whether a firm decides to obtain certification. Analyses showed that Vietnamese firms have lower awareness of regulations while being more supportive of regulations. Chinese firms have higher awareness while having a more negative attitude towards regulations. The findings also highlighted a split between firms with a domestic focus and firms which export to foreign markets suggesting a split in the market which may reduce the impact of regulations. This segmenting of the Chinese market and to a lesser extent the Vietnamese market supports the idea that regulatory leakage is taking place, wherein sales of wood products from suspicious sources are shifting away from regulated markets and towards unregulated markets which are experiencing rapid increases in demand for wood products.
 

​Executive Summary
The overall goal of this study was to develop a better understanding of US residential homebuilders’ and remodelers’ perceptions and use of Green Building Programs (GBPs), Environmentally Certified Wood Products (ECWPs), construction materials (i.e., wood, steel and concrete), and other innovative green technology and products.
Green building refers to a structure built using a process that is environmentally responsible and resource efficient throughout its life-cycle: from design and siting, to construction, operation, maintenance, renovation, and demolition. Since it is difficult to assess the sustainability of houses, a number of organizations have developed standards, codes and rating systems that let regulators, building professionals and consumers embrace green building concepts and practices with confidence. Collectively, these rating systems and standards are known as green building programs (GBPs). In the US, the National Association of Homebuilders’ National Green Building Standard (NGBS) and the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) for Homes have become the two major competing GBPs at the national level.
Each GBP employs a different rating system to award compliance for the use of sustainable materials, building products, and technology. As green building practices in residential housing become more popular in the US, the influence of LEED for Homes and NGBS on the choice of materials by construction professionals is of fundamental interest for forest resource professionals. Since a large volume of wood is consumed by the US building industry, it is important to understand the adoption of green products and technologies by US homebuilders and remodelers.
A survey targeting US homebuilders and remodelers was developed and the probability sampling frame was carefully designed in order to ensure reliable and valid statistical inferences. The results of the survey suggest that a great majority of homebuilding professionals are aware of GBPs in the US. Although less than a quarter of homebuilders had actually used either LEED for Homes or/and NGBS, many non-users were planning to use one of the programs in the future. The main reasons why homebuilders adopted GBPs were: to differentiate their homes in the market, the home buyer specified that they wanted a green house, and there is strong demand for homes built using a GBP. Those builders who have used a GBP favored the NGBS program over the LEED for Homes program, because they perceived NGBS as being less expensive and easier to use than LEED for Homes, although LEED for Homes was rated as being superior in terms of brand recognition and effectiveness in helping to sell homes.
Wood is a renewable natural resource with a smaller carbon footprint than other construction materials, such as steel or concrete. Wood products from responsibly managed forests should be an ideal fit for most GBPs. In order to communicate to consumers that a wood product comes from forests managed in accordance with environmental and social standards, some organizations have launched forest certification systems.
Environmentally certified wood products (ECWPs) are usually associated with eco-labeling and chain-of- custody programs that are designed to ensure that wood products are harvested from sustainably managed certified forests. There are a number of forest certification programs around the world, but several major certification programs in the US have become the de facto standard, including the Forest Steward Council (FSC) and the programs endorsed by PEFC (the Sustainable Forestry Initiative (SFI) and the American Tree Farm System (ATFS)). ECWPs certified by FSC and SFI are considered rival products in the market place. The LEED for Homes GBP has accepted FSC for the forest certification credit, but has not recognized SFI or ATFS. In contrast, the NGBS GBP allows the use of any third party certified wood. Consequently, forestry

experts, government officials and environmental NGOs are interested in how the two major GBPs might influence the demand for certified wood.
The survey results show that only about 10% of homebuilders used environmentally certified wood products (ECWPs) on a regular basis while another quarter of homebuilders used ECWPs occasionally. When asked to compare the two major certification programs, a great majority of ECWP users did not differentiate between FSC and SFI. Roughly 30% of homebuilders were still unaware of major wood certification programs.
As a result of increased interest in green building practices and GBPs, companies continually evaluate a wide variety of new green building products and technologies, including ECWPs. However, the US residential construction industry has long been criticized for being slow to adopt new products and technologies. A variety of attributes can influence a builder’s adoption of green building products and technology. The survey results show that the most important attributes for influencing product specification are the economic or technical performance of the products including, price, availability, durability, low maintenance, ease of installation, energy efficiency and consumer demand. On the other hand, the less important attributes tend to be those related to the environmental performance of the product. Finally, the survey shows that wood is clearly viewed by residential construction professionals as being the most environmentally friendly building material when compared to either steel or concrete across a wide range of performance attributes.
This study offers the first detailed look at residential construction professionals’ perceptions and use of a variety of environmentally oriented building programs and products in the US. It establishes a baseline for the use of GBPs and ECWPs by US homebuilders and remodelers. While the current awareness and use of these programs and products is often low, the results suggest that their use will increase in the future as the awareness of both construction professionals and consumers increases.

​Executive Summary
Despite international efforts, illegal logging and its associated social, ecological, and economic effects continue on a scale that is of global concern, with significant amounts of illegally-harvested wood and the resulting wood products entering into international trade flows. Recently, major importers of forest products have begun to implement legislation, such as the U.S. Lacey Act amendment of 2008, prohibiting the possession and/or importation of wood and wood products that are of illegal origin. To date, no studies have systematically investigated the effects of the 2008 Lacey Act amendment on the international trade of forest products. Drawing on bilateral trade data and using a quantitative, regression-based comparative case study methodology, the effects of the 2008 Lacey Act amendment on the international trade in forest products were evaluated. A data-driven method was used to create aggregate control groups for comparisons with countries affected by the policy. If the policy has been effective in reducing the amount of forest products of illegal origin being imported into the U.S., we would expect to see some unique differences in post-policy U.S. imports of wood and wood products from areas with high levels of suspicious wood in their supplies. Results from these analyses show few significant differences in post-policy U.S. imports of wood products of suspicious origins although there was a substantial decline in US imports of primary wood products from suspicious origins.
However, the policy may be affecting the suspicious wood imports of major exporters of finished wood products to the U.S. The results did suggest that Vietnamese imports of wood from suspicious sources have declined significantly in the post Lacey Act period. Our analysis also suggests that leakage of suspicious wood may be occurring whereby wood from suspicious origins may be redirected from markets where timber legality legislation has been adopted (e.g., the US, the EU and Australia) towards less environmentally sensitive markets (e.g., the domestic Chinese market, the Middle Eastern markets and India). In the case of Vietnam, wood furniture exports to the U.S. accounted for 55% of all wood furniture exports in 2012 (by value), and the domestic market for high-value finished wood products is limited. Overall, Vietnam is more dependent on the U.S. market for their finished products and therefore more likely to evidence a large-scale response to the 2008 Lacey Act policy. On the other hand, China’s more diversified markets (both export markets and the domestic market) for finished wood products allows for greater leakage of products sourced from suspicious wood to markets that do not distinguish between legal and illegal wood. This evidence, if corroborated by further analysis, provides some support for the success of the 2008 Lacey Act amendment in reducing suspicious wood imports at an aggregate level.
The apparent reductions in U.S imports of suspicious primary wood products, along with increased imports of finished products from suspicious countries (wood furniture), support the conclusion that an import ban on illegal wood may be more effective at reducing suspicious imports of primary products, which tend to be easier to identify and trace back to source. As discussed in Section 2, the few major enforcement actions for violations of the amended Lacey Act have focused on primary products (raw wood and wood flooring).
Finished products such as wood furniture, on the other hand, often contain a mixture of a variety wood products from different origins. The U.S. import trends show that U.S. law enforcement agencies may need to identify and pursue methods for establishing the legality of mixed-source products, such as finished products, as U.S. importers and businesses reduce their risk of violating the policy by reducing imports of suspicious primary products.

​Executive Summary
Since 1970, Japan has increasing relied on imports to meet its domestic demand for wood products. This reliance on imported wood has always caused a certain tension in Japan where forests cover two-thirds of the country. This tension is caused by the fact that along with the plentiful supply of wood, there is an extensive sawmill industry in Japan. Despite the closure of more than 13,000 sawmills over the past twenty five years (from 20,256 in 1983 to 5,927 in 2012), the Japanese sawmill industry remains uncompetitive and plagued by small, inefficient sawmills located in rural areas far from the main demand markets. High production and transportation costs have made both domestic logs and lumber uncompetitive within the domestic market and, as a result, lower cost imported wood products have become the primary source of supply within Japan. 
 
Over the years, the Japanese government and the forest products industry have proposed a number of subsidies and policies designed to improve the competitive position of domestic wood products as well as the forestry and sawmill sectors.  A recent regulatory initiative, the Forest and Forestry Revitalization Plan, proposes to develop an extensive system of subsidies and regulations designed to increase the volume of timber harvested from domestic forests while promoting the expanded use of domestic wood over imported wood in the construction of both public buildings and residential homes. Clearly any program designed to raise the market share of domestic wood in Japan will adversely impact the competitiveness of imported wood and would have serious implications for forest products manufacturers in the Pacific Northwest, many of whom are located in rural, timber-dependent communities which were particularly hard hit by the recent economic crisis.  With the US economy still feeling the effects of the housing crisis, and housing starts remaining at historically low levels, export markets have been the one bright spot in an otherwise dismal economic landscape for the forest products industry.  Total US forest products exports have increased by 46% since 2009, rising from $5.2 billion in 2009 to $7.5 billion in 2012.   Japan is the third largest destination for US wood exports, with exports of wood products increasing from $517 million in 2010 to approximately $730 million in 2012. With the introduction of the new Forest and Forestry Revitalization Plan in Japan it is critical that the US undertake research to better understand the potential implications of the subsidy programs on the competitiveness of US wood products in Japan.
 
This research project was designed to gain a better understanding of how the newly implemented Forest and Forestry Revitalization Plan would impact the overall demand for wood products in Japan in general and the competitiveness of US wood products specifically.  The objectives of the proposed research include the following:  1) describe the forest resource in Japan and assess the factors that influence the supply and demand of domestic wood products in Japan;  2)  provide an overview of the major wood industries in Japan (lumber, plywood and glue laminated lumber);  3) provide an overview of the housing sector;  4)  assess the changing demographics in Japan;  5)  assess the broad range of forestry and wood subsidies and support programs in Japan  and 6) assess the potential impact of the domestic wood policies and programs on wood use in Japan and the demand for imported wood products from the US.

Executive Summary
Japan has been one of the largest importers of wood products in the world. However, a large area of domestic plantation forests has matured, and the Japanese government has adopted several policy measures aimed at increasing the supply of, and demand for, domestic wood. The Forest and Forestry Revitalization Plan aims to increase the domestic wood supply and increase Japan’s wood self-sufficiency rate to 50% by 2020. The potential effect of the Revitalization Plan on the Japanese wood market, should be understood based on the competitive situation and substitutability of domestic and imported wood.
This study examined the existence of a cointegration relationship between domestic and imported wood using sawlog and lumber price data. If both woods compete in a single Japanese market, then the law of one price, the necessary condition for substitution between imported and domestic wood to occur, must hold. Markets are said to be integrated if, at equilibrium, the law of one price (LOP) holds and no arbitrage opportunity exists as a necessary condition for price efficiency. If the LOP is upheld then trade models that assume price equilibrium among homogenous products can be used to study the effects that the Revitalization Plan would have on the volume of domestic and imported wood consumed in Japan. On the other hand, if the LOP does not hold to be true, then the assumption of these trade models is violated, and any results yielded by those trade models may not be correct.
Using Johansen’s multivariate cointegration tests, it was revealed that the domestic wood market and the imported wood market had no cointegrating relationships. It was concluded that the market for domestic wood and that of imported wood are not closely connected through price arbitrage and that a price change for one wood product would not necessarily affect the prices of other wood products directly. Thus, the Revitalization Plan might not have a direct effect on the demand for imported wood products. However, in the case where the demand for wood remains constant or declining (as is the case in Japan), it is likely that a substantial increase in the demand for domestic wood would necessarily result in a corresponding decrease in the demand for imported wood.
Perhaps more importantly, the combined impact of the subsidy programs targeted towards the forestry and wood products sectors in Japan will likely adversely impact the demand for imported wood. In this regard, several issues have to be pointed out. First, Japanese housing starts have been decreasing and they are not expected to dramatically increase given that the Japanese population is aging and shrinking. Since lumber demand is highly dependent on the housing industry, the declining trend of housing starts will reduce the total demand for wood in Japan. Given the emphasis of the Revitalization Plan on doubling the supply of domestic wood by 2020, this will inevitably lead to a reduced demand for imported wood.
Second, as log imports decline, domestic sawmills and plywood mills have been switching from imported to domestic logs. This trend is strengthened by the government subsidy programs that support the expansion and modernization of domestic sawmills and plywood mills to replace older processing equipment with newer,

more efficient processing technology that can utilize smaller diameter domestic logs. Thus, the share of imported logs used in domestic sawmills and plywood mills is likely to decline.
Third, Japanese macroeconomic policy affects wood imports. Recent monetary-easing measures have impacted the exchange rate by depreciating the value of the yen by almost 50% since Prime Minister Abe’s election in December 2012. The depreciation of the yen as a result of Japan’s change in monetary policy is likely to lead to a decline in total wood imports into Japan.
Finally, and potentially most importantly, other government subsidy programs targeted to expand the use of domestic wood may distort the market relationships found in this study. In early 2013, MAFF announced a plan to introduce the “Wood Use Points Program (WUPP)” which provides a substantial subsidy to homebuilders who use domestic wood in place of imported wood in the homes they build. If this program is successful, then the huge subsidies provided by the program would effectively expand the demand for domestic wood and the adverse impact of the WUPP Program on the demand for imported wood could be tremendous.

​Executive Summary
This study explores China’s forest sector through the lens of three interconnected issues: production efficiency, foreign direct investment, and trade and illegal logging. China’s forest sector is now inextricably linked to markets all over the world and this research provides an important contribution to understanding China’s participation in the trade and processing of forest-based resources and products.
First, efficiency metrics were calculated to understand how efficiently Chinese wood-processing enterprises operate, given a set of inputs. Using data collected through an enterprise survey, a stochastic frontier production function was estimated and used to measure technical efficiency for Chinese enterprises. The coefficients for the material and labor inputs proved to be significant, and a mean efficiency score of .70 indicated significant room for efficiency improvements among almost all enterprises.
Second, the location choice of foreign investment in Chinese wood-processing enterprises was examined to understand whether or not the same factors that have been shown to motivate foreign investment in manufacturing as a whole within China also apply to the wood-processing subsector, and to assess the effect of roundwood availability on foreign investment in the wood-processing sector. This was done by employing two estimation methods: tobit and negative binomial. Two variables were found to have an impact on investment: the number of specially-designated economic zones and roundwood production.
The last study examined the effects of the removal of illegally logged resources from China’s imports originating in five of China’s primary source countries for logs on China’s domestic production, consumption, and trade flows. This was performed through the use of a spatial equilibrium approach by modifying the CINTRAFOR Global Trade Model (CGTM). This was performed both by applying a graduated tariff and by changing the supply elasticities in China’s primary log source countries. China was evaluated using supply elasticities that simulated the current harvest quota system, and a system that becomes more self-sufficient through increased log production. The results demonstrated large losses in producer surplus resulting from the imposition of a tariff as compared to methods that approach adjusting supply by a change in the cost structure.
In an increasingly globalized world, these issues are fundamental to the long-term sustainable management and provision of, as well as trade in natural resources and environmental services. This research provides an important contribution to understanding China’s participation in the trade and processing of forest-based resources and products.