Foreign Trade of Wood-Based Sectors: History
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Contributor:
Andrea Janáková Sujová
,
Katarína Marcineková
,
Václav Kupčák

The national strategies for the development of wood-based industries (WBI) in EU countries are aimed at higher utilization of the country’s own resources of wood as a raw material and the finalization of wood processing in the country of origin. The high level of exports of wood as a raw material in Slovakia and the Czech Republic contributes to an active trade balance, which on the one hand is positive for the economy of these countries, but on the other hand is not in line with national strategies.

  • contribution of foreign trade
  • economic performance

1. Introduction

According to Afonso [1], foreign trade enables technological transfers and foreign investment and belongs among the main sources of economic growth. The association between economic growth and international trade has started to be investigated using international trade theories originating from classical economics. The specialization of each country in the production of products where a comparative advantage exits and trade with other countries contributes to the economic growth [2].
Assessing the causalities between international trade and macroeconomic perfor-mance or growth has been a subject of many researchers and their studies in many African, Asian, and European countries [2][3][4][5][6][7][8][9][10][11][12][13]. The methods frequently used in research were econometric models, such as ARDL, the Johansen multivariate cointegration model, the autoregressive distributed lag cointegration framework, and statistical regression models. In most studies a positive impact of foreign trade on GDP was revealed.
The impact of foreign trade on economic performance can also be measured by specific indicators such as multipliers of export and export, the contribution of trade balance, and input-output analysis. This approach was used in studies by several authors [14][15][16][17][18][19][20].
Many current empirical studies focusing on investigating the relationship between foreign trade and economic output worldwide indicate that the issue has been extensively discussed and is worthy of investigation. However, such research for industries or economic sectors is insufficient.
The national strategies for the development of wood-based industries (WBI) in EU countries are aimed at higher utilization of the country’s own resources of wood as a raw material and the finalization of wood processing in the country of origin [21]. The high level of exports of wood as a raw material in Slovakia and the Czech Republic contributes to an active trade balance, which on the one hand is positive for the economy of these countries, but on the other hand is not in line with national strategies [22].
The production of wood-based products in the conditions of the Slovak Republic and the Czech Republic has a long tradition and, as one of the options for obtaining renewable resources, is closely linked to many sectors of the national economies. Both countries have sufficient sources of wood as a raw material to produce wood products. WBI provides an economic, environmental, and social contribution based on the use of renewable resources. Wood-based products are recyclable, and reusable either in new products or as energy. They are biodegradable and can replace materials from non-renewable sources. The WBI sector is an important part of the emerging economy, a new promising direction based on biotechnology. Support for the development of industries based on renewable resources is also declared in the European Union’s strategy. The principles of the circular economy and the bioeconomy, which are currently being intensively discussed and promoted, indicate the importance of developing wood-based industries as strategic sectors of national economies. The study of determinants influencing the WBI economy and its improvement is therefore indispensable and important in the implementation of national and transnational economic development strategies.

2. Impacts of Foreign Trade on the Economy of Wood-Based Sectors Generating Different Levels of Value Added

The measurement of economic growth and performance is based on different indicators at different levels of the economy. Macroeconomic performance is assessed on the basis of gross national or domestic product (GDP), which includes net exports, i.e., the difference between national exports and imports. Thus, foreign trade can affect the value of GDP positively or negatively. The economic performance of individual enterprises is assessed through financial indicators of profitability, profit, economic and market valueadded. At the sectoral level, which represents the mesoeconomic level, it is a combination or link between the macroeconomic and enterprise approaches to measuring economic performance. However, the assessment at all levels is based on the same principle, the value added by processing.
Mesoeconomics is based on how to measure the effects of the structures of the macroeconomic reasoning of aggregate supply and demand, and microeconomic buying and selling and supply and demand, and mainly how these forces play out. Foreign trade is important because of its effect on levels of employment. In addition, the competitiveness of products in the global market affects the increase in income. In the theory of economic growth and international trade, competitiveness is defined as the ability to gain profitability and maintain market share. The competitive performance of a country or a sector of the national economy is demonstrated by using trade indicators, including trade balance [23].
The relationships and linkages between foreign trade flows and the economic growth of national economies have been analyzed by statistical and econometric models in several papers. A standard growth-regression analysis was carried out by Were in African countries [3]. Econometric, non-parametric approaches, ARDL and Johansen multivariate cointegration models have been used in analyses in China and in other Asian, African, and European countries. These studies confirmed that growth in foreign trade volume positively affected GDP growth in China [4][5][6], and a positive influence on GDP was recorded by export growth while conversely imports affected GDP negatively in Ghana [7]. A review of past empirical studies conducted by Winters and Masters showed that imports also contribute to economic growth [8]. The opposite findings were demonstrated by an analysis by Blavasciunaite et al. in EU countries, where foreign trade has negative effects on GDP growth [9]. The same results were found in an analysis of Saudi Arabia by Belloumi and Alshehry in the long run [2]. A study of the most important states in the world (the US, Russia, China, and Germany) conducted by the authors Makhmutova and Mustafin showed different effects of international trade on GDP growth in the surveyed countries [10]. Hobbs’ study showed the opposite relationship in Albania, namely that economic growth induced export growth and foreign investment, but not vice versa [11]. The studies by Reppas and Christopoulus [12] and Cetin [13] revealed indirection by assessing the causality between international trade and macroeconomic growth. The impact of European integration on Visegrad countries trade using more advanced econometric techniques, examined by Gauger and Sledziewska [14], showed the influence on trade of higher value-added goods.
To measure the effects of trade balance flows on macroeconomic growth is possible via specific indicators. The most used measurement is quantification by so-called contribution to economic growth. This value expresses the contribution of net exports to the growth of GDP as a weighted difference between the export and import growth rate, where weights are portions of exports and portions of imports in relation to GDP based on the previous period [15][16]. Another measure of the impact of exports on economic growth is a quantification of the impact of exports using an input–output analysis based on the analysis of the direct and indirect intensity of home production to import. The contribution of net exports to economic growth is calculated as total exports after deducting induced imports for intermediate consumption [17]. Mandras and Salotti estimated the multipliers of production value and added value using input-output analysis of the smart industries in the Western Balkan countries [18]. Multipliers of the final use quantify home production, imports in the particular year of induced export, the total consumption of households, the total consumption of the government, the creation of gross capital or the amount of produced added value, and employment at all stages of production [19]. Marcato et al. [20] explored value-added trade measures to illustrate countries’ specialization patterns in vertically-integrated production networks. A positive linear association between higher levels of domestic value added and higher levels of RCA was found. The contribution of foreign trade to the competitiveness of product groups in South Korea using CTBI (contribution to trade balance index) as an indicator was confirmed in exports of high value-added products in the study by Erkan and Aybudak [24].
According to authors Pawera et al. and Stefanovic et al., indicators measuring industrial international competitiveness are being continuously improved [25][26]. They constructed a comprehensive international-competitiveness index by combining the variation coefficient and the entropy method. It was based on the market share index (MS), trade competitiveness index (TC), revealed comparative advantage index (RCA), and relative trade advantage index (RTA). Trade balance is considered a factor of political-economic cooperation [25] as well as a factor of economic development influencing corporate performance [26].
In the study by Bojnec and Ferto [27] it was found that the central European countries export lower value-added raw wood and semifinished wood products to Austria, and Austria exports higher value-added wood products back to the central European countries. Similarly, studies by the UN Economic Commission for Europe [28] revealed that the increased supply of Czech raw wood in 2016 was mostly exported to Germany when exports increased by +12.2%. The study of Toth et al. [29] revealed the strong correlation between unplanned wood harvesting by incidental logging and the decrease in wood prices. More than 42% of the harvested timber is purchased by German and Austrian partners based on long-term contracts with Czech producers.
Michal et al. in their study [30] considered the export orientation of the timber trade an ongoing disaster due to the current capacity and production potential of the wood-based sector in the Czech Republic. Loučanova et al., [31] also stated that most Slovak wood processing faces difficulties in direct access to foreign markets and their production is often sold as semi-finished or low value products (raw material such as sawnwood) to processing companies. Slovakia is inter-industry specialized, but with the increasing added value of products Slovak trade could become intra-industry specialized.
According to the study by Slavova [32], exports of Bulgarian wooden products show a steady trend of growth over the years 2016 and 2019 and the branch is described by a positive trade balance. Key factors of the economic growth are population, natural energy and resources, fixed assets and infrastructure, organization and entrepreneurship, enterprise knowledge and technological change [26]. The furniture enterprises have been forced for social reasons (the COVID-19 Pandemic) to invest in new technologies as a key tool to enhance their competitiveness [32]. Presumptions for the development of the forestry and wood-based industry are increasing the level of production, consumption, and export of wood and paper commodities with higher added value [30]. Similar results were presented in the published paper by Keegan et al. [33] whose research sample was from the EU. In addition, this statement was confirmed by Gordeev in a study from Russia [34]. Vu et al. [35] found that the low value added and low productivity of Vietnam’s wood processing industry caused a gradual fall in the international competitiveness growth rate.
Schier et al., authors of the study [36] used The Global Forest Products Model (GFPM) as a partial model for a forest market simulating production, consumption, and trade in wood and wood-based products. The structure of the model distinguishes between raw, intermediate, and finished products. They concluded that both the production of roundwood and wood products shifted from the EU to non-EU countries to varying degrees and decreasing production of roundwood could be a valid estimator for future scenarios in building processes. In addition, from the research results it could be stated that an increase in possibly occurring leakage effects is not significantly affected by the pre-set supply and demand elasticities.
According to theories of international trade, specialization allows countries to focus on production in which they can make the most efficient use of available domestic resources and achieve the best quality [37]. The Heckscher–Ohlin model of international trade speaks of a comparative advantage in a particular factor of production by virtue of its relatively better endowment [7]. The price of the productive resource that a country has an abundance of is low, and so countries specialize in production and exports in those commodities that are input-intensive to produce and with which they are well endowed. In imports, on the other hand, they specialize in commodities whose production is demanding of scarce input resources. As Slovakia and the Czech Republic are well equipped with inputs of wood as a raw material, the processing of domestic raw material, the production of final wood products with the highest added value and their subsequent export should contribute to economic growth and to the higher performance of the wood-based industries. At the same time, these countries do not need to achieve high levels of imports of wood as a raw material and semi-finished wood products.

This entry is adapted from the peer-reviewed paper 10.3390/f14051029

References

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