Competitiveness in the global forest industry sector: an empirical study with special emphasis on Germany

The objective of the presented study is to analyze the competitiveness of the German forest industry sector against the background of the international timber markets. The analysis is conducted based on global bilateral trade data in monetary terms. Timber commodities are grouped according to twelve commodity classes; each class is clearly attributed to one of the three processing levels raw wood, semi-finished and finished wood products. After an introductory description of the structure and development of the global timber market, two result-oriented competitiveness indicators have been applied: the revealed comparative advantage (RCA), which indicates whether a country is specialized in a specific sector-the RCA analysis has been conducted by means of the two consecutive indices Balassa index (BI) and Aquino index (AI)-and in addition the constant market share (CMS) analysis, which disaggregates the overall export growth of a country into four different effects: (1) the world growth effect, (2) the commodity-composition effect, (3) the market-distribution effect and (4) a residual, which usually is interpreted as the competitiveness effect. Depending on the chosen indicator, results are given for 21 and 25 leading countries (RCA and CMS, respectively). The highest BI values are shown by Russia for raw wood (10.4), by Finland for semi finished wood products (11.3) and by Poland for finished wood products (4.7). The AI shows that countries which are specialized in timber commodity exports mostly are significant timber importers, as well. This is an indication of their integration in an intra-industry trade. Germany only has a BI value somewhat greater than 1 for finished wood products. This can be seen as an indication of merely an average competitiveness position in global timber markets. The CMS analysis delivers two key results: most of the leading timber exporters in absolute terms show only low export growth rates and vice versa. Furthermore, a strong positive relationship can be identified between a country's timber export growth rate and its competitiveness effect. Most of the Eastern European and many Asian and Latin American countries show this pattern, as they have high growth rates and high positive competitiveness effects. Germany's export growth can be attributed much more to the overall world growth in timber markets than to its forest industry capacity. Hence, a stagnation of world growth would have crucial effects on the German forest industry sector.