I. Introduction

Purpose of the study
Methodology
Economic setting

Purpose of the study

During the course of the past century or so the world economy, in the sense of the total product of economic activity, has been steadily growing at rates which are almost certainly higher than have ever previously been achieved over any sustained period. But, as is well known, by no means all the countries in the world have experienced this sustained growth. It has in fact been confined to those in which a modern industrial system has grown up, and to the period over which the industrial sector has been an important part of the economy in these countries. For those developed countries for which records exist over any appreciable part of this period, growth in product has often been at rates surpassing 20 percent each decade - a rate which means a rise in product of more than 6 times over a century and an increase of nearly 40 times over two centuries.

In the-more recent past, and in particular in the postwar period, attention has increasingly been directed to the ways and means of sustaining this growth and of initiating sustained economic growth in those countries still at an early stage of development. This has given mounting impetus to the need to appraise and understand the workings of the economy, and to determine what action is necessary within its component parts in order to effect optimum growth.

The sector which produces and uses wood and wood products is an important part of overall economic activity in nearly every country in the world. Wood is one of the world's principal natural resources, one that is renewable, and one which nearly all countries possess or have the capacity to create. The products of wood enter widely into the economy at every stage of development, and the industries which use wood form an important part of the manufacturing sector of most of the more advanced economies. To take but one global measure of this importance, in 1961 the woodusing industries accounted for 6.2 percent of the total value added and 8.6 percent of the numbers engaged in all industrial activity in the world.¹

¹ UNITED NATIONS, 1965. The growth of world industry 1938-1961: international analyses and tables.

In recognition of the importance of the sector, growing attention has been paid for some time at the national and industry levels to systematic appraisal of the nature and evolution of wood requirements and of the productive capacity of the forest resources. A number of countries have by now conducted several periodic studies of this nature.

In 1950 the member countries of the Timber Committee of the United Nations Economic Commission for Europe and of the European Forestry Commission of FAO requested the secretariats of these two organizations to carry out such an appraisal for Europe as a whole, in order to provide the regional framework within which national plans and policies affecting the wood sector need to be set. The resulting study was completed in 1953. Subsequently, similar studies were undertaken by FAO and the respective United Nations regional commissions for the Asia-Pacific, Latin American, and African regions at the request of the countries of these regions, and the coverage of Europe was updated and extended in a new study for that region. Meanwhile the United States, Canada and the U.S.S.R., all countries already experienced in this type of investigation, have each been undertaking a new appraisal of their own for the period ahead covered by the United Nations/FAO; studies.

The present appraisal is designed to bring together, update and summarize the data and findings of this cycle of regional and national appraisals of wood resources and requirements,² and to round this out with data for the Near East and China (Mainland), the two areas not previously so covered. In doing this a new dimension is added. Wood and wood products enter widely into international trade, and no region is entirely unaffected by the markets, resources, and industries of other regions. This study, therefore, also takes a look at this interaction and at the evolution of the global balance between the supply of and demand for wood.

² The investigation undertaken by the authorities in the U.S.S.R. is still in progress. The present study has had access to the most up-to-date historical data available for the U.S.S.R., but the figures for 1975 are provisional estimates by the FAO secretariat, taking account of available Soviet plan data relating to the wood sector.

While there have been earlier endeavors of a similar nature, this is the first integrated analysis of past and prospective developments in the world wood sector which has been based on systematic country-by-country study. The form it takes is of an examination, both globally and area by area, of the pattern and evolution since 1951 successively of consumption of the various wood products, of output of wood from the world's forests, of the growth of the different primary woodusing industries, and of trade in wood and wood products. At the same time, attention is directed toward identifying the probable path and outcome of developments in the near future, and of their implications for the forestry and forest industries sector.

This examination of the probable future evolution of the sector is framed around estimates of the growth in requirements of wood products up to the year 1975. The estimates must not be looked upon as a prophecy of what will necessarily happen in 1975. They are designed to do no more than show what would be consumed under certain specified conditions, in order to provide a bench mark against which to judge the adequacy of present policies and plans affecting forest resource and forest industry development. Provided the conditions assumed are sufficiently close to the conditions which evolve in practice to illuminate correctly the problems and possibilities that will emerge, and their broad orders of magnitude, the study will have served its purpose.

The limitations of the study, and of the national and regional appraisals upon which it draws, are largely those of the quantity, quality and coverage of the data available. Pioneering in this particular field, the series of studies has predictably disclosed weaknesses in the data coverage of the wood sector. Apart from the poorness of much of the forestry sector statistics, there is a general lack of end-use statistics for forest products, and of data relating to the cost of producing wood. The form, depth and methodology of the studies necessarily reflect this.

But the work summarized here is to be seen not only as the culmination of the first comprehensive examination of the wood sector, but also as the initial step in a repeated process of appraisal, with subsequent exercises seeking both to improve the data base and to overcome the conceptual and methodological limitations inevitable in an initial appraisal. The next step at the international level can already be sketched out: the incorporation of the present work into the Indicative World Plan for Agricultural Development that FAO is currently undertaking. Forestry and forest products will form an important part of this fundamental appraisal, which is intended to provide an international frame of reference for countries in planning the whole of the agricultural sectors of their economies. The Indicative World Plan will not only appraise the likely evolution of demand for agricultural products, but will also indicate what overall production targets, for specified commodities and specified areas, would be needed in order to meet this demand, and will examine the implications of these targets in terms of policies, programs and priorities. In order to integrate the wood sector into the Indicative World Plan, it will be necessary not only to revise and extend the projections of wood requirements presented here, but also to project the supply of wood likely to be forthcoming under the conditions foreseen in the Plan. To do this, attention will have to be devoted to improving the knowledge of the economics of supply of -wood and wood products, an area in which the sector at present lags.

The strength or weakness of such future work will necessarily continue to rest principally on the extent and accuracy of the basic data available, which must originate at the national level. Furthermore, the region and the world are only two of the levels at which the sector needs to be appraised. As has been noted, studies at these levels provide the essential broader framework within which national policies and plans are set. But they can be no substitute for national, and local, appraisals of wood resources and requirements which must be the basis for sound formulation of policies and plans. The greater part of the effort devoted to studies of the wood sector around the world must continue to be at this level.

Methodology

As a summary of a series of earlier studies, the present work, by drawing upon their data and forward estimates, rests upon the methodologies used in their preparation. All this earlier work has been revised to take into account any better basic data, improved methodology or, as in the case of the study on wood-based panel products, significantly different relationships between economic activity and consumption which have emerged since the earlier studies were compiled. Revisions have also been undertaken to the economic and demographic framework when up-to-date national or international studies indicate that growth in either population or economic product has been, or is likely to be, significantly different from that assumed in the basic studies. In addition, an entirely new base period set of statistics has been constructed for every country in the world, for 1960-62, to make use of the most up-to-date statistics relating to the sector. A listing of the sources used, and notes on the revisions undertaken, are given in the Appendix.

Use of a number of different base studies means that no single methodology runs through the whole of the present paper. Nevertheless, nearly all the underlying work followed a broadly similar pattern. All contain an estimate of what wood requirements are likely to be in 1975 in each subregion³ at specified levels of population, income and price, and most contain an appraisal of the probable output of the forest in that year. As has been pointed out earlier, this does not necessarily add up to a forecast of what will happen in 1975, because of the qualifications attaching to the underlying assumptions, which are spelled out more fully in the Appendix. Here it will suffice to note, firstly, that what has been assumed to determine the future levels of requirements is not the passage of time to 1975, but the levels of population; income and price expected to develop by then. One or more of the factors might grow faster or slower than assumed, in which case the level of consumption estimated would be reached somewhat earlier or later than 1975. Secondly, the estimates of subregional wood production in 1975 used in the study are generally the felling forecasts of the forest authorities of the countries concerned. These tend to be based upon the physical potential and accessibility of the forest resource, modified by any constraints imposed by current forest policies, rather than upon estimates of the volumes of wood likely to be forthcoming in response to the evolution of the economic and demographic factors assumed. In effect the studies have been largely based upon reasoned assessment of likely future development in the wood sector.

³ For a list of the subregions and their country composition, see the Appendix.

The assumptions regarding trends in the three principal factors affecting future requirements need further elaboration. To take prices first, in nearly all cases the assumption is made that there will be no change in the relationship between those prices of wood and wood products and of their nearest substitutes which obtained during the recent period that formed the basis for the analysis. These relative prices tended in most cases to be actually moving up or down slightly during the base period, and it is further assumed that the effects of these price changes will be satisfactorily explained by the apparent relationship between consumption and income per caput and population which obtained during the base period.

As a result of this simplifying set of assumptions, the principal determinants of change in consumption of wood products in this exercise are change in population and change in income per caput. It will, therefore, be pertinent to examine briefly how these two factors are expected to evolve, both separately and in terms of the accompanying changes in overall economic structures and magnitudes.

Economic setting

Growth in population
Growth in income per caput
Some implications

Growth in population

Over the quarter century to 1963 the world's population increased at an average annual rate of about 1.5 percent - a rate of growth which has resulted in a 50 percent increase in population numbers over that period, which, if sustained, would double it in less than 50 years. In fact, over the past century the world population has apparently increased by between two and a half and three times, a growth of a magnitude which has almost certainly not been experienced over any period of this length earlier in the world's history.

Moreover, in some of the major regions of the world populations have been growing very much faster. The recent rates of growth in Africa and Latin America shown in Table I-1 are such as to double the population of these regions every 25 to 30 years. In contrast, the population of Europe is growing at a rate which would require nearly a century for it to double in size. As the growth in population in Asia is also faster than average, a further feature of the pattern of population growth is thus that the population of the developing regions is growing faster - appreciably faster than the populations of the developed countries.⁴ Moreover rates of growth in many developing countries are still accelerating.

⁴ The distinction between " developing " and " developed " in regions of the world is of course less a cut-and-dried division than a broad distinction into two groups of countries which are in fact at many different stages of development, and which will develop in the period to 1975 at widely different rates. Nevertheless, as is shown in this chapter, the difference in level of development between most developed and most developing countries is so striking, and has such important implications for the future as to require that this distinction be recognized.

As there remains considerable scope for rapid decreases in the death rate in nearly all developing countries, it must be expected that their population growth will-continue to accelerate. A feature of the coming decades will therefore certainly be a continuation of the so-called " population explosion." The assumptions as to future growth in population used in this study are based upon a recent United Nations report on population and prospects.⁵ As can be seen from Table I-1, which reproduces these projections, the countries classed as developing at present contain some 2,000 million people - about two thirds of the world's population. By 1975 they can be expected to contain nearly 3,000 million, and by the end of the century roughly 4,500 million people - by which time they would account for three quarters of the world's, population.

⁵ UNITED NATIONS, 1964. Provisional report on world population prospects, as assessed in 1963. Medium level projection. The population projections used in the United Nations/FAO timber trends studies for Latin America and the Asia-Pacific region were replaced in the present study by those given in this United Nations report.

Growth in income per caput

As has been noted previously, the earlier decades of this century, and often the latter decades of the 19th century, saw rapid and sustained growth in the per caput income of a number of countries, principally the developed countries of North America and Europe, the U.S.S.R. and Japan. Table I-2 indicates how much ahead of the rest of the market economy countries their per caput incomes have run, and Table I-3 shows to what extent economic wealth, as expressed by gross domestic product, is concentrated in these countries. As is shown in Table I-3, the group of developed countries accounts for nearly 85 percent of the gross domestic product of all market economies, although it accounts for only 33 percent of world population. In per caput terms, average GDP in the developed countries is more than 10 times as high as in the developing countries, which have yet to bring about a period of sustained growth. The range between the most and least developed is of course much wider.

TABLE I-1. - WORLD POPULATION: GROWTH FROM 1920 TO 1960, AND PROJECTIONS TO 2000

	1920	1930	1940	1950	1960	19751	20001
DEVELOPED REGIONS	Millions
Europe	327	355	380	392	425	467	527
U.S.S.R.	155	179	195	180	214	261	353
North America	116	134	144	166	199	243	354
Japan	55	64	71	83	93	106	122
Oceania	8,5	10	11	13	16	20	32
Total	662	742	801	834	947	1097	1388
DEVELOPING REGIONS
Latin America	90	108	1130	163	212	325	624
Africa	143	164	191	222	273	393	768
Asia2	968	1056	1173	1298	1558	2092	3185
Total	1201	1328	1494	1683	2043	2810	4577
WORLD TOTAL	1862	2070	2295	2517	2990	3907	5965

NOTE: Detail may not add to totals due to rounding.

SOURCE: Data derived from: UNITED NATIONS, 1964, Provisional report on world population projects, as assessed in 1963. ¹ "Medium" level projection. - ² Excluding Japan.

TABLE I-2. - GROSS DOMESTIC PRODUCT PER CAPUT, 1950-75

	GDP 1961	Average annual rate of growth in product¹ per caput (at constant prices)
		1950-60 (actual)	1961-75 (estimated)
	$ per caput	Percent
DEVELOPED REGIONS
Western Europe	21095	3,7	33,4
Eastern Europe	4	57,2	36,4
U.S.S.R	4	5, 67,5
North America	2620	1,5	31,9
Japan	550	8,0	6,0
Pacific	1495	1,7
DEVELOPING REGIONS
Latin America	295	1,8	2,6
Africa	135	1,9	2,5
Asia7	88	2,2	2,5
Chine (Mainland)	..	..	..

SOURCE: see Appendix.

¹ Refers to gross domestic product unless otherwise stated. - ² Excluding Yugoslavia. - ³ Gross national product per caput. - ⁴ A recent FAO/ECE secretariat attempt to express national incomes of all European countries on a comparable basis (see Appendix) gave the following approximate values for GNP per caput in 1960, in U.S.$: western Europe, 900; eastern Europe, 700; U.S.S.R., 950. (The discrepancy between this figure for western Europe and that in the table is due mainly to the use of different exchange rates from national currencies to U.S.$.) - ⁵ Net material product per caput. -⁶ 1953-61, -Less Japan and China (Mainland).

The data reproduced in Table I-2 show that, in the period 1950-60, per caput product in the developed market economies on average again grew at a faster rate than in the developing countries. In absolute terms an increase in per caput GDP of the developed countries from $1,080 in 1950 to $1,410 in 1960 compared with an increase of from only $105 to $130 as an average for the developing countries.⁶ Thus the gap between the two widened still further.

⁶ UNITED NATIONS, 1964. World economic survey 1963, Vol. 1, p. 20.

For the future there are no worldwide projections of growth in income comparable to those for population discussed above. But many countries and groups of countries have engaged in the exercise of forecasting, planning or setting targets for their future economic growth. The assumptions of economic growth to 1975 in this present study are as far as possible derived from such plans, targets or objectives as exist.⁷

⁷ See the Appendix.

It could be argued that rates of future growth based on targets and objectives are liable, almost by definition, to represent the upper ranges of what might emerge in practice. This may be so; they are accepted here as representing the expressed intentions and aspirations of the countries concerned. If this examination of the forestry and forest products sector is to be of use to the countries of the world, it must clearly recognize these objectives and must examine their implications for the future of the sector. Furthermore, as has been pointed out above, the present paper is expository rather than prophetic in nature. What is important is that its underlying assumptions are kept in mind in drawing conclusions from its contents and in later years when comparing its forward estimates with the actual passage of events.

The rates adopted here, which are summarized in Table I-2 and set out in full in Annex Table I-A, assume rates of growth for most developed areas a little lower than those achieved during the recent past, while, for the developing countries, future growth is assumed to be rather faster than in the past. But, even these rates are not very high, nor will they in the period to 1975 raise the absolute level of GDP per caput very far in developing countries. In other words, even substantial deviations from the rates of growth assumed will not in this period of time alter the basic feature of the world economy - namely, the continued concentration of the absolute growth of economic wealth in the already developed countries and the continued low level of income per caput in the countries where the greater part of the world's growth in population will take place.

Some implications

Demand for wood and wood products will necessarily reflect the aspects of the structure of the world's economy set out immediately above. In other words, the additional demand stemming from growth in population is likely to be largely for the simpler forms of wood required at early stages of development, while the additional demand stemming from increased income is likely to be concentrated in the more highly developed countries.

The form and magnitude of the additional demand in the latter will also be very much affected by the changes in the structure of the economies of these countries which underly their growth. Viewed cross-sectionally across the range of countries at different stages of development, the share of the agriculture sector falls from about 55 percent of national product in countries in the initial stages of development, to less than 15 percent in those which are most highly developed. The share of the manufacturing sector meanwhile rises from about 15 percent to about 40 percent, while the service sector grows from about 35 percent up to about 50 percent. That this is also broadly the nature of the changes that occur over time with economic growth is witnessed by the data of the countries for which records are available for lengthy periods into the past.⁸

⁸ S. KUZNETS, 1957. Quantitative aspects of the economic growth of nations: II. Industrial distribution of national product and labour force. Economic Development and Cultural Change, Suppl. to Vol. 5, NO. 4.

TABLE I-3. - DISTRIBUTION OF GROSS DOMESTIC PRODUCT IN 1960

	1960 distribution
	$1,000 million	Percent
DEVELOPED MARKET ECONOMIES	920.1	84.1
Western Europe	314.3	28.8
North America	539.8	49.5
Japan	39.0	3.6
Oceania and South Africa	27.0	2.5
DEVELOPING MARKET ECONOMIES	169.1	15.6
Latin America	61.4	5.6
Africa¹	27.0	2.5
Asia ²	79.2	7.3
Others	2.2	0.2
ALL MARKET ECONOMIES	1 089.9	100.0

SOURCE: UNITED NATIONS, 1964. World economic survey 1963. Vol. 1, Table 2-1.

¹ Excluding South Africa. - ² Excluding Japan.

The growth in demand for manufactured goods has a particularly important bearing on the use of wood - which becomes less a product required for use in the round and more a raw material for industry. A principal purpose of this study will be to examine the prospects of the various industries that use wood, and the probable evolution of demand for their products. At this stage it will suffice to note two general features of industrial growth which have a bearing upon what follows.

Firstly, growth in income per caput requires a rising productivity per head employed. One measure of this rise in productivity is the continuous improvement in the efficiency with which resources and other factors of production are used, so that less and less are required for a given quantity of final product. In a dynamic economy there is, therefore, a strong tendency for growth in output to outpace growth in input of raw materials by an ever-widening differential. As will be seen in the following chapters, the wood-using industries, as a group, also exhibit this characteristic. Their continued success, both individually and in competition with industries based on other resources, is likely to depend to a considerable extent upon their ability to achieve further growth in the value of the product they can obtain from a given unit of wood.

Secondly, in a growing economy the industrial sector as a whole is marked by continuous technological progress to feed the sustained rise in productivity. But in any particular narrow field technological advance is highly discontinuous. In individual industries major new technologies occur only very infrequently, to be followed by lesser, supplementary changes, to build upon and consolidate the progress made. There is in fact a clear-cut tendency for growth in individual industries to be at a decelerating rate most of the time.

FIGURE 1. - DISTRIBUTION OF THE WORLD'S POPULATION, FORESTS, AND INDUSTRIAL WOOD USE, 1960-62

A constant or accelerating rate of growth in the economy as a whole is, therefore, only achieved by the constant emergence of new industries or a new stage of expansion in existing industries, with higher than average rates of growth. This draws attention to two important aspects of modern industrial economic growth. Firstly, the sequential pattern of growth with very different rates of growth in individual industries causes the structure of industrial output in the national economy to change over a period of time, and to change quite rapidly. Secondly, if economic growth is to be sustained, the pace of change underlying it must be always accelerating. The process of introduction, development and diffusion of each new technology must proceed at an ever faster pace. The prospects of individual industries, including the wood-using industries, must be seen against this background.

Some idea of the place in the industrial aggregate occupied by the wood-using industries can be gained from the statistics reproduced in Table I-4. As was noted in the opening paragraphs of this chapter, the two wood-based groups identified - wood products and furniture, and paper and paper products - accounted in 1961 for 6.2 percent of the value added and for 8.6 percent of the numbers engaged in all industrial activity in the world. The table also shows that, even in such a short period as that of 1950-61, there were marked shifts in the structure of the world's industrial sector, reflecting the significantly different rates of growth at which the production of different groups of industries were growing. Both the wood based industry groups were on average growing somewhat slower than industrial output as a whole, and this is reflected in the fall between 1950 and 1961 in the share of total value added that they accounted for. But these average rates of growth hide the widely different performances of individual industries. For instance, while output of the sawmilling industry was growing during this period at only 2.7 percent per year, the plywood industry was growing at more than 9 percent, while the particle board industry, which was still in its infancy in 1950, was, and still is, growing at an explosive rate.

Further consideration of the detail, industry by industry, will be deferred to the chapters that follow. The data deployed in the present chapter will suffice to set the wood sector in perspective, and to indicate some of the wider considerations that underly and affect its growth within the framework of the economy as a whole.

TABLE I-4. - STRUCTURE OF: INDUSTRIAL ACTIVITY IN THE WORLD IN 1950 AND 1961, AND AVERAGE ANNUAL: RATE OF CHANGE IN INDUSTRIAL PRODUCTION, 1950-60

	Distribution of:			Rate of change in production
	value added (1958 U.S.$)		numbers engaged
	1950	1961	1961	1950-1960
	Percent			Percent p.a.
Food, beverages and tobacco	13,1	10,7	13,6	4,8
Textiles, clothing and leather products	12,1	9,7	19,6	4,7
Wood products and furniture	4,2	3,8	6,9	5,7
Paper and paper products	2,7	2,4	1,7	5,4
Coal and crude petroleum, etc.¹	16,9	17,9	10,5	7,2
Nonmetallic minerals and products	4,7	5,1	6,0	7,9
Metal mining and basic metals	10,4	9,5	6,2	5,9
Metal products	25,4	29,9	27,1	8,6
Electricity and gas	3,8	5,0	2,0	9,5
Other	6,7	6,0	6,4	..
Total ²	100	100	100	6,7

SOURCE: UNITED NATIONS, 1965. The growth of world industry 1938-1961: international analyses and tables.

¹ Also chemical, goal, petroleum and rubber products. - ² All mining, manufacturing, electricity and gas.

ANNEX TABLE 1-A. - ASSUMED GROWTH IN POPULATION AND PRODUCT PER CAPUT, 1961-75

Region	Population		Average annual rate of growth in product per caput¹
	1961	1975³	1961-75
	Millions		Percent
EUROPE			(GNP)
Northern Europe.	20.21	22.40	2.85
EEC	171.23	188.49	3.65
United Kingdom and Ireland	55.74	59.29	2.95
Central Europe	31.19	35.94	4.40
Southern Europe	76.45	92.86	3.55
Eastern Europe	98.00	109.90	² 6.40
Total	452.82	508.88	4.00
U.S.S.R	218.00	260.80	..
NORTH AMERICA			(GNP)
Canada	18.27	24.71	1.9
United States.	183.76	223.00	1.9
Total	202.03	247.71	1.9
LATIN AMERICA
Mexico.	36.09	58.82	2.8
Central America.	12.25	19.12	2.8
Caribbean	20.18	27.68	2.8
Northern South America	27.48	44.46	2.8
Southwest South America	21.78	31.51	2.8
Brazil	71.81	108.01	2.5
Southeast South America	25.76	32.36	2.3
Total	215.35	321.96	2.6
AFRICA			(GDP)
Western	117.33	163.80	2.5
Eastern	88.06	122.40	2.5
Northern	55.31	83.20	2.5
Southern	18.13	25.90	2.5
Total	278.83	395.30	2.5
NEAR EAST			(GDP)
Mediterranean Basin.	11.36	16.71	2.5
Southwest Asia.	41.75	60.00	2.5
Arabian Peninsula	14.38	17.25	2.5
Total	67.49	93.96	2.5
FAR EAST			(GDP)
Continental south-east Asia	97.08	139.69	2.5
Insular southeast Asia	128.01	184.05	2.5
South Asia	550.29	767.24	2.5
Japan.	94.05	106.17	6.0
East Asia (less Japan)	48.87	73.48	2.5
Total	918.30	1 270.63	3.5
PACIFIC	13.82	17.92	..
CHINA (MAINLAND)	660.00	792.00	..
WORLD TOTAL	3 026.64	3909.16	..

SOURCE: See Appendix.

¹ Refers to growth in either gross national product (GNP) or gross domestic product (GDP) at constant prices. - ² Based on data from the recent FAO/ECE timber trends study for Europe in which the gross national product of all countries in Europe was expressed in comparable terms. - ³ In the ease of Europe, Canada and Africa (less western Africa), 1975 population estimates are those contained in the regional timber trends studies and differ slightly from the United Nations data reproduced in Table I-1.