Forestry at the heart of B.C.'s export economy

As the annual convention of the Council of Forest Industries of B.C. gets underway, it’s an opportune time to revisit the many contributions the forest sector makes to the provincial economy. The production activities that take place across all segments of the forest sector account for $13 billion of B.C.’s economic output (GDP), generate roughly $9 billion in annual labour income, provide direct employment for up to 60,000 British Columbians, and pay $4 billion in taxes, royalties and fees to various levels of government. According to a soon-to-released economic study, in five of seven B.C. regions forestry supports between 8% and 22% of all jobs. By any measure, then, forestry packs a substantial economic punch in the B.C. context.

Below, I focus on one important way forestry remains critical to the province’s economy: its outsized place in B.C.’s export mix.

British Columbia, like Canada, is a small open economy that depends heavily on international trade to drive the growth of incomes, high-paying jobs, and overall living standards. Exports of goods and services amount to around one-third of the province’s GDP.[1] These exports furnish the economic wherewithal that enables B.C. households, businesses and public institutions to pay for imports of a wide array of goods and services – everything from vehicles, medical devices, pharmaceutical products, IT equipment, and all manner of consumer electronics to digital services, clothing, sophisticated machinery, and many foodstuffs.

As a small economy, B.C. needs to devote sustained attention to the performance and prospects of its “traded industry clusters.” These are industries that produce goods and services for sale across the country as well as globally. Traded industries are in many ways the foundation of the province’s prosperity.

Forestry ranks as B.C.’s biggest traded industry cluster, and by a significant margin.

The first figure below shows the average share of forest products in B.C.’s total merchandise exports, measured on a three-year basis starting in 2009 and ending in 2017. Despite the province’s increasingly diversified economy, forestry continues to loom large as a source of exports, supplying 31-35% of B.C.’s merchandise exports[2] (by value) every year over the last decade. The annual figures bounce around based on trends in commodity markets, the exchange rate, and the strength of foreign demand for B.C. exports.

Figure 1

Share of forest products in B.C.'s Merchandise Exports
(average over the periods shown)

Source: BC Stats, Annual BC Origin Exports, August 3, 2018.

It may surprise some readers to discover that forestry’s contribution to B.C.’s merchandise exports hasn’t trended down in the last decade, even though some other industries – e.g., energy, agriculture, the digital sector, and high technology – have gained a higher profile. Indeed, if anything, forestry’s place in B.C.’s merchandise export portfolio has expanded slightly since 2009.

The second figure shows the value of B.C.’s forestry-based merchandise exports as of 2017. Lumber and pulp are the biggest export categories, followed by logs, panel products and paper.

Figure 2

B.C. exports of forestry-related products (2017)

Source: BC Stats, Annual BC Origin Exports, August 3, 2018.

The information summarized above confirms two points.

First, forestry is still the province’s leading industry, judged by its ability to generate many billions of dollars of export earnings every year – regardless of market conditions. Second, the forest sector’s importance to B.C.’s export economy has not diminished in the last decade.

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[1] This includes international exports of goods and services along with B.C. exports to other Canadian provinces.

[2] Note that this does not include exports of services, which represent a growing fraction of B.C.’s total exports.