Singapore: A Free Trade Case Study

The city-state of Singapore has transformed itself from a backwater colonial outpost to a world leader in international trade and finance in just a half-century's time.  How does something like this happen?  The Economist has a great summary for those with any interest in Asia's financial markets here.  For our purposes, let's look at what's happening with lumber and the associated products thereof.

The latest population figures for China come in at about 1.45 billion.  India at about 1.2 billion.  That's a lot of people, and people seem to acquire a few things made of wood over the course of their lives.  How does this affect me in the United States?  Well, the global trades of lumber products, pulp, manufactured goods, etc. are always going to be disproportionally skewed by activities in emerging markets.  I'm focusing on the activities of these Asian markets because price and supply fluctuations 10,000 miles away most certainly have an impact on pricing at home.

The point to be made here is that tropical lumber products fall under a very wide swath of variation.  If you've ever bought an $11 sheet of underlayment with a bamboo veneer from Home Depot that was manufactured in Vietnam, you've benefited from increased production in emerging markets.  A cheap assemble-it-yourself table from Ikea made in the Philippines--same thing.  The fact of the matter is that the industrialized countries simply cannot compete on an even playing field with manufactured goods on a global scale.  We still have vast supplies of North American forest products available for domestic production and consumption, due to the fact that our timber reserves remain vast, and are increasingly managed responsibly.

What does this mean to the exotic lumber market?  Despite the fact that the vast majority of tropical forests featuring the high-end decking materials such as Ipe, Cumaru, and Massaranduba are responsibly managed, it doesn't take much imagination to know where the irresponsible forestry is being practiced in the world.  The same people who bark about how the rain forests are disappearing worldwide are quite powerless to address concerns in countries that share no such concern over responsible management and growth.

Singapore, with its duty-free port, has become a hub of raw materials and manufactured goods.  I don't know if there is such a thing as "product laundering" to effectively wipe out the trace source of such goods, but if there is, it most certainly exists in this port.  It appears to me that about half the lumber goods flowing through that port are sourced in countries that are signors to no international treaties advocating responsible forestry.

So, next time you're sharing some drinks at a friends' home, and he or she starts bemoaning the state of the world's rain forests, take a close look at their furniture.  Ask if they know where the plywood was sourced to build their new green home.  You might just surprise those who seem to be the most concerned.