An international trade analysis for selected paper products

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Virginia Polytechnic Institute and State University


The future of the American paper industry remains uncertain. A growing South and the nation's continued reliance on trade for a significant proportion of its domestic needs is of concern to the industry and the nation. The probable consequences of past and potential changes in the demand for and supply of newsprint, printing paper, and paperboard concern businesses and public agencies in the paper industry. However, these probable consequences on the American paper industry have to be considered in relation to the world market since paper products are substantially traded on the international market.

A competitive model of the world market for newsprint, printing paper, and paperboard was developed. Estimates of supply and demand functions based on annual data for the period 1962 to 1978 were obtained for each of these products for the major producers and consumers which include Japan, Canada, the European Economic Community, the Nordic countries, and the United States. Based on these estimates, the historical data was simulated using reactive programming. Projections about the future market conditions were also made using the same algorithm.

Inelastic price elasticities of paper for both supply and demand confirmed the findings of more recent research. Thus, factors other than prices would be more responsible for changes in the quantity demanded or supplied. Three sets of projections for selected years up to year 2030 were performed. These projections assumed that the historical trend will continue into the future. Historical simulation indicated that many of the direction of trade flows were correct but the magnitudes did not come close to the actual data. The European Economic Community and Japan are the major markets and the U.S. South the major producer of paper products in the future.

Obtaining a consistent and reliable set of data across countries was a problem. Not including potential markets such as the less developed countries and Latin America, which is also a potential supplier, is a shortcoming of the study. Unrepresentative transportation costs is suspected for the divergency in magnitude between actual and simulated data. Further research on the role of transportation costs in affecting trade flows of paper products is needed.