It is the purpose of t h s section to lay out what appears to be the consensus goals among the North American participants for the North American component of the IlASA global model. The starting point is a list of objectives regarding the product that will result from the IIASA effort. The consensus is that the IlASA global model will be primarily use- ful as a tool for examining forest product international trade flows under a range of assumptions on supply-demand conditions and trade restrictions/barriers in participating countries. As a consequence, the following model characteristics would appear to be most important from the standpoint of utility to potential users in North America.
1. The global model should be compatible with the North American Timber Assessment Market Model - TAMM. That is, the basic North American component will be an adaptation (albeit a n extensive one) of the basic TAMM structure including price responsive supply and demand.
2. Emphasis in the IlASA study should be on relative delivered pro- duct costs and prices in determining international trade flows in international markets. Costs should also be given explicit recog- nition in the determination of production volumes in those coun- try models representing economies which are not centrally planned.
3. Operationally, emphasis in use of the IIASA model should be on
"what if" simulations, i.e., alternative scenarios of trade flows and prices under various assumptions on economic forces and differences. In addition, it is recognized that for many countries internal and external trade flows (even within fairly narrow pro- duct categories) are often not homogeneous, substitutable pro- ducts. Some allowance for this lack of product homogeneity should be introduced in the model.
For western market economies that are not centrally controlled, the country models should incorporate four basic modeling components:
1. Product demand processes. These processes would explain volumes consumed of various products and would recognize income and price substitution effects among major classes of forest products and other materials.
2. Product supply processes. These processes would explain volumes produced of various products and would have the fol- lowing general attributes:
a. They would be structured so as t o be sensitive to produc- tion costs and incorporate an accounting for total variable costs of production.
b, Investment decisions, i.e . , adjustment of capacity over time to changing economic conditions, should be explicitly modeled.
c. Product supply processes should allow for explicit treat- ment of product recovery (product output per unit of wood/fiber input) and for changes in recovery over time.
3. Demand for wood. The demand for timber can be derived from elements (1) and (2) above. T h s is a n essential consideration since it is a point where technological shifts
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notably those relating to timber utilization -would be introduced.4. Wood supply processes. These processes would explain the cost and volume of wood delivered t o processing facilities.
a. As in the case of product supply, these processes should be sensitive t o costs (in countries where this is appropriate) and incorporate a n accounting structure for the variable costs of operation.
b. Wood supply processes should incorporate such inventory and management inputs as necessary to describe short- term harvest.
c. Some thought should be given to differences in wood inputa quality characteristics, such as softwoods and hardwoods, and sawnlogs and pulpwood.
In the exchange module of the global model, a spatial equilibrium framework should be adopted as the process for solving for trade flows and prices. In this framework each country would operate in local deflated currency units. Exchange rates and transport costs would then be an integral part of the global spatial equilibrium framework. For some countries, the exchange rate would be exogenous, while in others it would have to be treated a s endogenous. In most countries, links t o the rest of the economy would be through the exchange rate, demand shifters and non-wood costs. In some countries, such as the U.S., these links would be unidirectional, since events in forest products markets have little impact on the rest of the economy. In other countries, where the forest products sector comprises a major segment of the economy, these links must be two-directional.
Finally, for countries such as the U.S. with large domestic markets, several domestic producing regions, and complex patterns of internal trade, it seems desirable to limit the role of the exchange module to the determination of international trade flows. However, intra-national flows for large countries as the U.S. and Canada could be determined by a sub- model which produces a domestic solution that may be conditional on international market conditions. Full equilibrium in this context may require several iterations of both the national and exchange models.
APPENDIX
k List of presentationsF'inland
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- A n I d e a l m p e of Forest S e c t o r S o c i e t y ? Tarmo KoskinenThe Role of t h e S t a t e in t h e D e v e l o p m e n t of t h e F i n n i s h S e c t o r Ritva Hainari
Forest s e c t o r a n d R e g i o n a l D e v e l o p m e n t in t h e NORDCAN a r e a Jussi Raumolin
I m p a c t of B u s i n e s s C y c l e s o n Wood S u p p l y John Hdsteland
U t i l i z a t i o n of C o m p u t e r s t o I m p r o v e t h e C o m p e t i t i v e n e s s of Veitsi- l u o t o Co
Eino Ravaska
S t a c k e l b e r g Equ.llibria f m t h e F i n n i s h Forest S e c t o r Markku Kallio
Fixed P o i n t A l g o r i t h m s a n d t h e World T r a d e Model Seppo Salo
A l l o c a t i o n of Forest B i o m a s s in a R e g i o n Sten Nilsson
Wood R e s o u r c e s a n d t h e D e v e l o p m e n t of t h e Forest I n d u s t r y in N o r d i c C o u n t r i e s
Kullervo Kuusela
P r o b l e m s of t h e Wood A v a i l a b i l i t y in t h e P l a n n i n g of t h e Forest I n d u s t r y
Yrjo S c h d t
Wood S u p p l y S i t u a t i o n for N o r w e g i a n P u l p a n d P a p e r I n d u s t r y Jens-Mikael Lund
T h e P l a n n i n g P r o c e d u r e of Forest I n d u s t r i e s Pentti Sierila
Cash-based P r o f i t a b i l i t y C o m p a r i s o n of finnhh a n d S w e d i s h Forest I n d u s t r y
Eero Artto
S t r a t e g i c P r o b l e m s a n d P l a n n i n g of S o e d r a S k o g s a e g a r n a