Forest-Based and Related Industries of the European Union - Industrial Districts, Clusters and Agglomerations

Colin J. Hazley

No 160 in ETLA B from The Research Institute of the Finnish Economy

Abstract: This book reveals the importance of the forest-based and related industries of the European Union, which is a large economic entity, providing widespread benefits to the whole of the EU. Combined, these industries provide direct employment for over 4 million people, have a turnover of 400 million Euro, and generate a value-added of some 160 billion Euro. These industries are widely distributed across the EU and provide employment both in urban and rural areas, whilst contributing 13% of the EU’s trade surplus. Despite the fact that most of the forest-based and related industries are classified as low-technology industries, tight interaction with specialised machinery and chemical suppliers, reveals that most of the R&D is conducted by the suppliers and thus technology is embodied in purchases of these inputs. Nonetheless, the forest-based and related industries have shown to be very competitive over long periods of time. In fact, most of the competitive elements are based on specialisation and localised learning and are especially located in industrial districts, clusters and agglomerations. In many cases, the sources of competitive advantage are derived from localised intangible resources, which are built-up over long periods of time and are not easily transferred or rebuilt. In revealing some of the forest-based and related industries’ strengths and weaknesses, in key products and industries, the book also highlights some threats posed by the expansion of the European Union to include its neighbours in Eastern Europe. Although EU forest-based and related industry exports have grown rapidly to Eastern Europe, the share of imports from the Eastern European countries and Russia has grown even faster, and now stands at 6.5 billion Euro, the second largest importer after North America. Expansion of these industries in some of the least regulated markets in Eastern Europe, also suggests that environmental problems are being encouraged to develop, unabated. Developments in Eastern Europe will clearly have an impact on the forest-based and related industries of the EU, hence a more detailed analysis of the situation using the cluster approach would seem the most appropriate way forward.

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