International Commodity Governance: Softwood Timber Trade 1870–1970

1 Introduction

The analysis of public and private commodity governance and their interactions is an emerging field of the social, political, and environmental sciences.^[1] In economic and business history, exploring commodity governance can offer perspectives on institutions and norms which have facilitated economic growth, productivity, standardization of products, cartels, legal development, and international relations, among other things. Exploring the long history of commodity governance reveals institutional continuities, collaborations, and competition between different governing regimes.

This article delves into the history of the softwood timber trade. The focus is on the international governance of timber, which originated from the expansion of trade during the Second Industrial Revolution. Although governance is typically defined as the exercise of political power to manage a nation’s affairs or as the management of organizations or countries at the highest level, Maximilian Oehl argues that governance encompasses a broader scope than just government activities and institutions. It often comprises the “informal underpinnings of political decision-making that have always supplemented formal procedures”, including the contributions and policies of other actors in society.^[2]

Following Oehl’s definition, we suggest that the activities of business associations and their international networks, which aimed at gathering knowledge, distributing resources, and creating market regulation, have represented a significant form of international commodity governance in the past.^[3] Furthermore, as this article shows, these two realms of governance, public and private, do not exist or develop in isolation, but often competed or collaborated with each other.

The aim of this article is to contextualize the circumstances and institutional conditions that shaped international governance of the timber trade in the 20^th century. We show how private and public organizations in the international timber trade have created governance institutions since the late 19^th century. We explore how the commercial, legal, and political environment shaped international timber governance over time and how international geopolitical challenges, world wars, changing economic regimes, anti-cartel movements, and the Cold War re-structured timber governing institutions. Special attention will be paid to the power shifts and competition over who governed the timber trade: the governments, the trade associations and their international coalitions, or the economic committees of the League of Nations and the Food and Agriculture Organization (FAO).

International commodity governance as a concept is often associated with the United Nations Conference on Trade and Development (UNCTAD) and post-colonial governmental agreements concerning commodities, however, we suggest that the concept is applicable outside this framework.^[4] According to Jeffrey Fear, cartels have been perceived for over a century as a legitimate form of market governance.^[5] We use international governance as a conceptual tool to analyze the timber trade associations’ initiatives to internationally regulate, standardize, monitor, and develop the production and trade of timber. The (inter-) governmental interest in interfering in governance, which has been high at times for the timber trade, makes the concept particularly suitable. The conceptual choice allows us to ask which forms of international governance the timber traders chose or were subject to over the course of decades, due to political, commercial, and legal constraints and rivalries.

Another major contribution of our article concerns periodization. Literature since the 1970s has divided the history of international commodity governance into pre-history and history. The creation of UNCTAD represents the great thresh-old dividing the two eras. Furthermore, the literature is typically focused on developments after 1964, paying less attention to the longer history of commodity governance. Interest in the history of global commodity governance under the auspices of the League of Nations and in private business has only emerged quite recently, and the scholarship has identified a rich and complex field of intellectual, political, and economic history.^[6] This research shows that the interwar period is not at all pre-historic. Following these observations, we do not treat 1945 as a year zero after which a new world was invented. The re-ordering and re-institutionalizing of global relations after 1945 grew on the basis of what had gone on before. This is particularly evident in the timber trade; archival data suggests that international governance of timber after 1945 represented a continuation of pre-war institutions.

Following an introduction on the international timber market in the 19^th century, this article shows how the first international governing efforts started to develop around 1900 between the Swedish and Finnish timber trade associations. Then we discuss how the First World War changed the timber market and how growing concerns over the stabilization of the European timber industry – and European economic growth and peace in general – transformed private and public governance institutions in various parts of Europe. Finally, we explore, based on archival materials, the re-building of governance between European exporters and importers after the Second World War and how this is connected to FAO’s timber governance.

2 Early Internationalization of the Softwood Timber Trade

Softwood timber is a basic commodity: it is a robust, bulky product made of wood through a fairly simple manufacturing process. Softwood timber has been shipped from Russia, the Nordic (Finland and Sweden) and Baltic countries (area covered today by Estonia, Latvia and Lithuania), and Poland since the Middle Ages.^[7] A large-scale international timber market developed during the Second Industrial Revolution. The expanding industrialization, population growth, and the growing urbanization in Europe in the second half of the 19^th century required increasing volumes of building and construction materials, but also raised concerns over the exhaustion of domestic forests in urbanizing European countries.^[8]

Securing timber supplies for building and construction became a public discussion in Great Britain in the 1830s and a more pronounced concern in the 1880s. The preference for Canadian timber in the UK, due to trade embargoes during the Napoleonic Wars, petered out by the 1860s and opened opportunities for growing timber exports from the countries around the Baltic Sea. Finnish, Swedish, and Russian timber began to fill the demand at an accelerating rate. Great Britain became the world’s largest timber market with half a million standards’ (std)^[9] import volume by the mid-19^th century.^[10]

By the end of the 19^th century, timber had become a major sector of trade in Great Britain, Finland, Sweden, and Russia. The organization of business followed commercial success in the Western timber countries: Finnish, Swedish, and British timber firms created national business associations in the late 19^th century.^[11] These new institutions gathered and exchanged information on various factors that influenced trade, such as natural environment, prices and stocks, technical issues, insurance, floating, financing and loans, and economic and political trends that affected building activity and the commercial use of forests. The timber sector had expanded greatly and the cyclical nature of the modern timber trade – oscillating between booms and busts – was becoming clear. Timber firms, before the associations, had gathered knowledge individually from their middlemen in various countries – from merchant houses and foreign buyers – but the joint efforts of the associations offered a much greater resource, or hub, which gathered and distributed international market information more efficiently. Furthermore, the associations became the voice of the sector in the crucial political debates surrounding labour questions, the commercial use of forests, duties and tariffs, and transportation. The Finnish and Swedish associations represented a large majority of exporting firms in both countries.^[12]

The timber trade associations, from very early on, also served the purpose of guiding the timber sector to regulate its output according to demand curves.^[13] By 1913, the industrialized continental European countries had become important consumers of Swedish, Finnish, and Russian timber.

The timber markets were divided so that the Nordic and Russian firms exported mainly to Great Britain, and to a lesser degree to France, Germany, the Netherlands and Belgium, while the East Central European firms exported mainly to the continental markets of France and Germany.

Fig. 1

World timber exports in 1913 (by country of origin in percent). Source: Ahvenainen, Suomen sahateollisuuden historia, p. 288.

The prototype of an international governance body for the timber trade began to emerge in 1891 when the Finnish and Swedish associations formed a private cartel to regulate output. Cyclical fluctuations were typical for the rapidly expanding sector – the market oscillated between over-production and shortages – and it was hoped that coordinating the market would stabilize the commercial environment. Creating predictability and stability in the market was, according to Jeffrey Fear, one of the motivations to create cartels along with product quality standards, technology transfer, and increasing profit.^[14] The basis of international governance was built upon the national associations: they exchanged market information and coordinated efforts to regulate output. The cartel agreements were signed for six to nine months – i.e. the coming shipping season – and renewed as needed. Institutionally, the cartel agreements were part of the associations’ operations. Joining the associations and cartels was voluntary for the firms. The collaboration between the Swedish and Finnish associations solidified during the 1910s with the exchange of information, standardization of contracts, and attempts to form further cartel agreements.^[15] Before the outbreak of the First World War, the Swedish and Finnish exporters considered extending the cartel collaboration to the Russian timber industry, but since Russia did not have a national timber trade association, these efforts were fruitless. Nonetheless, the biggest exporters from the Russian ports, such as Archangelsk, occasionally joined the Swedish-Finnish cartel agreements.^[16] Literature on timber export from the former Austro-Hungarian territories and neighbouring countries – Poland, Czechoslovakia, Romania, Austria – does not indicate any joint market governing efforts between them, or indeed even domestically before the First World War.^[17]

The First World War reorganized the raw material and commodity trade. During the war, supranational bodies on an unforeseen scale were created by both the Allied and the Central Powers to obtain strategic materials. The conflict divided the world and turned international trade into economic warfare, designed to produce material hegemony – or shortages for the enemy.^[18] European timber producers operated in the political economy of war: the war cut Finland off from international trade during 1914–1918; Sweden remained neutral and traded with Great Britain, France, and Germany until the naval war of 1917; and the Austro-Hungarian timber resources were bound to German war efforts. Timber was traded through government monopolies.^[19] Great Britain suffered from a timber shortage due to German submarine warfare.^[20]

The collapse of the Russian, German, and Austro-Hungarian Empires totally changed the dynamics of international timber trade. Russia, which had been the leading timber exporter, vanished from international markets until the early 1920s. Political, economic, and social disarray in East Central Europe put timber exports on hold immediately after the war.^[21] Finland was also affected by the collapse of the Empires by gaining independence from Russia in 1917. However, this did not revolutionize the Finnish timber trade. Finland’s trade policies, infrastructure, and institutions had developed separately and independently from Russia. Finnish exports to the West revived within months after the German dominance in the Baltic Sea ended in late 1918.^[22]

Immediately after the First World War, Finland and Sweden were the only countries in Europe with a large capacity to export timber. The timber traders in the two countries, both long-time competitors and collaborators, formed a cartel in 1918, which operated until 1921. It covered 80 percent of all exports.^[23] The Swedish-Finnish cartel of 1918–1921 had written rules, a formal organization, printed price matrixes, and regular communication domestically and bilaterally. Due to the importance of the timber trade for the economies in both countries – in 1920, timber accounted for 27 percent of the value of all export trade in Sweden and 57 percent in Finland^[24] – the cartels also had open channels to the Ministries of Trade and to central and commercial banks.^[25] The economic down-turn that started in the late 1920s, undermined firms’ willingness to collaborate, which is typical for low sunk cost industries, and the cartel fell apart in 1921. The Bank of Finland also contributed to the demise of the cartel; Finnish foreign exchange reserves had reached rock bottom and the central bank advised the timber trade association to abandon barriers of trade like minimum price agreements. Since the central bank financed timber firms, its advice was heeded.^[26]

Gathering and exchanging information and making forecasts was an essential form of collaboration and governance for the Swedish and Finnish timber association leaders. The most important forecasts concerned demand in Western Europe, and from the mid-1920s onwards, also Russian prices and production capacities were reported. The Finnish and Swedish exporters communicated with the timber traders in the importing countries (i.e., GB, France, Belgium, the Netherlands, and Spain) actively before and during the shipping seasons (winter and autumn). The Finnish and Swedish timber associations’ leadership needed information on the size of stocks that the importers had at the docks, how much demand existed in the importing countries, and how prices were expected to develop in the near future. The forecasts concerned markets in the upcoming six- to twelve-month period, and their purpose was to inform the cartel and the Swedish and Finnish timber trade associations about how much they could offer in the coming weeks or the upcoming shipping season; what prices they might want to offer considering the saturation of the market; and how much raw material the Finnish and Swedish timber firms should acquire at auctions. The information that the Finnish and Swedish timber associations gathered was discussed by the leadership of the associations, at board meetings and general meetings between the association members (firms). The information was also communicated in writing to the association members and often to the banks that financed the trade. Unlike in agriculture, tree planting was considered out of the timber cartel’s scope, since it takes decades for trees to reach harvesting age.^[27]

The European economies started to recover from the post-war economic depression before the mid-1920s; the return to the gold standard increased foreign industrial investments and the governments in all major timber importing countries – most importantly Great Britain, France, and Germany – introduced new social housing programmes or expanded existing ones between 1925 and 1929.^[28] Demand for timber peaked. By the mid-1920s, Austria, Czechoslovakia, Poland, Yugoslavia, and Romania increased their international exports to 1.6 million stds. Finland and Sweden were still ahead with some 2 million stds in timber exports.^[29] The Soviet Union was also making its way back to international trade. It had re-organized its timber industry in 1922 under a national selling syndicate, Severoles (later Exportles), and started selling growing volumes to British buying syndicates.^[30] By 1928 the Soviet Union had reached pre-war Russian export volumes.

With a recovering economy and revived demand for building materials, the European timber trading countries started creating structures and networks of international governance partly based on the experiences of the pre-war era and war time, and partly based on the opportunities and constraints of the new post-war political economy. However, European governance was more of an idea than a practice in the 1920s. The Finnish and Swedish timber trading associations continued building strictly bilateral, firm-driven, and commercial collaboration as they had done since the turn of the century, while the coordination of the timber industry among the newly created Central European countries took a more multilateral form.

Governing timber trade on the Swedish-Finnish level in the 1920s took the form of exchanging information on the economic situation and development in the importing countries; exchanging statistical data on timber production, stocks, and sales volumes in both countries that the national associations gathered regularly; and re-establishing the Swedish–Finnish cartel in 1925, which regulated output and occasionally also prices until 1930. The cartel covered the vast majority of all exports in both countries. Including Soviet exporters in the cartel was discussed between the three countries in the mid-1920s as well as 1928 and 1929, but the Nordic producers abandoned the idea.^[31] They also did not consider collaborating with countries like Austria, Czechoslovakia, Poland, Yugoslavia, and Romania because, according to their understanding, collaboration between Nordic countries and them lacked commercial motivation. Furthermore, the organization of the industry there was different; the ownership of Nordic timber firms and forests was to a large extent private, while in these East Central European timber trading countries, governments were more involved on all levels. The Swedish and Finnish collaboration operated via active postal exchanges, personal meetings, and in 1930 also in new joint institutions such as the Swedish-Finnish Trust Council.^[32]

While bilateral timber governance between Sweden and Finland in the 1920s was exclusive, commercial, and firm-driven, the Central European links that began to grow in 1923 were broader in agenda and geographical scope as well as in terms of participants. Sources about the Central European links are scarce – who initiated what, which organizations were involved, and who invited whom – but we do know that there were important meetings of timber traders in Bratislava in 1923, Lyon in 1924, Rome in 1926, again in Bratislava in 1929, and in Paris 1931. It appears that the organizers and the contexts of the meetings varied: for instance, the meeting in Rome 1926 was part of the International Forestry Congress organized by the International Institute of Agriculture (later integrated into FAO). The goal in creating links between the Central European timber interests was, first, to start gathering data on the European timber resources and trade, which was lacking at the time, and second, to rationalize the Central European timber industry and coordinate trade between exporters and importers. Experts and businessmen from various European timber exporting countries participated in these conferences, and representatives from the biggest importing countries – the UK, France, and Germany – participated at least in the conferences organized in the later part of the 1920s.^[33] These timber conferences were often large: the International Forestry Congress in Rome in 1926 had participants from 50 countries and the conference in Bratislava in 1929, which was called the Second International Timber Conference, drew more than 200 participants.^[34] Sweden, Finland and the Soviet Union were invited to the conferences and they participated occasionally. However, sources indicate that the Swedish and Finnish timber trade associations did not consider European timber conferences as important: their main focus was on commercial aspects, the British timber trade, the Soviet competition, and their own Nordic bilateral cartel.^[35]

Separate European realms of international governance working from different commercial and organizational logics, as well as the role of the Soviet Union in undermining the various regulation schemes and rationalization efforts with its skyrocketing production volumes and dumping policies, were the challenges of the 1930s. Production curbs made in the late 1920s by nearly all timber exporting countries in order to balance the international timber market did not lead to effective results, because the Soviet Union, which by the end of the 1920s had reclaimed its pre-war position as the biggest exporter of softwood timber, stayed out of international governance efforts.

3 Reordering Commodity Governance: Formation of a European Cartel in the 1930s

The booming economy of the mid-1920s ended with the collapse of the global financial markets. The prices for agricultural commodities and raw materials had started falling towards the end of the 1920s and eventually crashed in 1929, and together with the monetary policy failures of the gold standard, plunged national economies around the world into depression.^[36] This was particularly true for economies that depended on the production of raw materials and basic commodities, such as cotton, wheat, copper, and rubber.^[37] Timber was one of the commodities that experienced signs of the approaching depression in 1928: supply exceeded demand and prices declined. The second international timber conference in Bratislava in 1929 openly promoted “the formation of an international cartel to regulate production and stabilize prices”, and it “appointed a preparatory committee to consider the foundation of an international timber union”.^[38] The Swedish and Finnish exporters, in the meanwhile, responded to tightening competition by reinforcing their cartel by seeking assistance from banks to keep timber production volumes in check according to the cartel agreement.^[39]

The Great Depression and its many impacts on national and international levels alerted governments to adopt protectionist and interventionist economic policies. As commodity prices were plummeting worldwide and deepening the depression, governments to a growing degree started to consider creating or taking active part in commodity governing institutions. Governments of many softwood timber producing countries were no exception. In early 1931, the Soviet government approached the Swedish and Finnish governments, suggesting a Nordic-Soviet timber cartel. It made sense for the Soviet government to try to improve prices and stabilize the market of one of their most important export products through mutual governance with Sweden and Finland. Government involvement in cartel negotiations was unusual in Nordic business culture during peacetime and the Finnish timber association in particular objected to the idea. The tripartite negotiations began nonetheless. The negotiations failed in early 1932, much to the relief of the Finnish and Swedish timber associations.^[40]

In 1932, the involvement of non-commercial actors in the international governance of softwood timber emerged from another direction. Pietro Stoppani, the director of the Economic Section of the League of Nations, sent invitations to the governments of timber trading countries to a timber conference. This was part of a larger orientation of the Economic Section of the League of Nations since the last years of the 1920s, which recognized that commodity and raw material cartels, under auspices of governments, might stabilize commodity prices, lower tariff barriers, contribute positively to European economic growth, and even facilitate long-term European peace.^[41] These potentials were first discussed at the World Economic Conference of 1927, and the idea gained momentum in September 1929 at the 10^th Assembly of the League of Nations with French Premier Aristide Briand’s initiative of European Union.^[42]

When the Great Depression hit the world economy later that year and led to monetary crisis and high tariff barriers, international commodity cartels – as a channel of advancing economic appeasement and stabilization of agricultural and commodity markets – seemed ever more useful. Joint European actions to combat the economic crisis were drafted at various conferences and commissions set up by the League of Nations, most importantly in the Concerted Economic Actions in 1930, the Commission of Enquiry to European Union from 1930 onwards, and eventually the International Monetary and Economic Conference in 1933. Governmentally controlled commodity cartels were discussed at these conferences as a way to build a peaceful, prosperous, free-trading Europe – and softwood timber was on the list of commodities that was seen as needing government coordinated cartels.^[43] At the turn of the 1930s, many commodity sectors, timber included, suffered from demand fluctuations, overproduction, and under-consumption. Regulation schemes were seen as a fitting instrument of market governance. Models for the governmental regulation schemes at the time were drawn from experiments with the coffee, rubber, tea, tin, and sugar trade, some of the agreements originating from the 1920s or even from the turn of the century.^[44]

Building international timber governance was a multifaceted endeavour for the Economic Section of the League of Nations. It started to gather data about forest resources in Europe, production capacity, ownership of forests, product variety, and trading relations for the purpose of bringing about stability in the timber market. Building governance required not only international standardization of product measures, forest size, and foreign trade – which at the time varied between the countries or was insufficiently documented – but also multilateral negotiations between interest groups, experts, and policy-makers in different countries.

What role did the League of Nations eventually play in organizing timber governance? A traditional paradigm of international relations based on political realism, originating from the 1950s, sees the League of Nations merely as an arena for national battles that lacked agency as an institution. More recent research, following Susan Pedersen and Patricia Clavin’s pioneering works, questions the idea that the League of Nations can be reduced to a sum of national interests.^[45] Particularly on economic and financial issues, the League of Nations operated as “an actor, or more properly as a company of actors” that created a shared normative understanding and practices of liberal internationalism.^[46] In the light of archival material, the agency of the League of Nations in timber trade negotiations during the 1930s was multifaceted: on the one hand, it directly invited and hosted the negotiations on regulating timber output – like in the spring of 1932 and the summer of 1933 – but on the other hand, it also acted as a middleman or orchestrator in bringing experts, businessmen, and policy makers together without being formally present at all times, like at the timber conference hosted by the Austrian government in the spring of 1932. Similar observations can be made about other commodity sectors, like cocoa, tea, and rubber: the Economic Section set the agenda and brought the key interest groups together to discuss and decide the details.^[47] The discussions about industrial agreement at the International Economic Conference of 1927 already made clear that, while many member countries of the League of Nations agreed that European economic growth and long-time peace needed free trade and a new political economy based on economic cooperation and the coordination of industrial agreements, the actual arrangements should, as much as possible, be conducted between commodity producers with the key people of the Economic Section working in the background. The majority of the members of the League of Nations as well as the economic experts the League listened to disapproved of the idea of a supra-national coordinator of cartels, so the Economic Section, once the commodity negotiations processes were underway, became an orchestrator that initiated, invited, set the agenda, and created the institutional settings for the creation and introduction of international rules for commodity governance.^[48]

Austria, which agreed with the Economic Section about the need to create a government-controlled timber cartel, hosted a timber conference in 1932. This conference led to the creation of an international timber office, the Comité International du Bois (CIB), founded by governmental and semi-state timber associations of Austria, Czechoslovakia, Poland, Yugoslavia, and Romania. The CIB was first designed to represent the interests of these countries in cartelization, but later became an important distributor of statistical data on timber. Organizationally, the CIB did not operate under the League of Nations.^[49] The timber producers of Austria, Czechoslovakia, Poland, Yugoslavia, and Romania unanimously supported the idea of a closer collaboration with all timber producing countries in the form of gathering data and regulating the markets. Finland and Sweden sent data to the CIB but were reluctant about an international commodity cartel under the auspices of governments and the Economic Section of the League of Nations. The Nordic timber traders recommended to their governments not to attend the timber conferences in 1932, but the governments nevertheless decided to send delegations for diplomatic reasons.^[50]

A timber regulation scheme under the auspices of the League of Nations was negotiated again in 1933 during the World Economic Conference. To prevent the League’s and governments’ intervention in the timber regulation scheme, the CIB’s statistical secretary, Egon Glesinger, opened a private negotiation channel and invited the European timber exporters to a meeting in late 1933. As a result, the exporter countries of the CIB and the Nordic countries agreed to keep their output in check during the following year. No details, practicalities, nor control mechanisms were decided upon. It was just enough of a decision to write a joint press release that the European timber exporters were collaborating. This was little more than a gentlemen’s agreement and it proved to be ineffective in terms of keeping output in check, but the CIB repeated the invitation and the informal decision again in 1934.^[51]

Timber regulation and international governance were formalized in late 1935 when the European Timber Exporters’ Convention (ETEC) was created. The ETEC existed between 1936 and 1939. This was a full-fledged output regulation scheme between all significant European timber exporter countries: Finland, Sweden, the Soviet Union, Austria, Poland, Czechoslovakia, Romania, Yugoslavia, and Latvia. It was an exporters’ institution that decided upon yearly production quotas for each country. To this end, it gathered data in collaboration with the CIB about timber demand, supply, and stocks, and made forecasts on the direction of the market based on political and economic developments. The ETEC gathered monthly data from the signatory countries on how much timber each producer country had exported, in order to keep track of how the quotas were being followed. All countries were responsible for arranging their own quota division and control institutions to keep their exports in check.^[52] In Finland, for instance, the quotas were divided between all exporting firms – altogether 571 production sites in 1936 – based on their past export volume, so that if a firm A had exported one percent of the Finnish total exports in 1933, they would have the “right” to export one percent of the 1938 quota.^[53] The Finnish timber association had very detailed data, based on information provided by the firms, on the production volumes of each company since 1918. Not all firms complied with the ETEC rules and regulations, of course, but the number of firms staying outside the ETEC was very small: in 1936, for instance, 0,8 percent of the total Finnish exports. Lacking legal instruments to force firms to join the cartel, the timber association used other means of encouragement, such as informing the exporters that the Finnish ETEC organization was collaborating with the National Customs Department, banks, domestic agents, and expeditors, who all were aware of each firm’s individual quota.^[54]

Institutionally, the ETEC represented a hybrid form of commodity governance: private trade associations and governments both took active part in it. The signatories were timber trade organizations, but governments and banks participated in the national control structures in all countries, with the exception of Sweden, where only banks were involved in organizing control. The involvement of the banks as cartel controllers meant that the banks received information from the timber trade association about each company’s yearly quota so that they could give the correct amount of loans to the firms for wood auctions, while the Finnish government became an assistant of the Finnish ETEC organization even though it could not legally compel cartelization in the country. Together the banks and the Finnish government formed a credible deterrent for the firms to follow the quotas; even though they could not effectively punish uncooperative firms, this did not weaken the deterrent.^[55] The ETEC was designed to bring stability and predictability to the international timber trade, but it did not quite achieve its aims. The recession of 1938, for instance, was a challenge for the quotas.^[56] From its inception, the ETEC leadership hoped that Canada would join the convention but, given that they only exported to Great Britain and no other European countries, the ETEC did not appear useful to them.

The importers in Great Britain, France, Belgium, the Netherlands, and Belgium looked favourably on the ETEC at first. International governance and regulation of competition was not interpreted as scheming against the buyer or artificially pumping up the prices; in the eyes of the importers, it increased the stability and predictability of output.^[57] However, as signs of economic recession started to appear in 1937, the importers felt that they also needed to institutionalize their collaboration to voice their opinion on the ETEC’s quota policies. They even wished to hold a more formal position in the ETEC’s process in deciding the right level of output, but the ETEC did not invite the importers into their organization.^[58] Therefore, the timber traders created a tradition whereby the European importers would meet the European exporters just before the ETEC meeting. This tradition would continue in a new context after the war.

The international arms race intensified after the Munich crisis in 1938. The governments prepared for national and international governing of commodities under war circumstances and approached the timber trading associations with cooperation and coordination in mind. Timber demand skyrocketed, and by the spring of 1939, contemporaries described the timber market as being in “war psychosis”.^[59] The ETEC’s exchange of information and meeting routines, which were crucial to the working of the cartel, came to a halt in early 1939 due to travel restrictions, disarray, and growing uncertainties in continental Europe. Production quotas for 1939 were practically abandoned.^[60] When the war began, the world was divided into blocs. Private governance was replaced by public governance and freedom of trade by military laws.

4 Co-Operation in Cold War Europe

The Second World War brought about a long break for private forms of international timber governance. Wartime regulations became post-war regulations, and private governance of the timber trade was virtually impossible before the 1950s. For example, in the United Kingdom, which remained the biggest timber importer in the world, the Timber Control Department, operating under the Ministry of Supply, was responsible for imports until 1950.

The Second World War changed the overall architecture of the global economy in which the timber traders had operated. The international order of peace, prosperity, and liberalism was reinvented in intergovernmental organizations such as the United Nations (UN), International Monetary Fund (IMF), World Bank, and the General Agreement on Tariffs and Trade (GATT), which were based on the experiences of and experiments in multilateralism during the interwar period.^[61] The reordering of the global economy had implications for the timber trade in multiple ways.

One of the concrete changes in international timber governance were intergovernmental timber institutions. The Emergency Economic Commission for Europe (EECE) formed a Timber sub-committee in 1946 that aimed to increase production and allocate supplies to consumer countries.^[62] In 1947, as a result of a conference held at Mariánské Lázně in Czechoslovakia, this Timber sub-committee of the EECE was replaced by two new intergovernmental bodies: the Economic Commission for Europe’s (ECE) Timber Committee and FAO’s European Forestry Commission.^[63] These continued to promote reconstruction and development as well as to collect and distribute data and knowledge about the timber industry. According to Gunnar Myrdal, the first Executive Secretary of the ECE, the timber trade needed international agreements, though not perhaps in the form of cartels. Myrdal said at the Fifth Meeting of the ECE Timber Committee in 1949:

“On the one hand, […] long experience has fully clarified the danger to economic progress and to our standards of life in market arrangements of a cartel character, whether they are private or governmental in form. We clearly do not want to move in that direction. On the other hand, there are certain concrete market problems in the field of timber which may be capable of solution by international agreement. We must strive to consider these problems in ways which positively contribute to the economic well-being of Europe, the steady expansion of its trade, and the more economic use of its resources.”^[64]

The post-war timber governance institutions had new names and they operated under new organizations, but they were in many ways descendants of the interwar institutions. The Economic Section of the League of Nations and the ETEC had gathered data, created connections between the buyers and sellers, and shared the same goals: to stabilize the market, bring about predictability, and flatten the curve of overproduction and shortage. Furthermore, the pre-war and post-war governance institutions were partly run by the same people. The ECE’s Timber Committee and FAO’s Forestry Commission had a joint secretariat, which was managed by Egon Glesinger, who had been one of the key people in the CIB and the ETEC before the war and who had migrated to the United States in 1941. J. O. Söderhjelm, the Vice-Chairman of the Timber Committee, described Glesinger as ”the soul” of the committee.^[65] Glesinger had remained in contact with the Swedish timber traders, and correspondence from the 1940s shows that his goal was to revive the pre-war multilateral governance.^[66] Voicing the opinion of the Nordic timber trade, the leadership of the Swedish timber trade association strongly opposed this idea. Even though the public and private actors had learned to collaborate in the 1930s – governing the timber sector and regulating competition – the timber traders wished to keep the state and intergovernmental organizations out of their institutions.^[67] The ECE, on the contrary, could not keep the businessmen out of the timber committee activities, given that national governments often appointed them as members of their official delegations, or at least consulted them about current issues.^[68]

The new public governance institutions, such as ECE and FAO, promoting co-operation as well as collecting and distributing data, left less room for private timber governance. Furthermore, the anti-trust movement, which arrived in Western Europe from the US after the war, was turning public opinion and the law against cartels which had been one of the core activities of business associations. The Treaty of Rome that set up the European Economic Community (EEC) in 1957 framed cartels as secretive institutions that distorted trade and worked against the interests of consumers and society. Cartels were outlawed and the EEC countries introduced national competition legislation. While the laws did not change business cultures and actual practices overnight, industries that traditionally had had strong and formal cartels – such as pulp, paper, and paperboard – were forced to rethink their cooperation and agreements from a new perspective.^[69]

However, despite the war, post-war regulations, and even the anti-cartel movement, the idea that private actors should collaborate in stabilizing the notoriously cyclical European timber markets prevailed. The export associations or sales organisations of major European exporters – Finland, Sweden, and the Soviet Union – established connections, or “friendly consultations.”^[70] Furthermore, the European timber exporters and importers re-connected in the early 1950s. They started to organize joint annual conferences between the national associations of importers and exporters to exchange information on the market, future prospects, and products. The economic backdrop for these private timber collaboration initiatives was the rapid boom–bust cycle for raw materials triggered by the Korean War in 1950. This was followed by other drastic changes in the timber markets, including what Danish delegate Niels Kampmann called the “ghastly hangover” created by the market “chaos” of 1954–1955,^[71] when there had been the “greatest timber rush of all time.”^[72] Importers had bought heavily and ended up having large stocks of timber which they struggled to sell to end-users.^[73] These fluctuations brought the Western European timber traders together to seek stability.

The Belgian timber importers’ association invited other major importers to Brussels in 1951, and the French organization did the same in the following year, but also invited major exporters.^[74] This meant that the importers revived the habit of international conferences. In the 1930s, European importer and exporter associations held meetings in connection with the ETEC’s annual meetings, and some of the same industrialists were also involved in the postwar conferences. The post-war connection between the timber traders became known as the European Softwood Conferences (or Congresses). The greatest difference between the pre-war and post-war collaboration was that the European Softwood Conference did not decide the next year’s output like the ETEC in the 1930s had done: the European Softwood Conference was not a cartel.

The emergence of anti-cartel policies alone does not explain why the European Softwood Conference did not seek to regulate competition openly. One of the lessons of the 1930s and the ETEC for the cartel leadership had been that international cartels involved many countries, large number of participants in the meetings both from importers’ and exporters’ side, and that publicity was dysfunctional. In large meetings, participants were cautious about sharing business information. Exchanging reliable information had been a challenge in European timber exporters’ meetings in the 1930s and in the ETEC.^[75]

While the archival material of the European Softwood Conference does not imply that the community was a cartel or that the conference convened to fix prices or regulate outputs, its participants did discuss production volumes and even prices. The importers tended to argue that the prices were too high, a view that the exporters naturally did not share. The conferences offered a framework for the competitors to get to know each other, create networks, and exchange information. Besides conference sessions, the timber traders had multiple chances to interact in informal ways during the conferences – which often included leisure programs. The annual conference, bringing competitors together in the same room with the explicit aim of sharing views on the market, was an excellent basis for creating cartels, international cooperation, and mutual trust.^[76]

The European Softwood Conferences and the ECE Timber Committee performed similar and often overlapping work. The minutes of both bodies record discussions about market and price trends, production levels, and predictions of future demand, as well as talks about technical issues such as quality problems and plans to promote standardization.^[77] Unsurprisingly, the organizers of the European Softwood Conference, who were usually the importing associations, and the ECE Timber Committee eventually started to coordinate the timing of the meetings. The ECE Timber Committee usually met in Geneva in autumn and the importers and exporters met some days later in another Western or Northern European city.^[78] The co-ordination of these events made it easier for timber traders to participate in both.

British statistician Geoffrey Davies, who provided some analyses to the timber traders, called the community of the European Softwood Conference an “exclusive club”.^[79] Unlike the intergovernmental organizations, such as the United Nations’ ECE Timber Committee, which could not select their participants in the same way, the private softwood conference community was exclusive. The timber traders had the advantage of having experience of multilateral collaboration. Collaboration paid off only if the participants shared enough similarities. Furthermore, publicity and a big crowd did not promote fruitful business collaboration.

As a result, representing the traders, only the associations of the largest importer and exporter countries were invited to the European Softwood Conference. The first members of the European Softwood Conference were the importers’ associations of the United Kingdom, the Netherlands, Denmark, West Germany, France, and Belgium, and the exporters’ associations of Finland, Sweden, and from 1957 onwards, the Soviet Union. New members could be accepted, but only after careful consideration and a debate between members. Exporters from Austria and Poland were accepted in the late 1950s, and Italians, as importers, in 1958.^[80] Canadian and the United States representatives participated from the late 1950s onwards as observers.^[81]

Being accepted into the timber trading community of the European Softwood Conference was not guaranteed. Norway, for instance, had a distinguished history in the timber industry, but its representatives were rejected in 1968 due to its insignificant share of the European timber trade.^[82] Despite being exclusive, by the mid-1960s the European Softwood Conference – comprising eight importing countries and five exporting countries – represented roughly 80 percent of European softwood timber trade.^[83]

In 1948, the US and its Western European allies set up the Organization for European Economic Co-operation (OEEC), and the Soviet Union and its satellites responded by founding the Council for Mutual Economic Assistance (CMEA) in 1949. The Cold War division into two blocs continued during the ensuing decades. Countries preferred to co-operate within their camp and in exclusive organizations, rather than in joint ones like the ECE. However, while the governments quarrelled, experts in the European Softwood Conference co-operated. For timber traders, the Cold War was not a factor that defined collaboration or distracted from it. Cold War blocs were very rarely even mentioned in the context of European Softwood Conference; the Soviet occupation of Hungary in 1956 is one of the few exceptions.^[84]

The Soviet Union export agency Exportles, which participated in the European Softwood Conference from 1957 onward, shared its views on the markets, demand, and prices in the same ways as its capitalist competitors. Timber exporters on both sides of the Iron Curtain shared the same goal: stability, which translated into predictability and profitability. The Soviet Union, which possessed the world’s largest forest resources, underlined particularly to the Nordic countries that, even though the Soviet Union exported only a small percentage of its capacity, it had no desire to disrupt the international market with overproduction and dumping.^[85] After the price bubble of the Korean War had burst in 1953, the Soviets explicitly let the Nordic exporters understand that they would not undermine price levels and weaken the position of their competitors.^[86] Similarly, in 1965, a leading Soviet official said to a group of Finnish exporters that he could ”put two fingers on the Bible” that the Soviets had no intention of practising dumping. After all, “with senseless competition we can only destroy each other and ruin the market”.^[87] This was a different Soviet Union than with whom Finland and Sweden had dealt with in the 1930s, and which in 1931 had threatened to sink the Nordic economies with dumping if the Western banks did not give them credit.^[88]

The learning curve of the Soviet Union between 1930 and 1960 regarding its participation in multilateral economic organizations together with Western Europe was steep and motivated by economic growth. The country had to sell raw materials and commodities, in order to acquire foreign currency, which it needed to finance imports of technology and machinery. The Soviet Union was involved in several international cartels, for example in diamonds and gold during the post-war era, and its role in them was like that of any commercial and capitalist actor.^[89] Oscar Sanchez-Sibony has argued that “the Soviet trade and economic officials got along better with businessmen than with civil servants of foreign countries”.^[90]

Besides ‘friendly consultations’ between the Nordic countries and the Soviet Union in the 1960s, Sweden and Finland enjoyed a particularly close connection together. Sweden and Finland exchanged information on markets and occasionally decided on a mutual pricing policy, even though holding on to minimum prices under the pressure of customers was always a challenge.^[91] However, the managing director of the Finnish Sawmill Owners Association, Paavo Miettinen, felt that the Swedish and Finnish timber industries should develop stronger Nordic collaboration similar to the pulp and paper industry to regulate markets.^[92]

The oil crisis in the 1970s inspired European timber collaboration anew. In 1973, Finland, Sweden, Austria, and Canada announced production cuts to stabilize the market.^[93] In the European Softwood Conference meeting of 1974, Poland joined the output regulation efforts and declared its “definite intention to follow a coordinated selling policy”.^[94] Poland, the Soviet Union, and Canada all agreed that they would rather stop selling altogether than accept lower prices.^[95]

5 Conclusion

Did the joint activities of timber importers and exporters manage to increase market stability? The timber markets in the 1930s remained cyclical despite the ETEC, and they continued to be cyclical in the post-war era despite the intergovernmental timber committee and private forms of governance. The business executives may have managed to flatten the fluctuations, but certainly not to eliminate them. Then again, elimination of fluctuations was never a goal in the capitalist market. As a British timber specialist observed in July 1954: “world timber prices can be influenced, but never controlled, by exporters and importers, but [they] are subject to the interplay of economic and political forces far beyond the limits of our trade.”^[96]

According to P. Schoenmakers, President of the Netherlands Softwood Association, stabilizing prices might be difficult, if not impossible, but it was nevertheless necessary to try. At a European Softwood Conference in Amsterdam 1963 he said:

“If I might add a wish in this connection it is the fervent hope for stable prices. We all know that many factors outside our sphere of influence may work together to frustrate our efforts in this direction, but to use an old dictum: it is not always possible to succeed, the main thing is to have tried.”^[97]

This article has charted the long-term history of international timber governance since the late 19^th century to the 1970s. We have described how public and private governance institutions developed and interacted with each other, how they collaborated and competed, and how the objectives of governance changed over time. The longue durée timeframe of the study shows the longevity of commodity governance practices. The world changed profoundly in the 20^th century, but many goals and practices survived through the changes. Both world wars created unique legal, economic, and political conditions for multilateral institutions to facilitate international relations and economy, and the practices of international timber governance adapted accordingly. Creating international rules, gathering and distributing knowledge, regulating resources and markets seems to have been central for the shaping of 20^th century economies, societies, and businesses.

This article shows that the public and private practices of timber governance- such as international cartels between exporters, conferences between exporters and importers, the gathering of statistical data, and connections between private and governmental actors – have deep roots. The European timber conferences, for instance, might seem like an invention of the 1950s, but a closer look reveals that the foundations of collaboration between importers and exporters were laid in the early 1920s, fortified in the 1930s, and finally became an established institution after the mid-1930s. Furthermore, the form of post-World War II collaboration as a selective and exclusive club was not an invention of the 1950s, conditioned by the Cold War, but was a descendant of the experiences of the interwar period, during which large, all-inclusive timber conferences had been found to be ineffective and dysfunctional decision-making forums. Similarly, the ECE Timber Committee and FAO’s Forestry Commission were in many ways descendants of the interwar timber governance institutions, the ETEC and CIB, not least through the personal link of Egon Glesinger.

European political and economic history of the 20^th century is full of dramatic changes which reformed and changed international relations. Yet what remained constant in the timber trade, and even grew stronger over time, was the desire to develop international governance. The business associations in the major exporting and importing countries wished to build co-operative structures to overcome the boom–bust fluctuations that were inherent to the timber trade. In 1900 the cooperative sphere was limited to neighbouring countries, such as Finland and Sweden. In the 1920s, cooperative networks were established between Central European timber trading countries, and finally in the 1930s, all major European timber trading countries, Soviet Union included, cooperated in the framework of the ETEC and the European importers’ collaboration. Furthermore, governments in timber trading countries and the League of Nations had a role to play in creating international timber governance. In the post-World War II period, the sphere of collaboration was broader than ever. Commercial interests even overcame the political divisions of the Cold War: East and West met at timber conferences – not only as sellers and buyers, but as a group of exporters from East and West wishing to balance the market. The sources suggest that post-war collaboration was smoother partly because the Soviet Union used a new strategy in their negotiations. Between the 1950s and 1970s, the Soviet Union showed a commitment to longterm market stability similar to Western producers, while in the 1930s the Soviet Union had threatened Swedish and Finnish negotiators with overproduction unless its demands were met.^[98] Public international timber governance promoted standardization of timber measures and products as well as producing a stable knowledge base about world timber resources. Private governance took care of similar issues, although they could never solve the key problem: the instability of the timber market. Invisible market forces were stronger than the visible hand of traders and their international cartels.