The objective of the Forest Sector Project at IIASA is to study long- term development alternatives for the forest sector on a global basis. The emphasis in the project is on issues of major relevance to industrial and government policy makers in the diffeerent regions of the world, who are responsible for industrial and natural resource strategies and to related trade policies. The key elements of structural change in the forest industry are related to the changing pattern of demand, supply capacity and trade. It is obvious that technological change, to a large extent triggered off by evolving Research and Development strategies, plays a major role in this process of structural change at the global level. Conclusions from this article are as follows: The forest sector is developing into an integrated systems industry in the same way as large parts of chemical and other process industries, with similar requirements on coordinative capacities and support from logistical infrastructure. This makes location to highly developed economies an advantage for the integrative parts of the sector. It is a low R & D industry, however measured, in a comparison with other manufacturing industries. This may cause problems for the sector in inter-industrial competition for labor and capital resources. For the non-integrative forest industry, like mechanical wood processing, it means a long-term process of relocation from the OECD region to less developed regions of the world