FOREST PRODUCTS 2008 - Greater US-China trade balance in hardwoods seen
Government imposed restrictions on exportsBy Peter A. Buxbaum, AJOTThe United States has been seeking greater balance in its trade with China for some time. The area of hardwoods and hardwood products is one area in which success in this endeavor may yet be seen.
China’s trade surplus in wood products reached $7.4 billion in 2006, accounting for over 25% of the total US trade deficit, as compared to 23.6% in 2005, according to the Center for International Trade in Forest Products (CINTRAFOR) at the University of Washington. Wood products trade between the US and China grew an average of 26.3% annually between 1996 and 2006. In 2006, the US exported $556 million worth of wood products to China, primarily hardwood and softwood lumber. In contrast, US imports of wood products from China, mainly finished and semi-finished products such as furniture, plywood and flooring, reached $8 billion.
China is the second largest wood products supplier to the US and China’s expanding trade surplus with the US has caused concern in recent years. Domestic US furniture and wood flooring industries have been complaining of unfair Chinese trade practices in these areas and have been pushing Congress to pass trade sanctions against the Chinese. But a confluence of circumstances may contribute to a decrease in Chinese hardwood exports to the United States, combined with the possibility of increased US exports of domestic hardwoods such as oak, cherry, and maple, to China.
The old, oft-repeated story of US export growth and greater trade balance is, of course, the weak dollar of recent years. This, combined with increases in the value of the Chinese renminbi, make US exports more attractive to the Chinese and Chinese exports less attractive in the US.
The statistics on the US-China hardwood trade tell an interesting story. US exports of hardwood logs veneers to China increased in 2007 by 38.9% and 32.7%, respectively, over 2006, according to numbers supplied by the Evergreen Building Products Association in Tacoma, Wash. At the same time, US exports of hardwood flooring and hardwood lumber decreased, by a dramatic 48.5% and 17.7%, respectively.
The Chinese, evidently, are interested in importing raw materials and semi-finished products, but not products involving much added value. That is related to another factor contributing to a greater potential balance in the US-China trade picture.
The Chinese government has initiated a policy-aimed self-sufficiency in wood and wood products, according to Jeff Cao of CINTRAFOR. The government is intent on reducing domestic wood consumption through productivity enhancements, wood fiber recycling, wood conservation, and material substitution, as well as through restrictions on wood and wood-product exports.
In late 2006 and early 2007, the Chinese government released a series of regulations aimed at curbing exports of low-end forest commodities. Most illustrative of these was an export ban, other than for products manufactured in export processing zones, on 66 categories of wood products and four categories of wooden furniture products made from domestically sourced timber beginning November 2006.
Another stringent government measure involves enhanced controls over re-exported wood products. The Chinese government has implemented an export licensing system for re-exported sawn timber made from imported logs, which became effective last year. Sawmills processing imported logs for re-export need to obtain export licenses from specific government agencies. Ten ports were also designated for re-exported sawn timber: Suifenhe, Dalian, Manzhouli, Erenhort, Shanghai, Tianjin, Xiamen, Putian and Zhangzhou.
Yet another measure designed to disincentivize exports is a reduction in the rate of value-added tax rebates on exports for 24 categories of wood products and four categories of wooden furniture products. The 24 categories of wood products include softwood and hardwood plywood, wooden mirror and photo frames, wooden windows and doors, wood parque
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