WVFA Winter 2018-19

I N D U S T R Y N E W S www.wvfa.org Winter 2018–2019 | West Virginia Forestry Association Mountain State Forestry 15 Trade Update from the Hardwood Federation BOTH CHAMBERS OF CONGRESS are now in recess and back in their home states until after the election November 6. But just because federal lawmakers have left D.C. doesn’t mean they stop hearing from their constituents—in fact, now is the best and most effective time for you to speak directly to them about what you are most concerned about. Members of Congress will be holding public forums, participating in community events and touring various businesses across your state. If you have the opportunity, we encourage you to seek them out and share your opinion on what matters most to you. Two issues that the Hardwood Federation continues to work on with staff and Administration officials still in DC are Trade and the Farm Bill. Below is some background and suggested talking points for you to use if you do meet with your elected officials. Trade: China has imposed retaliatory tariffs on hardwood raw materials and products in response to U.S. tariffs on Chinese products. These tariffs are having a devastating impact on the domestic industry. Hardwood is an important sub-sector of the wood products industry and has a heavy reliance on export markets for its survival. In 2017, U.S. hardwood producers shipped $4.04 billion worth of U.S. products to global markets; $2.09 billion to Greater China. Approximately 50 percent of hardwood exports to go China. In 2017, the U.S. had a trade surplus of $1.475 billion in hardwood lumber, up from $1.1 billion in 2015. Uncertainty in the market has rapidly driven market pricing of hardwoods down by 25–30 percent, causing severe market disruption and creating a life-threatening situation for many companies in terms of reduction of lumber, log and timber values Effect of Chinese Import Tariff on the US Hardwood Export Market Appalachian Hardwood enter White Paper #72 Clint n Gabbert & Josep McNeel Tariffs placed on Chinese goods imported to the US would likely lead to retaliatory imposition of tariffs on US goods exported to China. Such tariffs would have catastrophic effects on the US hardwood lumber industry. The US exported $1.2 billion of sustainably sourced hardwood lumber to China in 2016 and is poised to exceed that in 2017. Whil the US manufactures significant amounts of both industrial and appearance grade hardwood lumber, the growing Chinese demand for higher-value appearance grade hardwood, which is used to produce household furniture and cabinetry, is particularly important to foster. The loss of the Chinese market could essentially cut US hardwood lumber export revenues in half. Such changes would significantly affect US hardwood lumber manufacturers in the highly competitive world market and lead to devastating impacts in the rural areas where much of this lumber is produced, such as the impoverished Appalachian region. Spe ifically:  The value of hardwood lumber exported from the United States more than doubled from $1.03 billion in 2009 to $2.26 billion in 2016. (Fig. 1)  The proportion of US hardwood exported to China has risen from 23 percent of the value of all exports in 2009 to 53 percent in 2016 and now contributes $1.2 billion in revenue to the US economy. (Fig. 1) Figure 1. Value of Total US Hardwood Exports vs Value of US Hardwood Exports to China 2009-2016. Data obtained through the USDA Foreign Agricultural Service Global Agricultural Trade System and adjusted for inflation. 0.2 0.4 0.5 0.6 0.8 1.1 1.0 1.2 1.0 1.5 1.5 1.7 1.9 2.4 2.1 2.3 0.0 0.5 1.0 1.5 2.0 2.5 2009 2010 2011 2012 2013 2014 2015 2016 Value in Billions of Dollars US Hardwood Exports to China Total US Hardwood Exports China Trade Tariffs Truce The United States and China called a truce in their trade war on Saturday after President Trump agreed to hold off on new tariffs and President Xi Jinping pledged to increase Chinese purchases of American products. The two also set the stage for more negotiations to resolve differences over trade; which includes WV hardwood exports to China. According t USA Today, the truce may ease skittish investors and lawmakers this week, but some experts question its potency. This deal involves the U.S. holding off for 90 days on a round of steep tariffs that ad been set for January. In exchange, China will purchase “a not yet agreed upon, but very substantial” amount of U.S. products to “reduce the trade imbalance” that has vexed Trump for decades.