Westerman Testifies Before International Trade Commission
FOR IMMEDIATE RELEASE
WASHINGTON – Congressman Bruce Westerman (AR-04) testified Thursday (October 26) before the International Trade Commission. The commission’s Thursday hearing focused on allegations of hardwood plywood dumping by Chinese companies.
Westerman’s testimony (as prepared):
Testimony for Congressman Bruce Westerman (AR-04)
Final phase antidumping and countervailing duty investigations: Hardwood Plywood from China, Inv.
701-TA-565 and 731-TA-1341
October 27th, 2017
Good morning, Chairman Schmidtlein and members of the International Trade Commission. Thank you for the opportunity to testify before the Commission today on a matter of great importance to my home state of Arkansas, as well as the rest of the country. As a professional engineer and forester, and having spent 23 years of my life in private practice engineering and designing plants and mills that convert timber into a full spectrum of wood products, I believe I am able to offer a unique prospective on today’s ITC hearings.
Let me begin by taking a moment to discuss what basic inputs determine the overall price of a piece of plywood. Every wood product starts as a raw log, and 60 to 80 percent of the finished cost of goods can be attributed to raw materials when the timber is purchased legally in a competitive market. The raw material costs take into account the cost of the timber, labor to harvest, and transportation to the mill. In addition to the material raw material cost is the manufacturing and shipping costs that accounts for the other 20 to 40 percent of the overall cost of goods sold. Included in it are labor, mill operations, depreciation on capital equipment, interest expenses, taxes, environmental compliance, regulatory costs and warehousing and shipping.
Since timber is by far the largest determining factor associated with cost, let’s take another minute to examine how the United States and China procure raw materials for the products in question. According to the National Alliance of Forest Owners (NAFO), approximately 360 million acres or 70% of the working forests in the U.S. are on private land, owned by individuals, families, small and large businesses, and an increasing number of Americans who invest in working forests for retirement. The remaining 30% of timber land suitable for timber management is owned predominantly by the federal government. Due to complex environmental laws, litigation restraints, and a myriad of bureaucratic red tape, federal land is essentially locked away from reasonable timber management causing federal timber harvests to minimal. Therefore, the vast percentage of timber in the United State is harvested from private lands in a sustainable, environmentally sound, responsible manner by companies that pay a competitive fair market value for the material.
Unfortunately, the same cannot be said about timber procurement in China. According to the Food and Agriculture Organization (FAO) in 2016 the Chinese government owned over 195 million acres of planted forests. These plantation style forests, which account for 35.2 percent of the total amount of forested land in China, are planted and maintained for the specific purpose of helping to supply a wood hungry economy with a low cost, government subsidized raw material. Additionally, a 2011 article by Australian Professor William Laurance, published at the Yale School of Forestry and Environmental Studies, stated that in its relentless pursuit of timber: “More than half of the timber shipped globally is destined for China. But unscrupulous Chinese companies are importing huge amounts of illegally harvested wood, prompting conservation groups to step up boycotts against rapacious timber interest.”
U.S. working forests are among the best in the world and our free market economy allows timber to be purchased at a fair market value with an obvious freight advantage over Chinese wood products sold in America. American technology, environmental stewardship, and work force in the forestry sector are tops. We know what it takes to produce fair market plywood as well as many other wood products in the U.S. What we don’t fully understand and would likely never get an accurate data set to analyze is what are the accurate cost to produce in China and how much of that cost is borne by unfair practices by the Chinese government and producers.
Commissioners, I could certainly go on about how different aspects of Chinese plywood production indicate opportunity for heavy government subsidies through raw material procurement, lax environmental regulation, or negligent labor protections, but what is evident to me is that Chinese hardwood plywood producers have one immediate goal: to at all cost, capture market share in economies outside the control of the Chinese government and U.S. markets are a prime target of that goal. Chinas’ dumping creates an unfair market advantage harming not just domestic plywood producers, but all aspects of the plywood supply chain which in turn cripples rural economies and communities such as the ones I represent. I am hopeful that the ITC will find in favor of the petitioners thereby allowing our hard working men and women to compete on a level playing field with imported products. Thank you again for this opportunity to testify.