Wood furniture trade deficit on record pace.

Fueled in large part by record imports of wood furniture from Pacific Rim countries, the U.S. wood furniture trade deficit surpassed the $4 billion mark during the first three quarters of 1998 and is on a pace to break the trade-gap record set last year, according to U.S. Department of Commerce statistics.

The 1998 trade deficit could reach $5.6 billion, based on fourth quarter shipment trends recorded in 1996 and 1997.

The trade gap, represented by the amount of wood furniture imported into the United States minus the amount U.S. manufacturers ship to foreign countries, reached nearly $4.1 billion through the first nine months of 1998. The deficit is running 24% higher than it was during the same period in 1997. The gap, which has grown more than 105% since 1990, topped the $4 billion mark for the first time in 1997, reaching $4.6 billion. (See U.S. Trade Gap Widens chart, this page.)

Through the first nine months of 1998, the United States imported $4.9 billion worth of foreign-made furniture, which is $800 million ahead of the same period in 1997. More than 40% of the U.S. furniture trade deficit is with Asia.

The value of U.S.-made wood furniture shipped to other countries should reach the $1 billion dollar mark for the fourth straight year in 1998. Through September, exports were $847.5 million, slightly ahead of last year's pace.

Pacific Rim Struggles with Economy

In spite of, or perhaps because of the year-old economic crisis throughout much of in Asia, wood furniture shipments to the United States by the leading Pacific Rim countries jumped by approximately 19% during the first nine months of the year. During this time, U.S. exports to these same countries dropped by more than 33%.

In all, imports from China, Indonesia, Japan, South Korea, Malaysia, the Philippines, Taiwan, Thailand and Vietnam reached about $2 billion through the first nine months of 1998, as compared to $1.7 billion through September 1997. Exports to these countries dropped in the first three quarters from $118.3 million to $78.2 million.

U.S. Trade Deficit Widens

(In millions of U.S. $)

Year                       Imports      Exports      (Trade deficit)

1996 (full-year)            $4,969       $1,005           $3,964
(Jan. - Sept., 1996)        $3,589         $721           $2,868

1997 (full-year)            $5,765       $1,148           $4,617
(Jan. - Sept., 1997)        $4,150         $838           $3,312

1998(*) (full-year)         $6,850       $1,170           $5,680
(Jan. - Sept., 1998)        $4,941         $847           $4,093

Source: USDA Forest Service, Forestry Science Lab, Princeton, WV

* W&WP estimate

Japan, the biggest importer of U.S.-made wood furniture, bought 26% less wood furniture from U.S. manufacturers through three quarters, dropping from $72.3 million to $53.7 million. Shipments of U.S.-made goods to South Korea dropped 84% from $14.4 million to $2.3 million. (See Imports Up/Exports Down chart on this page.)

Only China and Vietnam bought more U.S.-made wood furniture this year than they did last year. Vietnam, [TABULAR DATA OMITTED] however, imported only $84 million worth of U.S. wood furniture, up from $55 million, while China's purchase of $8.6 million worth of furniture is just a fraction of the $835 million it had sold to the U.S. market through September. China. which has seen wood furniture exports to the U.S. rise approximately 380% since 1991. is the second largest importer to the United States. ranking behind Canada.

North American Market

The U.S. trade deficit with its fellow North America Free Trade Agreement partners, Mexico and Canada, also grew through the first three quarters of the year. Wood furniture imports from Canada and Mexico (through nine months) were $1.7 billion. while total exports to these countries were $425 million, creating a $1.3 billion trade deficit.

In comparison, 1997 imports from Canada and Mexico totalled $1.9 billion, or 33% of all wood furniture imports into the U.S., while exports were $540 million, which added $1.4 billion to the U.S. furniture trade deficit last year.

Canadian-made wood furniture imported into the United States jumped 25% to $1.3 billion in the first three quarters of 1998 as compared to the first three quarters of 1997. Mexican-made wood furniture shipped to the U.8. also increased in the same period, with shipments jumping 17% to $387 million.

The Canadian furniture industry is expecting to have very good years in 1998 and 1999. The furniture industry is one of five business segments identified by the Canadian Imperial Bank of Commerce that are projected to grow substantially this year and next. The CIBC projected 18% growth in 1998 and 6% growth in 1999 because of capacity expansions, strong North American consumer demand and a favorable exchange rate.

U.S. wood furniture manufacturers did ship more product to Canada and Mexico in the first three quarters of 1998. Exports to Canada jumped 10% to $362 million through the first nine months and exports to Mexico rose 18% to $63.1 million in that time frame.

Wood furniture imports from Pacific Rim countries and Canada/Mexico make up the lion's share of wood furniture shipments into the United States. While the Asian countries ship more wood furniture to the United States than any other trading block, its market share has eroded since NAFTA was enacted in 1994. Four years ago, the Pacific Rim countries had a 48% market share; today it stands at 40.8%. Canada and Mexico had a 24% market share in 1994 and today that percentage has increased to more than 33%.