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World Shrinking, Trade Gap Widening.

As the world's economy globalizes, U.S. woodworking firms are faced with a number of trade-related challenges and opportunities.

As the 21st century looms, the debate over international trade is heating up. Demonstrators swarmed Seattle in early December to protest against the World Trade Organization and what they fear it could do in its quest to reduce barriers on international trade. Perhaps the loudest voice was that of the environmentalists, who bristle at the WTOs ability to weaken environmental regulations it feels stand in the way of free trade.

For example, the WTO supports lower tariffs on wood products. While this would make international trade easier, it could also encourage clearcutting of forests and increased consumption of forest resources, according to WTO critics.

Whatever one's views on the WTO, or past trade agreements such as NAFTA and GATT, the fact remains that international trade is increasing, and companies in the United States cannot afford to ignore the potential threats and benefits that come with it.

Trade Deficit Growing

The recent protests against the WTO underscore the concerns American firms have with international trade. Many see the United States as a net loser when trade restrictions are loosened. The trade deficit in wood furniture seems to support those concerns. The trade gap grew from $2.553 billion in 1989 to $5.704 billion in 1998, according to Department of Commerce Statistics. (See chart, top right.) Based on the first three quarters, W&WP forecasts a deficit of more than $7 billion in 1999.

Recent changes in China's policies and the NAFTA treaty partially explain this growing gap. Another factor has been increased imports from and decreased exports to Pacific rim countries, which have been suffering the effects of an economic crisis.

In order to compete in the changing world trade environment, American machinery manufacturers and woodworking companies must build partnerships with foreign companies, make components for foreign woodworking firms and embrace the potential of foreign buyers for their products.

China

China serves as an example of the changing climate of international trade. Between 1989, the year of the violent crackdown on human rights demonstrators, and 1998, imports of Chinese wood furniture and component parts increased by a staggering 1,197%. During that period, China's share of the U.S. imported furniture market has grown from 3% to 17%.

The boom in imports from China are due in part to the U.S. government's continued granting of Most Favored Nation status to the country. Chinese leaders have done their part as well. While they are not abandoning Communism, they are opening their doors to more commerce and foreign investment. China has even established woodworking shows that have attracted exhibitors from around the world.

Many U.S. woodworking machinery and furniture. manufacturers correctly view China as a great market opportunity. Exports of wood furniture to China have grown from a mere $811,000 in 1989 to $10.8 million in 1998. Though this pales in comparison to the value of furniture imported from China, it does demonstrate the enormous potential of the Chinese market for companies willing to think globally.

NAFTA and Its Effects

Canada, and to a lesser extent Mexico, have also increased exports to the United States in the last 10 years. In 1992, the year before NAFTA was enacted, U.S. imports of Canadian wood furniture and components totaled $180.089 million. In NAFTA's first year, Canadian imports jumped to $563.3 million, an increase of 213%. That figure has continued to grow, reaching $1.785 billion in 1998.

Mexican woodworking companies have benefitted less from the trade agreement than the Canadians. Between 1992 and 1993, Mexico's exports to the United States grew by only 10%. By 1998, Mexican exports to the United States doubled, however, strengthening its position as the 4th leading source of imported furniture in the United States.
 U.S. Trade Deficit Expands
 (In millions of U.S. dollars)
 Imports
1989 $2,553
1990 $2,256
1991 $1,948
1992 $1,961
1993 $2,430
1994 $3,042
1995 $3,443
1996 $3,954
1997 $4,617
1998 $5,734
1999 [*] $7,318
Source: USDA Forest Service, Forestry Science Lab,Princeton, WV
(*.)W&WP estimate based on first 3 quarters
 TOP 10 SOURCES OF IMPORTED FURNITURE IN THE U.S.
 (In millions of U.S. dollars)
 1989 vs. 1998
 1 Taiwan $761 1 Canada $1,795
 2 Italy 424 2 China 1,193
 3 Canada 365 3 Italy 791
 4 Philippines 149 4 Mexico 529
 5 Yugoslavia 140 5 Taiwan 474
 6 Mexico 136 6 Malaysia 424
 7 Denmark 129 7 Indonesia 368
 8 China 92 8 Philippines 192
 9 West Germany 82 9 Thailand 187
10 Thailand 82 10 Denmark 123
 Top 10 Total 2,360 Top 10 Total 6,066
 World Total 2,902 World Total 6,870
Source: USDA Forest Service, Forestry Science Lab, Princeton, VW
 NORTH AMERICAN TRADE IN WOOD PRODUCTS
 (In Millions of U.S. $)
 EXPORTS TO EXPORTS TO IMPORTS FROM IMPORTS FROM
 CANADA MEXICO CANADA MEXICO
'96 $393 $70 $1,159 $367
'97 $463 $77 $1,460 $465
'98 $491 $108 $1,785 $592
Source: USDA Forest Service, Forestry Sciences Lab., Princeton,WV
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Article Details
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Author:KILMER, BARRETT
Publication:Wood & Wood Products
Article Type:Statistical Data Included
Geographic Code:1USA
Date:Dec 1, 1999
Words:862
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