DeFazio: Chinese plywood turning S. Oregon into 'New Appalachia'

By ERIC BRADNER, Politico Pro
September 19, 2013

Building or renovating a kitchen might cost less as cabinet-makers increasingly use plywood imported from China.

But that shift in the industry over the last decade also has turned southern Oregon — home of most of the U.S. lumber industry — into a “new Appalachia” riddled by chronic unemployment, Rep. Peter DeFazio (D-Ore.) said during a six-hour hearing Thursday before the U.S. International Trade Commission.

“The Chinese penetration into the market is what has caused us to lose jobs in the industry,” DeFazio said.

It’s the job of the International Trade Commission, a six-person panel, to decide in the coming weeks whether to approve steep new tariffs on Chinese plywood imports. At stake is the ability to supply the $8.6 billion annual U.S. kitchen and bath cabinet industry.

Domestic plywood manufacturers complain that they are now operating at only half of their capacity, and blame their Chinese competition, which often sells its product 30 percent less and, they said, sometimes relies on illegal logging in Russia and Malaysia.

The U.S. Department of Commerce this week announced anti-dumping duties as high as 121.65 percent and countervailing duties as high as 27.16 percent — fees meant to offset the Chinese government’s alleged subsidies and unfairly low prices. Customs officials already are collecting the duties in lieu of a final judgment by the International Trade Commission.

For the duties to continue, the International Trade Commission must rule that China’s prices have materially injured the domestic industry.

The United States is not the only country considering action against China’s plywood industry. The European Union as well as Argentina, Colombia, the Philippines and South Korea all have targeted Chinese plywood imports for anti-dumping investigations or sanctions.

“This is a worldwide, recognized problem, and we could lead the world today toward a just resolution of this issue,” DeFazio said.

He and two other lawmakers — Sen. Ron Wyden (D-Ore.) and Rep. Peter Welch (D-Vt.) — pressed the commission to green-light the duties that Commerce announced.

“The growing tide of Chinese imports have the potential to sink the boat of the American hardwood plywood industry, and they have done considerable damage already,” said Wyden, who chairs the Senate Finance Committee’s international trade subcommittee, during Thursday’s hearing.

Plywood comes in different grades, ranging from the thicker, more expensive high-end product to a cheap, thin, low-end version — and though those grades are used for different parts of cabinets and other wood products, they are made from the same trees.

The Chinese competition comes almost entirely in the low-end grades. The result is a “vicious cycle” in which U.S. companies must charge increasingly higher prices for their top-end products to stay in business as Chinese imports push them out of the market for low-end products, said Wave Oglesby, the vice president of sales and marketing for Columbia Forest Products in North Carolina.

“It’s like suiting up for a football or basketball game every day with your hands tied behind your back,” Oglesby said.

Opponents of the duties, led by a coalition of U.S. cabinet-makers, argued that American and Chinese plywood are an apples-and-oranges comparison.

They said the American production process uses much more advanced machinery, which can manufacture a thick, high-quality and expensive product. The Chinese process, meanwhile, is driven by cheaper labor, which means workers there can handle the thin and breakable plywood by hand during the production process.

“They are clearly and simply different products,” said Peter Bendix, vice president of operations for the U.S.-based StarMark Cabinetry. “We have extremely exacting demands for our raw materials of our products.”