Having witnessed the disintegration of the U.S. furniture industry over the past two decades, it comes as neither a shock nor a surprise to learn that domestic hardwood plywood and wood flooring producers are also losing out in a big way to foreign competition.

How imports grabbed nearly half of the U.S. market share of these two product categories is detailed in a recently released report from the U.S. International Trade Commission, “Wood Flooring and Hardwood Plywood: Competitive Conditions Affecting U.S. Industries.”

The study was initiated following hearings organized in spring of 2007 by Sen. Ron Wyden (D-OR). Representatives of several U.S. wood flooring and hardwood plywood companies, plus industry trade association executives, testified that domestic manufacturers face increasingly unfair competition from abroad in their home market.

Phil Guay, vice president of corporate strategy for Columbia Forest Products Co., echoed the testimony of several others when he said, “(W)e believe imports have done far more damage to our industry than the current housing slump. And many of these imports are subsidized by illegal logging as well as unfair trade practices.”

According to the report, imports of wood flooring and hardwood flooring increased from $1.2 billion in 2002 to $2.7 billion in 2006 before dropping to $2.4 billion in 2007 due to the housing downturn. In comparison, U.S. consumption of these products grew from $3.5 billion in 2002 to $5.6 billion in 2006 before falling to $5.2 billion in 2007. In other words, the market share of imported wood flooring and hardwood plywood increased from 34% to 46% over the five-year span.

The study observed, “This increase in market share indicates a possible decline in the competitive position of U.S. industries, particularly vis-á-vis the Chinese industries, which are now the largest foreign suppliers of these products and the most significant competitors to the U.S. industry in the U.S. markets for hardwood plywood and engineered wood flooring.”

According to the report, “Factors contributing to the rise in imports included shifting U.S. market preferences and reportedly, the increased market power of wholesale distributors and large retailers whose greater logistical capabilities make them more able to source imported products.” The report also notes that part of the import products’ gains were created by U.S. manufacturers. “U.S. producers of wood flooring and hardwood plywood increased their imports of finished products either to broaden product lines or supplement domestic production.”

China Leads the Way

The study encompasses products made in China, Canada, Brazil, Indonesia, Malaysia and Russia. It examines each country’s tariffs, currency exchange rates, technological capabilities, labor practices, environmental policies, government programs in illegal logging and other trade factors.

China is the biggest focus of the study and for good reason. Imports of Chinese wood flooring and hardwood plywood increased at an annual rate of 37% between 2002 and 2007 and accounted for most of the growth of U.S. imports.

China, now the world’s leading producer of hardwood plywood and largest market for hardwood flooring, is the subject of one of the six chapters of the ITC’s study. “Despite paying relatively high prices for many imported raw materials, Chinese hardwood plywood and engineered wood flooring producers have been able to take advantage of domestic plantation wood resources which provide a large portion of the material for the veneer cores and relatively low wages to achieve lower overall production costs as compared with U.S. manufacturers,” the study notes.

What’s Next?

That’s the question for the ages. The ITC’s report does not offer any conclusions on whether U.S. manufacturers are at an unfair advantage as the result of illegal practices by their foreign counterparts. The study also does not make any recommendations of what actions the U.S. government might take to re-level the competitive playing field of U.S. wood flooring and hardwood plywood markets.

Is the report the prelude to potential antidumping or other trade remediation? Or is it merely a restatement of the obvious, two more examples of how imports are growing to the detriment of domestic manufacturers and jobs?

Stay tuned.