The Great Wood Debate – China vs. United States Round One

On December 3, 2010 the United States International Trade Commission determined that there is a reasonable indication that the wood flooring industry in the United States is being materially injured by reason of imports of engineered wood flooring from China that are subsidized by the Chinese government and sold in the United States at less than their fair market value. Round One to the United States wood manufacturers.

This action was taken as a direct result of a complaint that was filed with the United States Department of Commerce and the International Trade Commission. In plain English the complaint says, that these products being imported from China are being sold at below-market prices which results in unfair trade practices and damages United States manufacturers. If the International Trade Commission agrees with these charges duties of up to 240 percent could be imposed on Chinese wood flooring imports.

The complaint alleges that Chinese manufacturers receive broad government subsidies not the least of which is the government’s manipulation of currency exchange rates. In the past the Commerce Department has refused to investigate requests relating to the currency valuation issue. The complaint alleges that American jobs and manufacturing are being lost due this anti-competitive situation and in fact the entire United States industry is in jeopardy of folding up. At risk are thousands of jobs and a domestic market estimated to be $ 736.2 million in 2009. What is known is that China accounted for 62.5 percent of the United States imports in 2009.  The complaint asks for countervailing duties to offset Chinese subsidies in amounts up to 242%. Furthermore, if the importers are found guilty than their liability are not limited just too future imports but extends retroactively for certain products imported in prior years.

The Chinese position is that their impact on the United States market has been overstated and that they currently do not have any programs in place to subsidize the Chinese manufacturers. They argue that United States manufacturers have been hurt by the recession and specifically the downturn in the United States housing market.

In my opinion the end result will be that nobody will win. If the importers are found guilty the United States manufacturers will move their production from China to other countries in the Far East. Any costs associated with the move and duties will be passed on to consumers making wood flooring unaffordable to all but the wealthy. Our relationship with the Chinese government will also take a hit and supplies of engineered wood will become scarce.

What should happen is that these importers should take a hard look at the products they are importing. They should worry more about the quality of the materials they are importing as opposed to just price. They should only import from companies that are using environmentally approved materials in their manufacturing. They should work with companies that are working to reduce waste and consumption of our natural resources.

If the world is truly flat then companies need to be able to sell their products worldwide. However, uniform standards need to exist that help assure that everyone has a fair opportunity to market their products while working to protect our natural resources. If there is to be a Round Two then I suggest we figure out what is fair and figure out a way to work together to make engineered wood flooring a quality product that is affordable and supplied by manufacturers that manufacture with our environment in mind. I don’t have the answers but paying lawyers tons of money to fight this out is not the answer.

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