Trade Case Update - Furniture and Lumber
July 8, 2004Chinese bedroom furniture
The Department of Commerce (DOC) has decided to calculate the market price
of Chinese furniture using methods that will cause the duties to be lower
than what the domestic furniture industry had hoped. When a domestic industry
files a petition asking for protection from foreign competition, the International
Trade Commission must determine if, in fact, there has been injury to the
domestic industry. In most cases it finds that there is. The DOC then conducts
an investigation and asks each foreign company exporting to the U.S. to fill
out a questionnaire that describes in detail how it arrives at its price.
In the furniture case, more than 100 companies filled out the questionnaire
and returned it to the DOC, but only 85 percent of those were individually
considered by the DOC. They had duties ranging from 4.9 to 24.34 percent imposed
on their products. The DOC claimed that the other 15 percent failed to provide
adequate information on their questionnaire, and so were slapped with the
country-wide rate of 198.08 percent. This may yet change as this is just a
preliminary decision and is subject to review before the final anti-dumping
rates are announced.
This is slightly better news than expected for American consumers since domestic
furniture manufacturers originally asked for exorbitant duties ranging from
158 to 441 percent. However, it is still a sucker punch. First, this case
never should have been brought in the first place. Chinese furniture is NOT
being dumped, or sold at an unfairly low price, in the American market as
the U.S. industry claims. Its price is lower because it costs less to manufacture
furniture in China. This "unfair" trade case is really a cynical
attempt to block certain companies from importing so that American furniture
retailers will be forced to buy directly from American manufacturers at higher
prices. Once again the consumer is being taken to the cleaners.
Softwood Lumber
Planning on adding on to the house in the near future? Do-it-yourselfers will
be glad to know that on June 12th, the Commerce Department recommended that
the steep 27 percent tariffs on imports of Canadian softwood lumber be cut
in half. Lower tariffs would mean more imports and lower prices for both Canadian
and U.S. lumber products, an outcome U.S. companies have tried to avoid as
they battle what they claim is a subsidized Canadian wood-products industry.
The recent Commerce Department decision would go into effect in December of
this year and may still be appealed by the domestic industry.
While this is certainly good news, the fact remains that the duties themselves
are simply not justified. The U.S. has been challenged on these duties at
the World Trade Organization (WTO). In addition, Canada has protested the
duties under provisions of the North America Free Trade Agreement (NAFTA).
Dispute settlement panels at these organizations have ruled that the U.S.
has failed to prove that the domestic industry has been harmed by Canadian
imports and that the Dept. of Commerce has used improper methodology to calculate
the duties. If the International Trade Commission, whose job it is to determine
whether injury to a domestic industry has occurred, is not able to provide
proof of injury, or even a threat of injury, than the United States is required
to repeal the tariffs. In the mean time, the DOC must revise downward the
duties on lumber according to guidelines set forth by the NAFTA dispute settlement
panel.
The fact that these duties are not justified prompted several leading members
of the U.S. House of Representatives to send a letter on June 24th to Commerce
Secretary Donald Evans, imploring the Administration to end the duties altogether
which have a negative impact on affordable housing (Page
1, Page 2). The
U.S. is dependent on imports to supply a third of the lumber required in our
housing industry. The nearly 27 percent duties, along with the current cost
of lumber, eliminate hundreds of thousands of families from mortgage eligibility.
Industries that depend on lumber as an input and that oppose import restrictions
include manufacturers of value-added wood products, lumber dealers, manufactured
and on-site home builders, and remodeling contractors and individuals. These
industries employ more than 6.5 million workers, 25 to one when compared with
those in the forestry industry.
Clearly from an economic point of view this case does not make sense. As is
usually case with government interference in the free market, more Americans
are being hurt than helped. If our government finds it politically expedient
to protect American industries from international competition, it should at
the very least look at the larger economic picture to make sure the largest
number of Americans is being helped. To do otherwise for purely political
reasons is irresponsible.