WTO must eliminate
trade barriers on forest products The U. S. forest products industry accounts for $230 billion in annual sales and employs 1.5 million American workers. To put this in perspective, the industry employs about as many people as the data processing and computer services industry. Basically, wood and paper products are essential elements of our standard of living and are derived from a renewable resource which the U.S. forest products industry is committed to managing on a sustainable basis.
For our industry, the upcoming World Trade Organization (WTO) Ministerial meeting in November represents the last opportunity to level the competitive field for our products. The U.S. market has an open door to foreign competitors in the forest products sector, while U.S. producers must scale high tariff walls and other barriers to compete in foreign markets.
Starting with the Uruguay Round, we have sought to level the field through reciprocal tariff elimination agreements. That objective was only partially realized. Continued disparity in market access, combined with foreign capacity growth and weak demand abroad, have resulted in an actual deterioration in the trade balance in our sector since the Uruguay Round.
We are seeing explosive growth in forest products capacity in emerging economies like Indonesia, China, Korea, and Brazil. They may claim to be developing economies, but the capacity they are building is world-class. For instance, in 1998 paper imports from Asia increased 73 %, while imports from Indonesia increased 1800%. In total, foreign imports of paper products increased by more than $1 billion in 1998, while U.S. exports declined by almost $335 million. This alarming trend of increasing imports has been evident since the early 1990s.
Turning now to wood products: Since 1994 U.S. exports of wood products have dropped 20% percent, while foreign imports have increased 33%. In total, between 1994 and 1998, the trade deficit in our sector jumped from $3 billion to $9.4 billion, almost a tripling in this short time period.
The real significance of these numbers is the effect on U.S. jobs in our industry—jobs which are among the best-paying in our communities. For instance, paper mill jobs pay about $20/hour, which is $7/hour more than other private sector production jobs in the U.S. In 1998, a year of record demand for our products, paper industry employment declined by nearly 18,000 jobs—the largest single-year decline since 1983.
Our industry has made substantial capital investments to modernize our operations to compete on a global scale. At the same time, our relative cost position has changed, in part due to public policy actions affecting fiber supply, rising environmental costs, and tax rates. For example, the U.S. tax rate on corporate forestry and timber investment is 55% compared to 22% in Finland and 7% in Indonesia.
Clearly, the WTO meeting will not change tax or environmental policy, but it can finish the job we started in the Uruguay Round. The Administration has proceeded on Congressional authorization to accelerate and expand reciprocal tariff elimination in forest products and several other sectors. Last November, and again last month, the APEC ministers agreed to work toward an agreement accelerating tariff reductions by the WTO Ministerial.
The Accelerated Tariff Liberalization (ATL) proposal would eliminate tariffs on paper products between 2000 and 2002 and on wood products between 2002 and 2004. An agreement on the ATL package would boost global trade and benefit producers and consumers around the world. However, that objective is threatened by the Japanese government’s continued refusal to agree to tariff elimination on wood products, and by European resistance to conclude any agreement before launching a new round of negotiations.
Immediate action at the Seattle Ministerial is essential for our industry. Delaying results will mean continued erosion of our competitive position in world markets, loss of potential market position in fast-growing markets, and potential transfer of forest products jobs to other countries. With the APEC economies prepared to lead the way in advancing the pace of tariff liberalization in several sectors, an agreement on the ATL at the outset of the new round would provide important momentum for global market opening negotiations. The WTO must demonstrate that it is capable of eliminating barriers to trade on a continuous basis and can do so by concluding an ATL agreement in Seattle. We urge your support for the Administration’s efforts to achieve this important objective.
The text above was taken from the oral testimony of John Dillon, chairman and CEO of International Paper Co. which was delivered on Aug. 5, 1999, before the Subcommittee on Trade House Ways and Means Committee on behalf of the American Forest & Paper Association.
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