FOREST PRODUCT NEWS REPORTS
Japan Announces Further Steps to
Deregulate Housing Sector
By Michael Hicks, Coordinator for Trade Policy
On May 3, 1999, the United States and Japan released the Second Joint Status Report (2JSR) detailing progress made this past year under the U.S.-Japan Enhanced Initiative on Deregulation and Competition Policy, as well as new commitments in the housing, telecommunications, medical devices, pharmaceuticals, distribution, financial services, and energy sectors.
Discussions with Japan in the housing area this past year led to several significant changes, including the development of a performance-based standard for 2x4, wood-frame construction, recognition of U.S. grademarked-lumber for use in 2X4 construction in Japan, and the amendment to the Building Standard Law to make it performance-based.
The commitments, which were announced in early May, should make it easier for U.S. manufacturers/exporters of building materials and systems to compete in the Japanese residential construction market (worth an estimated $42 billion) in the years ahead. With just under 1.2 million housing starts in 1998, Japan=s housing market was second in size to only that of the United States, even though Japanese housing starts in 1998 fell to their lowest level in 14 years due to recessionary economic conditions. U.S. manufacturers/exporters supplied an estimated $1.5 billion worth of building materials to this market last year, including over $300 million in lumber, plywood, glue-laminated timbers, and other wooden building materials.
U.S. manufacturers/exporters are not the only ones that stand to benefit from the announced commitments. Japanese consumers will also benefit from better quality, lower cost housing. Japan=s commitments in the housing area are consistent with the Government=s goal to lower the cost of housing by one-third, while at the same time increasing the size and quality of housing. Any number of studies have shown that Japanese housing is still two to three times more expensive (not including the cost of land) than comparable housing in the United States.
Japan=s commitments cover a wide-range of areas in the housing sector, from co-sponsoring seminars with the United States to promote U.S.-style building materials to the implementation of performance-based standards for three-story, multi-family and mixed-use wood construction in urban areas. Some of the commitments are new; others build upon commitments made to the United States last year.
Progress in JFY 1998 Under the Initiative
1) The Government of Japan amended the Building Standards Law (BSL) on June 5, 1998, to introduce performance-based codes, a uniform evaluation system for new building materials by June 2000, and upgraded and efficient building confirmation and inspection procedures, including an interim inspection system, as of May 1, 1999. The law will be fully implemented by June 2000.
(2) Japan initiated a process to coordinate funding for the translation into English of the amended BSL and related documents, e.g., enforcement orders and notifications, and provided information on their implementation through a series of formal and informal meetings.
(3) Japan held a series of joint seminars with the United States beginning on July 2, 1998, to introduce and promote procedures for approval of three-story, multi-family, wood housing and certain commercial and mixed-use wood buildings in quasi-fire protection districts (urban areas), which was permitted beginning in August 1997.
(4) Testing methods and procedures for 2x4 construction were established and published in December 1998, based on international and North American practice.
(5) American Lumber Standard Committee (ALSC) and Western Wood Products Association (WWPA) grademarks received recognition as 2x4 construction material for Machine Stress-Rated Lumber (MSR) in February 1998, and for Finger-Jointed Lumber (FJ) in June 1998.
(6) An engineer training program was concluded in 1998 required for recognition of the Underwriters Laboratories as a fire-testing laboratory for various fire preventive building materials.
(7) Japan concluded that the cordless nailer (IM350/90CTQ) did not fall within the definition of Afirearms@ in the Firearms and Swords Control Law in March 1998.
(8) Japan continued ongoing dialogue with the United States in the Housing Experts Group and the Building Experts Committee on recognition of U.S. nails and nailing systems.
(9) Japan continued ongoing dialogue with the United States in the Housing Experts Group and other fora on market access and standards-related issues in the housing sector.
(1) Upon its introduction by the GOJ on April 1, 1999, the Ministry of Construction (MOC) will apply Public Notice and Comment Procedures in developing cabinet orders, ministerial ordinances, notifications, and other relevant regulations that will be issued to implement revisions to the BSL.
(2) By May 1, 1999, MOC will develop and implement all measures necessary for the use of performance-based building standards for three-story, multi-family wood housing and certain commercial and mixed-use wood buildings in quasi-fire protection districts.
(3) Japan and the United States will expand the scope and frequency of joint educational programs to acquaint Japanese builders and consumers with newly made available, U.S.-style building materials and methods.
(4) By June 1999, MOC will issue and implement guidelines, which will include information on the content and timing of inspections, on new interim inspection systems for building code enforcement.
(5) Within six months of submission of all necessary data from the United States, MOC will authorize the use of U.S. power-driven nails and staples in Japan.
(6) MOC will accredit Underwriters Laboratory as a testing laboratory for fire-preventive building materials by recognizing certain necessary protocols after conducting an on-site examination.
(7) The Ministry of Agriculture, Forestry and Fisheries (MAFF) will revise Japanese Agricultural Standards (JAS) for structural plywood during an early stage of FY 1999, with increased emphasis on performance-based standards, including board strength.
(8) Within two months of the submission of requested data from the United States, which is anticipated by September 1, 1999, the MOC will re-evaluate the existing correction factors of Oriented Strand Board (OSB) with a view to applying the existing plywood correction factors to OSB, thereby achieving equivalency.
(9) By June 1, 1999, the MOC will publicly reiterate that it does not intend for its programs to discriminate against imported products.
(10) By June 2000, the Government of Japan will establish and implement a system of recognized/designated evaluation bodies for the nationwide acceptance and evaluation of test data for building methods and materials, and will facilitate implementation by providing opportunities for discussions with potential applicants prior to this date.
(11) A bill amending the JAS Law will be presented to the Diet during the present session with a view to bestowing on testing organizations overseas a function as JAS-registered grading organizations (RGO) and/or JAS-registered certification organizations (RCO).
(12) The MOC will provide the information requested by the United States concerning the approval process for aluminum fire-resistant windows in 1991.
It is expected that Japan=s commitments in the housing area, coupled with a nascent recovery in housing starts, could turnaround U.S. wood products exports to Japan, which were off more than $800 million in 1998. Perhaps most notable is Japan=s long-awaited commitment to allow the construction of three-story, multi-family and mixed-use wood-frame construction in quasi-fire protection districts (urban areas). This will open up significant portions of Japan=s major cities to three-story, multi-family and mixed-use wood-frame construction. To put this in perspective, three-story, multi-family and mixed-use wood-frame construction is currently not allowed except on a case-by-case basis in the majority of the area within the confines of Japan=s four largest cities, Tokyo, Yokohama, Osaka, and Nagoya.
Shifting Composition of U.S. Hardwood Lumber Exports to the European Union
By William P. Bomersheim, Economist
As European consumers learn more about American hardwoods, demand for Anon traditional@ American species is increasing. Ten years ago two species accounted for 73 percent of all U.S. hardwood lumber exports to the European Union. In 1989, over half of U.S. hardwood lumber shipments were white oak, while red oak constituted another 23 percent.
Today, however, U.S. exports to the European Union have broadened to include American sassafras, tulipwood, willow, sycamore, hackberry, cottonwood, and other species which were largely unknown in Europe ten years ago. While American white oak is still a favorite in Europe, American red oak exports have dropped to less than eight percent of U.S. hardwood lumber exports to the European Union.
However, the biggest beneficiaries of Europe=s willingness to try new species, besides European consumers, are U.S. exporters of American red alder, cherry, and maple. Together these species grew from under eight percent of U.S. hardwood lumber exports in 1989 to more than thirty percent today. American red alder exports to the European Union increased steadily from $10 million in 1989 to over $71 million in 1998. Over the same period, American cherry exports to the European Union grew from $6.5 million to over $47 million, while exports of maple grew from $3.4 million to $32 million.
U.K. Consumers Indicate Preference for Natural Character
By William P. Bomersheim, Economist
In Europe, the furniture industry has long preferred hardwood without blemishes to Acharacter marked@ hardwood. Believed to be favored by European consumers, most furniture manufacturers have attempted to produce uniform pieces of furniture, void of character marks and other Ablemishes@. Over the years, this has created demand for the highest grades of American hardwood, and export opportunities have been excellent for U.S. suppliers of FAS (First & Seconds) grade lumber. However, new evidence indicates that European manufacturers= bias against Acharacter marked@ hardwoods may not reflect consumer preferences.
In interviews conducted by the American Hardwood Export Council (AHEC) at the BBC Good Homes Show in England, U.K. consumers indicated that they would like to be offered the choice of hardwood products with natural character. Although the full results of the study have not yet been published, the preliminary evidence indicates that most U.K. consumers are unwilling to pay more for furniture void of Acharacter marks@, and many consumers actually prefer the Anatural@ look. The interviews also revealed that consumers are generally unaware of the environmental benefits to using products that contain natural character and color variation. When informed that European manufacturers normally discard defects and blemishes, many consumers expressed great concern about the use of the resource and felt this was an important issue.
The surveys conducted at the BBC Good Homes Show are part of AHEC=s Koomen Project, funded under the U.S. hardwood industry=s partnership with USDA/FAS market development programs. The objective of the Koomen Project is to determine the effect of materials selection on yield and costs in a hardwood furniture application. The study is also intended to determine defect acceptability and perceived product quality based on consumer surveys conducted using furniture manufactured in the study. For more information about the Koomen Project, please contact Mike Snow at the American Hardwood Export Council, 1111 19th Street, NW, Suite 800, Washington, DC 20035, or by phone at (202) 463-2774.
Korea=s Recovery Bodes Well for 1999 Exports
By Craig Jenkins,
Agricultural Marketing Specialist
The Korean economy is undergoing a fast recovery, and U.S. exports of wood products are rebounding from last year=s low. Korean wood imports were off 60 percent in 1998, while wood imports from the United States were down 64 percent. This year has shown a fast turnaround however, as U.S. exports in the first quarter almost tripled compared to the first quarter of 1998.
Exports of softwood logs and hardwood lumber are leading the charge. Softwood logs exports through March were $12 million, compared to $2 million for the same time period last year. Hardwood lumber exports through March were $9 million, compared to $2 million for the same time period last year.
The jump in exports can be attributed to the increasing health of the Korean economy. Reform and restructuring in the government and private sector, though slowing, has been dramatic. The forecast for GDP annual growth has been adjusted upward to 4 percent, international credit agencies have upgraded Korea=s credit, and the Korean stock market is up 40 percent for the year as of June 1. Encouraged by the recovery and booming stock market, foreign investment is pouring into Korea.
The housing and construction sector is experiencing an even more rapid comeback than most sectors of the Korean economy. Housing starts in 1998, at 300,000 units, were down by half from 1997. The forecast for housing starts for 1999 is 460,000 to 500,000 units. The import demand for wood products from the United States is expected to rebound considerably to meet the strong demand from the housing sector. Wood products export levels are still far below pre-crisis levels, but export prospects are brightening as Korea=s economy turns the corner.