U.S. Forest Products: Building Potential for New Growth

Warm, beautiful, workable, renewable-- just a few of the adjectives that commonly are applied to wood and forest products. U.S. forest products manufacturers are also adaptable: the industry has developed many high-value and specialized products to meet the requirements of discerning consumers not only in the United States, but worldwide.

A whole spectrum of products start out as wood. Value-added products include moldings, cabinets, flooring and doors and windows. In addition, the U.S. wood industry produces plywood, oriented strandboard (OSB), fiberboard, veneer, particleboard and many other products.

U.S. manufacturers now market a host of engineered wood products, including numerous combinations of roof and floor trusses, wall panels and other products in response to customer needs, as well as to changing raw material availability.

Wood and forest products loom large in the U.S. economy, accounting for more than 1.2 million jobs and an expected record $7.6 billion in exports in fiscal year 1997.

The U.S. forest products export industry may enjoy its best year ever in 1997. While the United States is the world's largest consumer and second largest importer of wood products, U.S. solid wood exports are expected to post a 9-percent rise this year by value. U.S. exports are expected to increase from $7.0 billion in 1996 to $7.6 billion in 1997.

U.S. value-added product exports are finding increasing opportunity in foreign markets and are key to the economic expansion of the industry. Total U.S. value-added export sales are expected to move from $4.3 billion in 1996 to nearly $5.0 billion in 1997. Value-added product sales now make up two-thirds of U.S. exports, leaving only one-third of U.S. exports in 1997, consisting of logs and wood chips.

Softwood plywood, which is used in construction as well as in materials handling applications, is expected to post exceptionally strong gains, with exports forecast to rise from $288 million in 1996 to nearly $375 million in 1997. Most of these additional sales will go to markets in the European Union and Canada.

Softwood lumber exports are forecast to rise $200 million to $1.3 billion in 1997, still $100 million shy of the record $1.4 billion shipped in 1993.

Overseas, furniture processors are looking more frequently at U.S. temperate hardwoods to supplement diminishing tropical hardwood supplies. As a result, U.S. hardwood lumber exports are forecast to reach an all-time high of $1.3 billion, climbing $145 million over what was sold in 1996. Likewise, U.S. hardwood veneer exports are expected to reach a record $330 million, $20 million more than what was sold in 1996.

Not only is world demand for wood growing, it is expected to continue to grow as economies improve, and more people attain middle-class status, demanding larger homes, higher quality furniture and ever growing amounts of non-durable goods. As a result, wood consumption is increasing. Value-added wood products to Japan are growing especially fast.

Japan is by far the biggest customer for U.S. wood products, importing more than $3.3 billion worth in 1996. Japan's imports of lumber and other wood product imports from the United States in 1996 posted the highest export values ever for the U.S. wood industry, although log imports were down.

The U.S. forest products industry has pursued a results-oriented, two-pronged strategy using trade policy initiatives and an aggressive market development program. One of the strategy's biggest payoffs has been in Japan.

In selling to Japan, exporters were up against an unfavorable trading environment, a complex product distribution system, restrictive building codes and product standards, and a broad lack of awareness of the properties, availability and grading of U.S. wood products.

Market access and development initiatives were merged into a seamless strategy that addressed impediments to trade and created marketing opportunities for U.S. wood products.

The results have been impressive. U.S. exports of wood products to Japan have increased over 20 percent since 1992, reaching a record $3.3 billion in 1996.

It's no wonder that U.S. sales grew. Actions taken under the 1990 U.S.-Japan wood products agreement and Japan's deregulation initiative are driving up demand for U.S. wood products, at a time when the Japanese have become more aware of the need to reduce their housing costs.

Japanese recognition of U.S. grade-marked lumber and acceptance of OSB as equivalent to plywood--and the movement toward performance-based building codes--are also fueling record demand.

The FAS/industry partnership has achieved marketing breakthroughs which have contributed to the export explosion of value-added products to Japan. By successfully using funds provided through FAS market promotion and assistance programs such as the Market Access Program (MAP), and by participating in FAS-sponsored trade shows, trade missions and other activities, U.S. wood products have gained significant exposure in Japan.

The FAS-industry marketing strategy for Japan stresses continual product promotion and presence in the market, as well as market research on new areas of opportunity for U.S. exporters.

Essential to this effort is the necessary technology and information transfer to Japanese buyers, builders, manufacturers, designers and government officials about U.S. wood products and building systems and how they can be competitively adopted in Japan.

U.S. government and industry representatives continue technical dialogues with the Japanese to ensure that, as the deregulation process moves forward, it is transparent and fair to U.S. exporters and results in greater market access.

Developing partnerships with Japanese associations and industry interested in expanding wood products trade with the U.S. remains a top strategic imperative of our government and industry partnership.

FAS and industry promotion efforts also are contributing to increasing U.S. export sales worldwide. By the end of 1997, sales to the European Union are expected to climb from $1.21 billion to $1.27 billion; Canada from $1.2 billion to $1.5 billion, and sales to Mexico from $237 million to $280 million.

Forested area in the United States has remained stable since the 1920s, at about one-third of the total U.S. land area, despite significantly increased harvesting. This is nearly two-thirds of the area that was forested in 1600.

According to David Brooks of the USDA Forest Service, in his U.S. Forests in a Global Context, (1993), the United States has 5 percent of the world's population and 40 percent of the world's private forests. With 7 percent of the world's timber inventory, domestic demand consumes 17 percent of the world's production of wood products.

The forest products industry is profoundly affected by swings in the national economy, particularly housing starts. Although demand for non-durable consumer products such as tissues, shipping materials and grocery pallets tends to be inelastic, demand for durable goods, such as houses and furniture that require wood products in their manufacture, tend to be strongly influenced by mortgage and other interest rates.

In order to moderate the market, and given the relatively limited possibility for large consumption increases, producers and manufacturers are increasingly turning abroad in the search for new markets.

With the industry comes jobs: more than 41,000 establishments, employing more than 1.2 million people, and 6.3 percent of all manufacturing employment are allied with the forest industry, according to recent U.S. Bureau of the Census data. Most of these are single-plant companies, and average 29 employees.

Country	U.S. Industry Offices Abroad	FAS Offices

Australia	Western Wood Products Association P.O. Box 695 Pymble, New South Wales Australia Tel.: (011-61-2) 91442898 Fax: (011-61-2) 91445125	Office of Agricultural Affairs American Embassy PSC 277 APO AP 96549 Tel.: (011-61-6) 270-5854
Belgium	APA-The Engineered Wood Assn.. Grote Steenweg 624 2600 Berchem, Antwerp, Belgium Tel.: (011-32-3) 440-6838 Fax: (011-32-3) 440-0840 Fax: (011-32-2) 511-0918	Office of Agricultural Affairs American Embassy PSC 82. Box 002 APO AE 09724 Tel.: (011-32-2) 513-3830
Germany	APA--The Engineered Wood Alsterufer 28 20354 Hamburg, Germany Tel.: (011-49-40) 448-0894	U.S. Agricultural Trade Office Association AmConGen Hamburg Department of State Tel.: (011-49-40) 4146-0730 Fax: (011-49-40) 4146-0720
Hong Kong	American Forest and Paper Association and American Hardwood Export Council Room 528, West Wing New World Office Building 20 Salisbury Road Tsimshatsui, Hong Kong, Greater China Tel.: (011-852-2) 724-0228 Fax. (011-852-2) 366-8931 (This office covers China, Hong Kong, Indonesia, Malaysia, The Philippines, Singapore and Thailand)	Agricultural Trade Office U.S. Consulate, Hong Kong PSC 464, Box 30 FPO AP 96522-0002 Tel.: (011-852-2) 841-2350 Fax: (011-852-2) 845-0943
Osaka, Japan	American Hardwood Export Council Nishi-tenman 2-11-5, Kita-ku, Osaka American Consulate Building Postal Code 530, Japan Tel.: (011-81-6) 315-5901 Fax: (011-81-6) 315-5103	Agricultural Trade Office/Osaka American Consulate General Unit 45004, Box 239 APO AP 96337-5004 Tel.: (011-81-6) 315-5904 Fax: (011-81-6) 315-5906
Tokyo, Japan	American Forest and Paper Association 8-F Tameiko Tokyo Building, 7th Floor 1-1-14 Akasaka, Minato-ku Tokyo 107 Japan Tel.: (011-81-3) 3583-2850 Fax: (011-81-3) 3589-1560	Agricultural Trade Office/Tokyo U.S. Embassy Unit 45004, Box 241 APO AP 96337-5004 Tel.: (011-81-3) 3224-5115 Fax: (011-81-3) 3582-6429
Korea	American Forest and Paper Association Leema Building, Room 303 146-1 Susong-dong, Chongro-ku Unit 15550-0001 Seoul 110-140, Korea Tel.: (011-82-2) 722-3685 Fax.: (011-82-2) 720-1898	Agricultural Trade Office American Embassy Seoul APO AP 69205-0001 Tel.: (011-82-2) 397-4188 Fax: (011-82-2) 720-7921
Mexico	American Forest and Paper Association and American Hardwood Export Council Monte Pelvoux 220 P.H. 2 Col. Lomas de Chapultepec 11000 Mexico City, Mexico Tel.: (011-52-5) 202-8520 Fax: (011-52-5) 202-8874 Southern Forest Products and Western Wood Products Associations Apartado Postal 459 Xalapa, Veracruz 91000 Mexico Tel.: (011-52-2) 816-3275 Fax: (011-52-2) 816-3275 APA--The Engineered Wood Association Colina de Herman #43 Frace, Boulevares, Naucalpan 53410 Mexico City, Mexico Tel.: (011-52-5) 393-9777 Fax: (011-52-5) 562-4423	Agricultural Trade Office American Embassy P.O. Box 3087 Laredo TX 78044-3087 Tel.: (011-52-5) 202-0168/0121 Fax: (011-52-5) 202-0528
Spain	APA-The Engineered Wood Association Garan Via 67, 4 Despacho 421 28013 Madrid, Spain Tel.: (011-34-1) 542-2900 Fax: (011-34-1) 542-6123	Foreign Agricultural Service American Embassy, Madrid PSC 61, Box 20 APO AE 09642 Tel.: (011-34-1) 577-8034 Fax: (011-34-1) 576-8063
United Kingdom	American Hardwood Export Council 10 Throgmorton Ave. London EC2N 2DL United Kingdom Tel.: (011-44-171) 588-8811 Fax: (011-44-171) 588-8855 (covers Europe) APA-The Engineered Wood Association 65 London Wall London EC2M 5TU United Kingdom Tel.: (011-44-171) 638-1414 Southern Forest Products and Western Wood Products Associations 65 London Wall London EC2M 5TU United Kingdom Tel.: (011-44-171) 638-1234	Foreign Agricultural Service American Embassy PSC 801, Box 48 FPO AE Tel.: (011-44-171) 499-9000 Fax: (011-44-171) 409-2019

The following offices are co-located with the American Forest and Paper Association in Tokyo and share the same address.

The Foreign Agricultural Service (FAS)will participate in the Japan Home Show 1997 on November 11-14 in Tokyo. The event, the first of its kind for FAS in Japan, will highlight U.S. wood products and house-framing technologies to help promote U.S. wood products and wood-framed housing, as well as U.S.-style 2x4 home construction. Cooperators include the American Forest Products Association, the Western Wood Products Association, the American Hardwood Export Council, and APA/the Engineered Wood Association.

The authors are agricultural economists in the Foreign Agricultural Service's Fisheries and Forest Products Division. Tel.:(202) 720-0638; Fax: (202) 720-8461 ; E-mail: freese@fas.usda.gov or jenkinsc@fas.usda.gov.