Hearings and Business Meetings

411 West 8th Street, Medford, Oregon Medford City Council Chambers 12:00 PM

Phill Guay

Vice President of Marketing and Strategic Planning, Columbia Forest Products

Oral Testimony – Phill Guay, Columbia Forest Products

Senate Hearing – Timber Industry Competitiveness

May 30, 2007

 

My name is Phill Guay and I’m the Vice President of Corporate Strategy and Marketing at Columbia Forest Products.  I would like to thank you for the opportunity to be a part of this important hearing, and in turn, thank everyone who made it possible. 

 

Columbia Forest Products is one of the largest manufacturers of hardwood products in North America.  Our four divisions: hardwood plywood, hardwood veneer, hardwood flooring and international division amount to $1 billion in sales, and we have more than 3,300 employee-owners.  We are one of the largest Employee Stock Ownership Programs (ESOP) in the United States.  We have 11 hardwood plywood and veneer manufacturing facilities and are the largest manufacturer in that industry.  We are also a major importer, using offshore resources to complement our domestic product line.  We are North America’s largest Russian Birch importer, and we contract-manufacture with suppliers in China, South America and throughout the world. We are also the nation’s second-largest hardwood flooring manufacturer, with five plants in North America.

 

As a major manufacturer and importer we recognize ours is a global industry.  In fact we have seized the opportunity to be global, both in sales and manufacturing.  We have two flooring plants in Malaysia and sell plywood manufactured in China, not only in the United States but in the European Union also. We sell flooring here as well as the European Union, the Middle East and Australia.

 

As a global company we see the need for balance across all global regions.   Balance is essential for the industry and consumers everywhere.  Just as important, perhaps more so, is the global enforcement of logging rules.  Such a practice would have an unbelievable impact on the environment by containing illegal logging, promoting sustainable practices and curbing related pollution.  So what we seek is not an advantage for any region but fairness across all regions, across all business functions, in raw materials, tax incentives, labor and numerous others.  What we seek is fair trade, and we believe free trade is fair.

 

Joe Gonyea has spent/will spend some time focusing on the issues in China.  We agree with Joe.  Let me give you our perspective not only on China but the overall global trends as well.  Speaking from a Columbia perspective green initiatives and sustainability are most important to us.  For 10 years, Columbia Forest Products has maintained a Forest Stewardship Council (FSC) chain of custody certification and was on of the first in our industry to do so with certificate number 65 out of 828 granted to date in the United States. 

 

We recently introduced a revolutionary, urea formaldehyde-free adhesive system, PureBond™, for the manufacture of hardwood plywood and flooring.  Recently the California Air Resources Board (CARB) concluded that the United States is a toxic dumping ground for excess urea-formaldehyde products manufactured worldwide.  CARB took bold steps to eliminate that practice by passing new regulations that are the most stringent in the world. Similarly we have an opportunity here to stop the United States from being the world’s biggest consumer of illegal logging. In doing so we can help the environment, our industries, domestic employment and tax receipts simultaneously.

 

Although there are several programs which certify that wood is being harvested sustainably, we use FSC; others use Sustainable Forestry Initiative (SFI) as well as additional programs available.  Of the 84.3 million hectors of forest land certified world wide by the Forest Stewardship council 49.7% is located in Europe, 31.5% in North America, 3.0% in Africa and 2.0% in Asia.

 

Certification is a clear indication of sustainable forestry practices.  Since it is nearly impossible to log illegally on certified land, you can see how easily it would be to log illegally in Asia and Africa where under 5% of their forest land is certified by the Forest Stewardship Council.  While we believe certification and legally controlled logging are both good business and social practices, they are not free.  North American industries’ commitment to these sustainable practices is expensive but the right thing to do.  However, it puts us at a significant cost—and at times availability—disadvantage to most other areas in the world. 

 

Let’s examine hardwood plywood alone.  When you look at plywood imports in 2002, 2.2 million cubic meters of hardwood plywood was imported.  In 2006 that number was 4.4 million cubic meters, up 93%.  At the same time, domestic production declined.  During that same period from 2002 to 2006 China’s share of imports increased from less than 10% to 50%.  Imports from other countries actually declined over the period as China dominated growth.  That trend has continued unabated.  Despite a significant slowdown in the domestic housing industry (the primary consumer of hardwood plywood) generally every month, 2007 has seen an increase over 2006 with regard to imports.  Imports are up 33% on a value basis and 6% on a volume basis first quarter 2007 over 2006 despite the housing slump.  Absolutely at this point we believe imports have done far more damage to our industry than the current housing slump.  And many of those imports are subsidized by illegal logging as well as unfair trade practices.

 

Although I know this is a hearing on hardwood plywood, I’d like to mention hardwood flooring as well.  In part because some hardwood plywood is converted into hardwood flooring, and flooring is a much bigger industry.  But also because the same logging and business practices that hurt domestic hardwood plywood manufacturing are present in flooring too.

 

Hardwood flooring imports have soared from 75 million cubic meters in 2001 to 325 million cubic meters in 2006.  The domestic hardwood flooring industry is carrying the same unfair burden.

 

How does this affect our economy as well as federal, state, BLM and private land owners?  The data in our submission provides a snapshot.  Our plant in Klamath Falls, Oregon, one of 11, consumed about 46 million board feet of timber in 2003; by 2006 that declined to 35 million board feet.  Admittedly, much of that timber is from private sources, but the decline clearly indicates a loss of revenue to the various government entities and land owners, as well as job cuts at our Klamath Falls plant.  The Northwest Forest Plan for United States Forest Service Regions 5 and 6 and BLM lands are running at under 25% of the allowable harvest for many reasons.  But had the allowable targets been achieved it would have had a significant positive affect on forest health, revenue as well as our global competitiveness. 

 

The story of log purchases and job loss at our Klamath Falls plant is no different at our other plants nationwide.  Our two largest plants on the east coast consume about 80 million board feet per year.  Once again that volume is falling and 98% of  it comes from private land.

 

So what do we want?  Free and fair trade.  Thanks to the effort of Senator Wyden and his staff, an ITC 332 investigation is now underway for both hardwood plywood and hardwood flooring industries.  That will identify the unfair business practices negatively affecting our industry, tax receipts and employment.

 

Just as important, perhaps more so, is that we develop and enforce measures so that all wood products imported into the United States are, first and foremost, legally logged and, ultimately, sustainably logged.  It is the key, not just to a healthy environment, but to free and fair trade, healthy tax receipts, employment and the survival of our domestic industries.

 

Global enforcement at the log level is the key to success.  Clearly, most wood product manufacturing occurs in China, but most of the illegal logging undoubtedly occurs in Russia and Africa.  While free and fair trade is essential, if logging practices are not controlled in the forest, we may improve the relationship between ourselves and China, but manufacturing will simply move elsewhere.  Hence, neither our tax receipts, nor our industry, nor the environment will really be improved.

 

So, in summary, what is best for tax receipts is best for our industry, free trade, fair trade and legal logging everywhere.