Hearings and Business Meetings

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

Joseph Gonyea

COO, Timber Products Company

 

Dear Senator Wyden:

 

Thank you for the opportunity to be a part of the field hearing in Medford, Oregon.  I am the Chief Operating Officer/Partner of Timber Products Company, which is owned by my family.  I am the fourth generation of my family to work in the wood products industry.  I am testifying to represent the views of our ownership, our management and our one thousand four hundred team members.  Timber Products Company is in the manufacturing, sales and marketing, transportation, and timberland management business.  We have nine manufacturing facilities located around the nation, most of which are here in Southern Oregon.  We operate an International Division that imports wood products from around the globe including South America, Africa, Russia, and, yes, China to complement our domestic production.  Imported products from all of these countries account for approximately 12% of our annual sales.  Further, it may be of interest and somewhat ironic to note that, in years past, we exported a greater percentage of our overall company sales to countries throughout Europe and the Far East than we now import.  We are proud owners and stewards of 118,000 acres of forestlands that are third-party certified under the standards of the Sustainable Forestry Initiative.  In Oregon alone we have 834 employees and an annual payroll of $38,000,000 (gross pay, not including benefits).  Our largest product line is hardwood plywood, from which we produce panel products used in the manufacturing of fine cabinets, furniture, retail store fixtures, and decorative millwork products.

 

I want to thank you for your leadership in Congress and for being our champion for free trade that is fair trade!  Thank you for advancing this investigation.  I would also like to thank Senator Max Baucus of Montana, Senator Jeff Bingaman of New Mexico and Oregon Senator Gordon Smith for their roles in bringing these important issues to light.  This is not a red or blue state issue but a red, white, and blue issue for our industry and country.  It is our time to act.  We hope your ongoing investigation will address these unfair trade practices and environmental discrepancies that give the Chinese hardwood plywood manufacturers an advantage.  The domestic hardwood plywood industry, like other North America wood products industries including furniture, cabinets, and flooring, is facing an onslaught of unfairly traded imports from China.  The continued survival of our industry is at risk.  It doesn’t have to be so!

 

Our corporate headquarters are in Springfield and our family has been long-time residents of the Eugene-Springfield area.  As you may know, we are proudly known as the Track Capital, USA and my family has been track fans for generations.  Hayward Field at the University of

 

Oregon is the center of this activity.  A group of elite runners is here to prepare for the 2008 Olympics in Beijing and some are part of the U of O Pac 10 Championship team.    When they get to China, there is one thing they can be assured of – a level playing field.  For all competitors, the track surface will be the same and the weather will be the same.  Given a fair set of rules for each sport, history has shown that hard-working American athletes can compete with the best of the best from around the world, including the Chinese. 

 

When it comes to the hardwood plywood business and China, the playing field is far from level and the competition is far from fair.  Official U. S. Government import statistics from the Commerce Department offer glaring evidence of these inequities.  Between 2002 and 2006, the dollar value of U. S. imports of non-tropical hardwood plywood from China rose by more than one-thousand percent, an increase of more than ten-fold.  And that trend continues, as the value of such imports in the first quarter of 2007 was 35 percent higher than the value of such imports during the first quarter of 2006.  In 2002, China accounted for roughly 10 percent of all non-tropical hardwood plywood imports into the United States.  In the first quarter of 2007, China accounted for roughly 54 percent of all such imports into the United States. (1) 

 

How did this happen?  Once again, look at the available facts.  The Chinese government provides direct subsidies to hardwood plywood manufacturers which export their products to the United States.  Many of these products are sold at below our cost, despite the distance they must travel.  We have learned that Chinese hardwood plywood importers have been trying to avoid tariffs by misclassifying their hardwood plywood and we appreciate your work with Customs to look into this.  We have also learned that some Chinese hardwood plywood is fraudulently labeled or stamped and we appreciate your investigation of this problem as well.  At the end of the day, all of these practices lower the price of Chinese hardwood plywood, making it harder for companies, like Timber Products Company, that play by the rules to compete. 

 

And then there are the environmental issues.  Independent studies state that some 30 – 50% of the birch logs coming into China have either been stolen or are the result of illegal logging.  Chinese manufacturers are not held to environmental standards in their wood sourcing or in the manufacturing process with use of resins and lack of controls on air and water emissions.  Add up each of these factors and it is no wonder the Chinese can sell products at below the cost of a vertically-integrated, highly efficient company like Timber Products Company.  These activities fly in the face of international trade rules – rules that China agreed to accept and abide by when it joined the World Trade Organization.  As a result, private hardwood plywood producers in this country are competing not only with Chinese companies but also with the Chinese government

and its distortive economic policies.  Furthermore, in our statement, you have not heard us discuss currency valuation or labor conditions, but these, too, are factors.

 

How does this impact the health and well being of our local economy and federal, state, and BLM forests?  As part of my written testimony, I am providing you with data on the potential impacts of Chinese imports on public forestlands based solely on the impact to hardwood plywood manufacturers based in Oregon.  These companies employ over 2,600 Oregonians.  In addition to Timber Products Company’s two mills, the other hardwood plywood manufacturers are: Columbia Forest Products, States Industries, Murphy Plywood, and Roseburg Forest Products.  70% of all hardwood plywood manufactured in North America is headquartered in Oregon with this group of companies.  These six manufacturing facilities have the potential to process approximately 165,000 MBF of logs or on average 28,000 MBF +/- per mill, a portion of which comes from federal forests.  Over the last five years, Timber Products Company has paid

 

___________

 

            (1) U.S. Census Bureau IM-145 (Document attached)

 

 

$6MM to purchase 38,000 MBF of standing timber from the U.S. Forest Service and BLM from sales that required thinning and salvage logging.  Additionally, during 2005 and 2006, Timber Products Michigan operations purchased 650 MBF of hardwood logs from USFS Region Nine.  All of this is done under strict U.S. environmental guidelines, both federal and state laws.

 

In this past year alone, two North American manufacturers of hardwood plywood (*) closed, displacing 460 employees.  If China is allowed to continue importing subsidized and illegally harvested logs as they are today, it will lead to more mill closures in the United States thereby making the job of thinning and forest health in National Forests even more difficult.  An example of what can take place when we lose the balance of management of federal lands is USFS Region Three in Arizona and New Mexico.  There, the US Forest Service and environmental groups are finding it far more difficult to attract businesses needed to carry out important forest health projects back to the region, now that the infrastructure is gone.  Obviously, this has had a large negative effect on the local rural communities which are surrounded by National Forests and BLM lands.  We do not want to repeat the same mistakes in Oregon.    

 

The decline of domestic hardwood plywood manufacturing could also lead to a further reduction of US thinning and salvage capacity on government lands.  The financial impact would be substantial, but even more serious would be impacts on forest health and public safety.  What’s at stake here is significant.  On the line are literally thousands of American jobs, closed mills, a further decline of local economies, and the degradation of forest health on public and private forestlands.  The impact of Chinese hardwood plywood imports has the potential to exacerbate this situation.

 

I would like to touch on what is happening on private forestlands in America.  For four generations, our family has owned and managed forestlands.  I’ve been doing it for over twenty years.  I can assure you this – forestry today is not my great-grandfather’s forestry.  Today we have laws which govern management of public and private forestlands.  Hard science, technology, and good old experience have taught us a lot.   At Timber Products Company we are active participants in the Sustainable Forestry Initiative program, or SFI.  We manage every aspect of the eco system on our lands.  We are not the only ones.  Over 150 million acres of forestland in America have been audited by independent third parties to meet the SFI standards.  American forestry should be the poster child for forest health and good practices.  Instead, we allow countries like China unfettered access to America’s wood demand.  By virtue of this, we condone their illegal and environmentally-unsound practices while American managed public and private forestlands continue to be an underutilized asset.

 

As you know, Senator, in 1994, in an effort to preserve and protect the Northern Spotted Owl, President Clinton and his administration proposed the Northwest Forest Plan for US Forest Service Regions 5 & 6 and BLM lands which was to reduce the annual harvest an estimated 75% in this area from 4.5 billion board feet to 1.1 billion board feet.  This figure is an achievable harvest.  In its 14th year, however, the Northwest Forest Plan has not met its goal.  The cumulative harvest has only produced 3.5 billion board feet versus a plan of 14.3 billion board feet - a woeful 24% of the targeted harvest.  (2)

 

Those who are concerned about the environment need to come to the table to help achieve the Northwest Forest Plan and produce a stable, reliable harvest from federal lands, and to stop the ____________

            * Longlac and GP Savannah

 

            (2)  AFRC, “Actual Sawtimber Harvested From Sales Sold Under the Northwest Forest                            Plan”, 2006

 

 

 

 

 

 

 

demand for imported wood products from countries that do not have good forest practices or environmental and product quality laws.  Let’s utilize the federal forests as they were intended. 

When it comes to buying wood products, let’s work to educate the consumer to buy American and to encourage those who supply the wood to the consumer – the “big box stores” – to purchase sustainable wood products as they have advocated doing, but have failed to do at times with their purchasing practices. 

 

In summary, I want to again thank you for your leadership on this trade issue which is so very important to my company and to our state.  Thank you also to everyone on the panel.  In closing, my primary message is that free trade must be fair trade.  As you watch American Olympians compete in Beijing next year, remember each athlete can be assured the rules of the sport will be applied equally to all, and that the best athlete will win.  We at Timber Products can compete on a global scale.  Just help us ensure that it is fair competition!

 

Very truly yours,

Joseph J. Gonyea, III

Chief Operating Officer