What is economic history if not the history of people trying to improve their conditions (increase their consumption, as economists say) by trading with other people and eventually developing trade and expanded markets? (See John Hicks, Theory of Economic History.) Of course, economic history shows the “dark side of power” as some people choose plunder instead of voluntary exchange. Economic history continues. We get a taste of all that in Paul Kiernan’s book “Logging is a Way of Life in Appalachia. Hanging by a Thread,” in the October 29, 2024 issue of The Wall Street Journal.
Hardwoods (oak, hickory, maple, walnut, and cherry) were woolly, among the first exports of the American colonies. They have had many uses, from flooring and cabinetry to pulpwood for paper production and airplane propellers. More efficient materials have been developed instead: aluminum alloy for propellers, plastic for flooring, soft wood or furniture agglomerates, etc. “Efficiency” refers to what consumers choose given their preferences, income, and relative replacement prices. Technology also affects supply-side costs as well as market prices. Because of internet publishing, for example, the demand for paper has decreased, so the demand for small hardwood trees (used as pulpwood) has decreased. Given all these factors, fewer workers are needed in the lumber industry, which is made up of sawmill workers, loggers and truck drivers. Logging as a way of life in Appalachia has long been threatened.
There is nothing sacred about the lumber industry or any other industry, in Appalachia or anywhere else. Consumer demand and producer costs change, as the entire economic history of mankind testifies. But this does not mean that the political authorities should be confused with the industry. Combining only economic factors-related to voluntary supply and demand in the markets-the trade war established by the US administration and its 2018 tariffs against Chinese products (and, in particular, against American consumers) contributed to the economic slowdown. The Appalachian hardwood industry and its way of life. The reporter explains:
As domestic demand for lumber shrinks, Appalachian sawmills turn to exports. From 1999 to 2017, US hardwood sales nearly doubled to $2.65 billion. China, where wood has been valuable in construction for centuries and a growing middle class fueled the housing boom, accounted for 57% of US hardwood exports at the end of that period.
That meant the industry was exposed when the trade war came. From 2017 to 2019, China’s exports decreased by 50%.
Output [of Eastern hardwood production] this year is 40% lower than in 2017, a year before the trade war with China dealt the industry a heavy blow.
The Chinese government retaliated against the new US tariffs by imposing its own tariffs, including on timber imports. As always, Chinese tariffs are likely to be paid by Chinese importers, but they reduce Chinese demand for lumber, especially imported lumber. Revenge doesn’t make sense as a reactive charge, because it repeats the damage. The Chinese government has punished “its” domestic consumers because the US government has punished “its” consumers (including middle industrial users). Taxes and retaliation present a double coercive entity in commerce: they are a form of extortion. Note that even without retaliation, a tax on imports (tariff) is also a tax on exports by increasing the importing country’s currency after imports are restricted.
Another way to look at this is that the US government favors domestic production of tariffed goods like steel and aluminum which led to less hardwood production. This is not surprising: resources (manpower and money) are limited and, ceteris paribusthe production of many goods or services means little to others. In addition, the protection led the competitive hardwood industry in Appalachia to produce less than it otherwise would have produced, and the uncompetitive steel and aluminum industry to produce more. Malfunction protection.
I The WSJ reports that Chinese tariffs on US lumber were eliminated in early 2020. But this did not fix the Appalachian lumber industry. Hedging often has long-term effects on market opportunities. Generally, when government interferes with trade, whether domestic or international, it undermines free enterprise, consumer satisfaction, and general prosperity.
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