What Price Protectionism?

Quick question for you... What are the consequences if public policies directed at diminishing wood imports into the U.S. are successful?

A) Reduced U.S. manufacturing capacity?

B) Increased U.S. manufacturing capacity?

C) Higher prices and fewer choices for consumers?

D) Lower prices and greater selection for consumers?

If you answered “A” and “C”, you get the golden star. Seems counterintuitive doesn’t it?

But that’s just not the case. Take for example the current International Trade Commission’s inquiry into Chinese flooring imports.

The investigation into the imported flooring was initiated by the Coalition for American Hardwood Parity, a group of U.S. domestic flooring manufacturers. As a result, the U.S. Department of Commerce is conducting countervailing and antidumping duty investigations on imports of this product from China. Importers and their U.S. customers are anxiously awaiting the outcome.

But guess who else is watching this case closely? U.S. sawmillers. Why? Because what do you think is going to happen if punishing duties are placed on flooring imports?

China flooring companies will cease buying U.S. woods which they use in manufacturing flooring that is exported back to the American market and around the world. Losing or reducing this export opportunity to China is going to severely impact an industry already facing significant trouble finding a home for their production. Not only that though. Consider this… U.S. flooring mills will have less global competition for the lumber they want to buy, conceivably pushing lumber prices down. Reduced global demand for their lumber, lower prices for their lumber, no wonder sawmillers are concerned.

Think U.S. consumers benefit? Think again! U.S. consumers will find fewer choices when shopping. And do you really think flooring manufacturers will lower prices now that they have less competition?

So who benefits from protectionism? I’ll let you finish that thought.