Trade policy hits home, and choices made at the national level affect local industries that rely on access to markets to stay competitive.
That was the lesson of the first Global Trade and Investment Symposium in Macon, Ga., in mid-January, which revealed how arbitrary tariffs threaten the health of some companies whose employees’ livelihoods depend on a well-functioning global economy.
The forestry sector is far from a staid industry, given that its products and residuals are now found in electronics (phone screens) to energy (wood pellets for power plants.)
But even in traditional areas like pulp and paper, change has been rapid over the last decade. Though dealing with the aftermath of the Great Recession and ongoing prognostications of paper’s demise, the industry has also seen the rise of e-commerce, which is fueling a boom in box demand. Amazon alone touched 5 billion cardboard boxes last year, with IKEA sitting at 3.5 billion.
“One tree produces about 135 boxes, so we’ve got to grow a lot of trees to keep up with an economy that has shifted completely,” said Andres Villegas, president of the Georgia Forestry Association.
Inbound investment and open markets have been key to helping the industry smooth out the wrinkles of the volatile forestry world, Mr. Villegas said.
Some pulp mills that had lain dormant are now getting much-needed upgrades as they send products all over the world.
“This mills are being retooled and reinvested in to the tune of hundreds of millions of dollars,” Mr. Villegas said in a panel discussion at the Georgia Sports Hall of Fame hosted by the law offices of Christopher N. Smith and supported by Global Atlanta.
That comes along with even more investment, especially from Canada, in Georgia’s sawmills, which will ensure they’re better prepared for the next downturn.
“Today every single landowner and every single one of our mills is competing with landowners and mills across the globe. Those mills in Canada, Brazil, China, Australia, South Africa, New Zealand — that is our competition,” Mr. Villegas said. “And every single one of our facilities has got to be competitive against those on its labor, units efficiency, on its technology, on the quality of its products.”
Export markets provide a much-needed release valve for an oversupply of timber that built up during the recession, when growers decided to hold onto their trees rather than harvest them and take the hit on prices. That segment, as well as Georgia’s newfound prowess in the log export sector, is being threatened by retaliatory tariffs China has placed on American products during the ongoing trade war, he said.
And then there are companies that depend on the forestry sector, like Irving Consumer Products, a Canadian firm putting a $400 million tissue plant in Macon — in part because of the robust forestry supply chain locally.
Canada’s Impact
No sector has been more contentious in U.S.-Canada trade than softwood lumber, which has served as a flashpoint for years in a relationship that on balance works pretty well.
Canadian Consul General Nadia Theodore was on hand to provide the panel perspective on the recently renegotiated NAFTA agreement and how vital the bilateral trade and investment relationship is (Hint: It supports more than 200,000 jobs in Georgia alone via companies like Decostar, an auto parts supplier owned by Magna, and Pure Flavor, which put a $105 million hothouse for cucumbers and tomatoes in Peach County.)
Much of the backlash against trade agreements like NAFTA stems from the fact that no one explained that they simply provide a framework, not a guaranteed economic panacea, Ms. Theodore said.
“For a lot of people, they were promised the stars and the moon and were told nothing about the very basic economic premise of a trade agreement, which is, ‘You do what you’re good at and I do what I’m good at, and then we trade.’ It’s about creating efficiencies,” she said.
Implicit in that idea is that there could be job losses if certain of your industries don’t stay competitive. But tariffs are not the answer to real trade concerns, she said, reiterating that NAFTA remains in effect, rendering 99.9 percent of products traded between the U.S. and Canada duty-free until its successor pact, the U.S., Canada, Mexico Agreement or USMCA, is ratified by all three parties.
“What I find is that whenever we in an effort to bolster our domestic economy impose tariffs, we slow down the effort of companies to become more efficient,” she said.
Staying Competitive
Maureen Halstead of KaMin LLC agreed. She noted the 90-year-old company’s 350 workers go home with a paycheck largely because it has been open to global markets.
It’s been 50 years since the company shipped its first export container to Japan. Since then, trade has gone from an incidental opportunity to a strategy — so much so that it bought a competitor in the Amazon jungles of Brazil, which outside of Georgia is home to the world’s other largest deposit of fine white kaolin clay.
“We have to be as easy for customers all over the world to do business with us as if they were able to go to a company down the road,” Ms. Halstead said, reiterating Mr. Villegas’s point about competitiveness.
In a state that is the No. 1 forestry products producer, it’s important not to let market share — or the state’s innovation edge — slip, Mr. Villegas said.
“We’re benefiting from the additional demand that these export markets bring because they’re taking some fo that oversupply off the market for us. We are in a position where we’d like to see those markets continue to grow.”
The forum was attended by more than 80 people, including multiple Georgia-based diplomats and representatives from some 10 Georgia cities.
For more information on the symposium and its aims, contact Christopher N. Smith at mcngalaw@mindspring.com. The Macon attorney is also the honorary consul of Denmark in Georgia.
