What is economic history but the chronicle of individuals seeking to improve their respective circumstances (maximize their utility, as economists say) through exchange with their fellows and ultimately develop extensive trade and markets? (See John Hicks, A theory of economic history.) Of course, economic history also reflects “the dark side of power,” as some individuals choose plunder over voluntary exchange. Economic history continues. We smell all that in Paul Kiernans “Logging is a way of life in Appalachia. It’s hanging by a thread”, in the October 29, 2024 issue of the Wall Street Journal.
Hardwoods (oak, hickory, maple, walnut and cherry), along with furs, were among the first exports of the American colonies. They have had many uses, from flooring and cabinetry to pulpwood for paper production and aircraft propellers. More efficient substitutes have been developed: aluminum for propellers, plastic for flooring, softwood or agglomerates for furniture, etc. ‘Efficient’ means what consumers choose based on their preferences, incomes and the relative prices of substitutes. Technology also affects supply-side costs and thus market prices. For example, online publishing has reduced the demand for paper, which has also reduced the demand for smaller hardwood trees (used as pulpwood). Considering all these factors, fewer workers are needed in the timber industry, consisting of sawmill workers, loggers and truck drivers. Logging as a way of life in Appalachia has been under threat for some time.
There is nothing sacred about the timber industry or any other industry, in Appalachia or elsewhere. Consumer demand and producer costs are changing, as the entire economic history of humanity attests. But this does not mean that political authorities should tamper with the industry. In addition to the purely economic factors – related to voluntary supply and demand in the markets – the trade war launched by the US government with its 2018 tariffs against Chinese products (and, more importantly, against their American consumers) has contributed to the decline of the economy. Appalachian hardwood industry and its way of life. The reporter explains:
As domestic demand for lumber shriveled, Appalachian sawmills turned to exports. From 1999 to 2017, U.S. hardwood lumber exports nearly doubled to $2.65 billion. China, where wood has been prized in architecture for centuries and a rising middle class fueled a housing boom, accounted for 57% of U.S. hardwood exports at the end of that period.
That meant the industry was exposed when the trade war broke out. From 2017 to 2019, exports to China fell by 50%.
Export [of Eastern hardwood production] this year the pace is 40% lower than in 2017, the year before the trade war with China dealt a heavy blow to the sector.
The Chinese government retaliated against the new US tariffs by imposing its own tariffs, including on timber imports. As usual, the Chinese tariffs were most likely paid by Chinese importers, but they reduced Chinese demand for timber, especially imported timber. Retaliation is as absurd as the rates it responds to, because it doubles the damage. The Chinese government punished ‘its’ domestic consumers because the US government had punished ‘its’ own consumers (including intermediate industrial users). Tariffs and retaliation create a double wedge in trade: they are a form of plunder. Note that even without retaliation, a tax on imports (a tariff) is also a tax on exports due to the increase in the importing country’s currency after imports are restricted.
Another way to look at this is that the U.S. government’s preference for domestic production of valued goods like steel and aluminum has led to less hardwood production. This is not surprising: resources (labor and capital) are limited and ceteris paribusmeans producing more of one good or service less of something else. Furthermore, protectionism led to Appalachia’s competitive hardwood industries producing less than they would otherwise have produced, and the uncompetitive steel and aluminum industries to produce more. Protectionism is inefficient.
The WJ reports that Chinese tariffs on American lumber were removed in early 2020. But this did not restore the Appalachian timber industry. Protectionism often has long-term effects on market opportunities. More generally, a government undermines free enterprise, consumer satisfaction, and general prosperity when it interferes with commerce, both domestically and internationally.