FAS and U.S. industry team up to promote value-added wood products - Foreign Agricultural Service

Over the past five years, U.S. exports of value-added wood products rose 15 percent to $4.4 billion, including some significant gains in the Caribbean, Europe and the Far East.

From 1991 to 1995, sales of U.S. value-added wood products(1):

* Rose 36 percent to $1.1 billion in Japan.

* Increased more than sevenfold to $13 million in Indonesia.

* Climbed 48 percent to $219 million in the Caribbean.

* Grew by 27 and 39 percent for hardwood lumber and veneer, respectively, to $1.2 billion in the European Union.

* Went up 79 percent to $151 million in Korea.

These significant gains could not have been possible without the commitment of the U.S. wood products industry and the U.S. Department of Agriculture's (USDA) Foreign Agricultural Service (FAS) to explore, develop and expand markets for U.S. value-added wood products.

Over the past 13 years of working together, the U.S. wood products industry has tapped into FAS export promotion and assistance programs and participated in FAS-sponsored trade shows, trade missions and other activities in markets worldwide. The industry has opened offices to carry out marketing activities in Japan, Germany, Australia, Korea, Mexico, the United Kingdom, Hong Kong, Spain and Belgium where U.S. wood products industry representatives are located.

The following describes industry strategies to use FAS programs to address trade constraints and increase sales of U.S. value-added wood products.

FAS Programs Help Market Products

During 1991-95, the U.S. wood products industry and the U.S. government together averaged more than $16 million in annual contributions to FAS' Foreign Market Development (FMD) and Targeted Export Assistance (TEA) Programs and the TEA program's successor, the Market Promotion Program (MPP).

These promotion programs help the U.S. industry advance its wood products by focusing on market segments and activities that maximize consumption of highly processed and higher value products (glue-laminated beams, engineered wood systems or modular housing, for example).

Recently, emphasis has been placed on laminated and other, more processed products (such as dimension, flooring and finger-jointed materials) that take advantage of U.S. technological developments and more efficiently use U.S. wood resources.

FAS promotion programs also help the industry coordinate the marketing of a broad range of products through a unified strategy. For example, timberframe construction has been a major thrust of the wood products industry's worldwide program.

Efforts to promote timberframe construction are in their beginning stages in such markets as Korea, Mexico and China. These countries have poorly regulated, organized or developed commercial real estate practices and financing programs for wood construction housing. Extensive preliminary work is required to educate private and government decision-makers in the areas of building codes and standards, insurance and financing.

In those markets where the industry has already succeeded in establishing timberframe for residential construction (such as Japan and the European Union), promotion efforts have expanded to larger commercial buildings or structures that fully utilize technologically sophisticated products, such as glue-laminated beams, structural wood I-beams and engineered wood systems.

In the furniture manufacturing and interior decorating sectors, promotional strategies have incorporated themes to take advantage of anticipated shifts in consumer preferences. For example, consumers now prefer lighter shades of wood over darker shades, benefitting U.S. species.

FAS promotion programs also have been used to introduce special finishing treatments that mix and contrast shades of wood to demonstrate the versatility of U.S. woods to interior designers and architects. The programs have focused on broadening the range of promoted species and grades, stressing the products' adaptability, promoting the aesthetic appeal of natural "character" marks and encouraging wider ranges of innovative applications.

U.S. Industry Attends Trade Shows

Several U.S. wood products associations, the American Forest & Paper Association (AF&PA), the American Hardwood Export Council (AHEC), the Southern Forest Products Association (SFPA), the Western Wood Products Association (WWPA) and APA - The Engineered Wood Association, participate in international trade shows and fairs on a regular basis.

Usually, these trade shows are market segment-oriented, targeting construction, furniture and flooring manufacturers or materials handling. In these shows, the U.S. industry displays various species of lumber (softwood and hardwood), plywood, molding, flooring, veneer and timberframe construction techniques to potential buyers.

Industry associations frequently hold seminars for specific targeted audiences at these trade fairs and shows. A limited number of foreign trade groups consisting of architects, designers and other decision-makers are invited to attend these seminars. At these seminars, U.S. industry representatives offer detailed technical information about different uses of U.S. wood products, grading, characteristics, diversity and sustainable U.S. forestry management practices.

Trade Missions Bring Foreign Visitors

One of the main market constraints for U.S. wood products is the lack of knowledge by foreign buyers about the different species and the various applications and grading rules of U.S. wood products. To overcome this challenge, the U.S. industry and FAS co-sponsor attendance by foreign industry officials at short technical courses and mill tours in the United States.

Foreign delegates from various disciplines are trained in the classification, grading and many applications of U.S. wood products. Delegates see live demonstrations of 2x4 construction techniques in the field where U.S. timberframe construction systems are used. The delegation also may include foreign journalists, who travel with the group to gather information about the quality and uses of U.S. value-added wood products for possible publication upon their return home.

Personal Contact Helps Promote Trade

U.S. industry representatives engage in trade servicing activities to assist and influence foreign traders, importers, wholesalers, retailers and government officials who import, distribute, market and use wood products in their respective markets.

They also regularly gather and report on key trade information regarding the current and future consumption of various species of U.S. wood products, as well as information about the competitiveness of U.S. products. Through personal contact, U.S. industry representatives gain the trust of foreign buyers, provide technical assistance to ensure their satisfaction with U.S. products and establish long-term relationships with them, making them better able to influence future purchasing decisions.

Throughout the year, independent evaluators conduct periodic assessments to determine the responses of targeted audiences to the various activities listed above. This enables the U.S. industry to adjust and fine-tune ongoing strategies according to the evaluators' findings to ensure maximum impact.

Assistance Programs Aid Exporters

Another way that the U.S. value-added wood products industry has expanded sales is through participation in export assistance programs administered by FAS. The GSM-102 credit guarantee program, for example, facilitates credit purchases of U.S. agricultural commodities, including wood products, by foreign buyers in developing economies. The program is not designed to displace normal commercial transactions that would have occurred in the absence of the program.

The credit guarantee is necessary to increase or maintain U.S. exports to markets where:

* the destination country lacks the financial strength to provide a reasonable expectation that foreign exchange will be available to make the payments as scheduled, and

* private U.S. financial institutions would be unwilling to provide financing without the U.S. government's guarantee.

Credit guarantee coverage for wood products is available for a maximum of 720 days. Countries or regions eligible so far in fiscal year 1996 include the Andean region, Central America, Czech Republic, China, East and West Caribbean, Egypt, Indonesia, Mexico, Poland, Slovenia and Tunisia.

In addition, a new pilot program - the Supplier Credit Guarantee Program - is expected to be available this year. This program will assist U.S. exporters who wish to provide relatively short-term (up to 180 days) credit to importers in a select number of countries.

The U.S. industry also has cooperated in two other FAS-administered programs - the Cochran Fellowship Program and the Emerging Democracies Program.

In 1995, the AHEC brought a delegation of Philippine wood product manufacturers to the United States under the auspices of the Cochran program, which provides short-term training in the United States to government and private sector managers from middle-income countries and emerging democracies. This April, the AHEC plans to bring another Philippine team to the United States under this program.

Last year, the AF&PA supported the Emerging Democracies Program by providing foreign language construction manuals for use in technical training seminars geared toward Eastern European construction tradespeople. The program helps promote U.S. agricultural exports to emerging democracies through technical assistance and U.S. agricultural and agribusiness expertise.

Through FAS export promotion and assistance programs, trade shows, trade missions and other activities, FAS and the U.S. wood products industry have forged a partnership for success, now and in the future.

1 Includes lumber, plywood, veneer, molding, flooring and dimension products, but not logs and chips and furniture and cabinetry. All data for 1995 are estimated at an annual rate based on January-September data.

COPYRIGHT 1996 U.S. Department of Agriculture
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