What is economic history if not the chronicle of individuals trying to improve their respective conditions (maximize their utility, as economists say) by exchanging with their fellow humans and eventually developing extended commerce and markets? (See John Hicks, A Theory of Economic History.) Of course, economic history also reflects “the dark side of the force” as some individuals choose looting instead of voluntary exchange. Economic history is ongoing. We get a scent of all that in Paul Kiernan’s “Logging Is a Way of Life in Appalachia. It’s Hanging on by a Thread,” in the October 29, 2024 issue of the Wall Street Journal.
Hardwoods (oak, hickory, maple, walnut, and cherry) were, with furs, among the first exports of the American colonies. They have had many uses, from flooring and cabinetry to pulpwood for manufacturing paper and airplane propellers. More efficient substitutes have been developed: aluminum for propellers, plastic for flooring, softwood or agglomerates for furniture, etc. “Efficient” means what consumers choose given their preferences, incomes, and the relative prices of substitutes. Technology also affects costs on the supply side and thus market prices. Because of online publishing, for example, the demand for paper has decreased, so the demand for smaller hardwood trees (used as pulpwood) has also gone down. Given all these factors, fewer workers are required in the lumber industry made of sawmill workers, loggers, and truckers. Logging as a way of life in Appalachia has been threatened for some time.
There is nothing sacred about the lumber industry or any other industry, in Appalachia or elsewhere. Consumer demand and producer costs change, as the whole economic history of mankind testifies. But this does not mean that political authorities should mess with the industry. Compounding the purely economic factors—related to voluntary supply and demand on markets—the trade war launched by the US administration with its 2018 tariffs against Chinese products (and, more to the point, against their American consumers) has contributed to the decline of the Appalachian hardwood industry and its way of life. The reporter explains:
As domestic demand for wood 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 came. From 2017 to 2019, exports to China fell 50%.
Output [of Eastern hardwood production] this year is on pace to be 40% lower than 2017, the year before the trade war with China dealt the industry a heavy blow.
The Chinese government retaliated against the new American tariffs by imposing its own, including on lumber imports. As usual, the Chinese tariffs were most likely paid by Chinese importers, but they reduced Chinese demand for lumber, notably imported lumber. Retaliation is as absurd as the tariffs it responds to, for it duplicates the damage. The Chinese government punished “its” domestic consumers because the US government had punished “its” own consumers (including the intermediate industrial users) with its tariffs. Tariffs and retaliation introduce a double coercive wedge in commerce: they are forms of looting. Note that even without retaliation, a tax on imports is also a tax on exports through the increase of the importing country’s currency after imports are restricted.
Another way to look at this is that the American government’s favoring domestic production of tariffed goods such as steel and aluminum led to less hardwood production. This is not surprising: resources (labor and capital) are limited and, ceteris paribus, the production of more of one good or service means less of something else. Moreover, protectionism led to the competitive hardwood industry in Appalachia to produce less than they would otherwise have produced, and the non-competitive steel and aluminum industry to produce more. Protectionism is inefficient.
The WSJ reports that Chinese tariffs on American lumber have been abolished early in 2020. But it did not repair the Appalachian lumber industry. Protectionism often has long-term effects on market opportunities. More generally, when a government interferes with trade, whether domestic or international, it undermines free enterprise, consumer satisfaction, and general prosperity.
