“This Is the Alamo!”

The Japanese want to buy wood chips from East Texas. So why is Congressman Charlie Wilson declaring war?

The signs were meticulously lettered in red and blue paint, the better to stand out for the TV cameras. “Cow Chips for the Nips,” read one. “Japs Will Cut and Run,” read another. Congressman Charles Wilson of Lufkin had come to the huge Temple-Inland paper mill at Evadale to bash the Japanese, and he was finding a receptive audience—that is, when the paperworkers could hear him above the hissing and humming of the plant. Ignoring the windblown sawdust that whipped against his neck and settled on his dark suit, Wilson bashed away. “We cannot have the same thing happen to the East Texas paper industry that happened to the Detroit automobile industry,” he shouted above the industrial din. “The Japanese don’t believe in fair trade.”

Behind Wilson, an overhead conveyor belt released its load of hardwood chips onto a mountainous pile. These square chips, smaller than a pat of butter, were the reason for the rally. Hardwood trees, once despised by timber companies as the natural enemy of profit-making pine, have become essential to the production of high-quality paper. Now Japan, which has no great forests but is second only to the United States in manufacturing paper, wants to import half a million tons of raw hardwood chips a year from East Texas. But the Japanese import virtually no American paper—and Charlie Wilson has sworn to start a trade war, if necessary, to prevent the Japanese from using East Texas chips to expand their paper industry. “This is the line in the dust!” he said when he first heard of the Japanese plan. “This is the Alamo!”

The dispute over wood chips is a microcosm of America’s strained trade relationship with Japan. Critics of U.S. trade policy say that America has been relegated to the position of an underdeveloped country, exporting primarily raw agricultural commodities like wheat and timber to Japan and importing manufactured goods. The fundamental issue is jobs. In East Texas, Temple-Inland says that there isn’t enough hardwood to supply both the local paper industry and the Japanese paper industry. A proposal to expand the Evadale mill is in jeopardy. Manufacturing jobs that should belong to Texans may instead end up in Japan.

But not everyone in East Texas sees things the same way as Charlie Wilson and Temple-Inland. For small landowners with timber to sell, for forestry consultants who advise them, for loggers and truckers and independent sawmill operators, for shippers and loaders at the port of Beaumont, the Japanese are seen not as invaders but as investors. A joint venture headed by Mitsubishi International will buy hardwood chips in East Texas and ship them to Japan through a cargo terminal at the port of Beaumont, and Mitsubishi’s presence will mean higher prices for timber and more work for the people who cut and haul it. In other words, jobs.

The humble wood chip, therefore, is a symbol of America’s inability to reach a national consensus on how to deal with Japan. If we leave our markets open to the Japanese, whether they are selling automobiles or buying wood chips, some Americans benefit and others suffer. If we close our markets, the winners and losers are reversed. Unable to choose sides, we do little except hope the Japanese will open their markets. But they don’t.

I COULD SPEND FIVE HOURS AND I could not tell you all the cultural and business-practice barriers against letting American paper into Japan,” Irene Meister said. Meister is an economist with the American Paper Institute, the trade organization for the industry, and when we talked by phone, she was getting ready to go to Washington for the latest round of trade talks between the United States and Japan. President Bush and Prime Minister Miyazawa have agreed that by the beginning of April the two nations will reach an agreement to open Japanese markets to foreign paper.

But government agreements won’t necessarily solve the problem, Meister said. The Japanese have greatly reduced the tariff on imported paper in recent years, but imports still have barely 3 percent of the Japanese market (in the U.S., imports have 15 percent of the market). Price is not an issue; the United States is the world’s lowest-cost producer of paper. Our advantage is transportation—the timber is accessible, the roads are good, the distance to the mills is short, the cost of fuel is low. Japan, on the other hand, is a high-cost producer. Raw materials have to be shipped thousands of miles; its principal hardwood chip suppliers are Australia, Chile, and the United States.

The problem is that price is often a secondary consideration in Japan, where the economy is oriented toward producers and jobs, not consumers. “The Japanese prefer to buy raw materials and process them themselves,” said Meister, “even if the product they get is more expensive.”

In the U.S. a high-cost producer would have a hard time finding someone to market his goods. But in Japan, distributors are often captives of producers, dependent on them not just for products but also for financing. Outsiders can’t crack this Japanese old-boy network.

Cultural differences are equally hard to overcome. American companies can’t find a market for corrugated paper in Japan, because American cardboard is brown. Japanese cardboard is yellow. Of course, American companies could dye their cardboard (the color is known in the industry as Asia Gold), but would the Japanese buy it if they did? So the companies don’t dye it, and the Japanese don’t buy it. The same stalemate exists in high-quality white paper used for printing. American white paper tends to have a creamy tint; Japanese white paper has a bluish tint. Meister said that American companies are willing to change—if they can be sure of a market.

Temple-Inland has had its own experience with this kind of chicken-and-egg dilemma. The Evadale mill makes cup stock, a stiff paper that food-service companies use to make paper cups. The Japanese won’t buy it. “They say it’s an issue of quality,” says David Ashcraft, Temple-Inland’s group vice president for bleached paperboard. “They want more


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