“This Is the Alamo!”

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

April 1992By Comments

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 strength. We see this as a matter of preference. We’re talking about something that is going to hold a Coke for fifteen minutes and then be thrown away. If you make a stronger cup, you’re just wasting fiber and energy.

“We haven’t made much attempt to serve them. We don’t have enough capacity to serve domestic and foreign customers. And we have no assurance that they’d buy anything if we gave them exactly what they asked for.”

WHAT THE JAPANESE WILL BUY IS HARDWOOD CHIPS. A few years ago, they could have taken all they wanted from the East Texas forest. Timber companies did everything they could to kill hardwood trees like oak and gum: girdled them, burned them, poisoned them. They were useless, not suitable for lumber (too susceptible to rot) or paper (the wrong kind of fiber). To make matters worse, hardwoods outcompeted pine for sunlight and nutrients in the soil. In a thinned forest, pines grow taller and wider, doubling the val-ue of each tree. Clear-cutting was devised not just to harvest the maximum amount of timber in the least amount of time but also to get rid of the pesky hardwoods. Today most of the company-owned uplands have been converted to pine plantations. Hardwoods survive mainly in smaller forests owned by private land-owners who can’t afford to manage their timber and on company lands, along creeks and rivers and in the bottomlands, where pines don’t thrive.

Even as Temple-Inland was winning its war against hardwoods, however, the paper industry was changing. Customers were insisting on higher-quality printing paper for everything from corporate reports to food containers. Pine alone couldn’t do the job. Its fibers are twice as long and twice as thick as hardwood fibers; under a microscope, a pine fiber looks like a tiny purple tree branch while hardwood resembles a black human hair. Pine fibers give paper a rough texture, but when hardwood pulp is mixed with pine, the paper turns out denser, smoother, and more receptive to ink. After years of destroying hardwood trees, Temple-Inland now finds itself needing more of them in order to expand its mill.

The Evadale mill opened in 1954—it was known as Eastex Pulp and Paper back then and was a subsidiary of Time Inc.—and it is showing its age. It was built in the shape of two side-by-side rectangles. The east rectangle looks like a chemical plant, a maze of mammoth tanks, pipes, and valves, and the west side looks like an ordinary factory. The chips are cooked into pulp and bleached on the east side, then turned into paper on the west side. The process begins in tall, slender cylinders known as digesters, where the chips are cooked in a caustic liquid under pressure until the fibers become limp. Then a valve opens and escaping pressure drives the pulp through a pipe into a much larger silo known as a blow tank. The process is ferociously noisy and occasionally stinky with sulfide gasses but, old-timers say, not nearly as noisy and stinky as it used to be. “When I came here in 1965,” my guide told me, “we’d blow a tank, and you could hear it ten miles away in Buna.”

After the pulp has been washed to remove chemicals, then bleached, and washed again, it goes to one of four paper machines on the west side of the mill. They resemble newspaper presses—row after row of whirling horizontal cylinders. Ninety seconds after the wet pulp starts its journey through the cylinders, it emerges as dry paper.

Later this year Temple-Inland will decide whether to add a fifth paper machine at Evadale. It is already building modern digesters for hardwood chips. The new machine, the company says, could require as much as 800,000 tons of hardwood chips a year. But is there enough hardwood to go around?

BOTH OPPONENTS AND SUPPORTERS of the Japanese export proposal agree that the annual growth of hardwood trees in East Texas exceeds the amount being cut. “We’re harvesting about sixty-five percent of what we’re growing,” says Bruce Miles, the longtime director of the Texas Forest Service at Texas A&M. The surplus represents around 2.3 million tons of wood. But that’s where the agreement ends.

Timber reserves in one respect are like oil reserves: Not everything in the ground is recoverable. Some hardwoods are off-limits. The Forest Service’s inventory includes the Big Thicket, which is a federally protected preserve. Other hardwoods aren’t suitable for making paper. “Post oak is good only for barbecue and Aggie bonfires,” Miles says. And, for Temple-Inland at least, still others are too far away. Every mile that wood has to be transported raises the cost. “We prefer to get our hardwoods from a forty-mile radius around our plant,” says David Ashcraft. “The surplus the Forest Service talks about is in northeast Texas. It isn’t around here.”

Temple-Inland gets two thirds of its hardwood chips from company lands, but most of the remainder comes from small, individually owned tracts that constitute 60 percent of the acreage in the East Texas forest. The Japanese will have to buy all of their timber supply from these same privately owned lands. Most landowners, however, don’t treat their trees as a continuing investment.

“Timber is the most poorly marketed crop there is,” laments Miles. “The average landowner has no idea of the acreage or the quality of his timber. The first person who drives by on a Sunday afternoon with a big check gets to cut it.” Many owners inherited their land and regard timber as a onetime windfall. So common is the practice of cutting trees to pay for sending kids to college that East Texans have coined the phrase “tuition cut.” Despite federal and state subsidies, only one landowner in seven replants following a cut. Trees do grow naturally, of course, but if the forest isn’t managed, undesirable hardwoods and brush reduce its commercial value.

That’s what has Temple-Inland worried. Perhaps there is enough timber for now, but what will the forest look like after the Japanese cut it for five, ten, fifteen years? Will it be cut to the stump, as it was early in this century by out-of-state companies that did not replant? That rapacious era gave another phrase to the language: “cut out and get out.”

Some people, however, say that Temple-Inland is the problem, not the Japanese. Indeed, they argue, the Japanese will be good for East Texas. The suspicion is widespread among landowners and their consultants that what really concerns Temple-Inland is the price of hardwood, not the supply. Before the recent flooding skewed the market, landowners in Temple-Inland’s southeast Texas bailiwick were getting only one third as much for their hardwood as landowners in northeast Texas.

“The reason for the low price is that we have so few purchasers,” says Ross Cahal, a Jasper County landowner. “There’s no competition. The companies use their own timber as a bargaining chip. If the market goes up, they cut their own trees until it comes down.”

Cahal will be one of the winners if the Japanese bring competition and higher prices to East Texas. Another will be William Sloan, a Houston-based forestry consultant who has recently set up an export business. Sloan cuts timber for landowners and plans to sell it overseas by the boatload.

“There are twenty-six Texans making a living off of our company,” Sloan says. “When the Japanese come in, I can employ thirty-five people and increase the profit to landowners. “There’s plenty of hardwood out there. I’ll even haul it to Temple if they’ll pay me what it’s worth.”

“SURE, A FEW PEOPLE WILL MAKE a few more dollars by selling trees to the Japanese,” Charlie Wilson told the Evadale paperworkers near the close of his speech. “In 1940 there were a few people who made a few more dollars by selling the Japanese scrap iron. That was a bad idea then, and this is a bad idea now.” Later, back in the RV that serves as his mobile office, Wilson stretched out his long legs and shook his head.

“They just want the jobs, that’s all,” Wilson said of the Japanese. “They’re just pigs. Nip pigs.”

Wilson’s critics view with cynicism his opposition to the Japanese. They note that as a young man he sold lumber for a Temple company; that his principal political benefactor for decades has been Temple-Inland’s now-retired chairman, Arthur Temple; that he faces a reelection race this fall. But whatever secondary motives Wilson might have, there is no doubt that the depth of his anti-Japanese feeling is genuine.

Wilson has had a checkered political career in which his personal excesses have overshadowed his considerable abilities. His dossier includes, among other things, a cocaine investigation by the House ethics committee (he was cleared) and a squabble with the Defense Intelligence Agency after it refused to allow his girlfriend to accompany him on a flight. But when he latches onto an issue that he cares about, he is an adroit politician. He single-handedly lobbied for aiding Afghan guerrillas, a policy that did its part in destroying the Evil Empire of communism. Now Wilson has found in Japan a new Evil Empire. His harsh words about the Japanese brought back memories of the time he explained why he cared so much about the Afghan guerrillas: “I like to kill Russians, as painfully as possible.”

It may take another kind of guerrilla war to stop Mitsubishi from shipping hardwood chips to Japan. Although Wilson is pushing two bills in Congress—one would prohibit the export from private land of timber found to be in short supply, and the other would give a tax break to landowners who sold timber for domestic use—neither is likely to pass. Too many Americans are making money from exports. “We’re opposed to any restriction on agricultural exports,” says a Washington lobbyist for the Agricultural Export Alliance. “We want America to be known as a reliable supplier.”

Wilson isn’t giving up. “We’re going to picket the building site,” he told me. “We’re going to create political problems for the port commissioners. We are trying to impress Mitsubishi that it will cost them more in public image and lobbying fees than they will make in East Texas.”

THE CASE OF THE WOOD CHIP ILLUSTRATES the dilemma of American trade policy: Given that the Japanese are unfair traders, how do we deal with them? Suppose that we were to tell the Japanese that they can’t buy wood chips here unless we can sell paper there. It wouldn’t work. The Japanese would simply buy wood chips elsewhere, just as the Soviet Union once bypassed our wheat embargo. The only way to force open their markets is to be willing to close ours—to prohibit the Japanese not just from buying our wood chips but also from selling their cars and VCRs in the greatest consumer market on earth.

Trade may seem like an economic issue, but it is really a political issue. It raises the question of who should make the basic decisions about buying and selling ordinary goods—the individual or the government? Lenin once said that the capitalists would sell the communists the rope that would be used to hang them, the point being that in our society, the decision to sell rope—or wood chips—is made according to private interests, not public interests.

The question that underlies the trade policy debate is whether this is a strength or a weakness. Is it best in the long run to protect our manufacturing jobs, even if American consumers pay the price for closed markets—just as Japanese consumers do? Or is it best in the long run to let people pursue their own self-interests? “This is America,” a lawyer for Mitsubishi’s joint venture told me, “and a landowner ought to be able to sell his trees to anybody he wants.”

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