59 According to industry observers, the furniture industry in Denmark is among the most advanced in the world, with that in Canada at apporximately the same level with the industry in the United States regarding the use of modern machinery or equipment. Most large furniture manufacturers in Taiwan and, to a lesser extent, Yugoslavia also use essentially the same equipment as the U.S. industry. The smaller plants in the Far East and Yugoslavia tend to be less advanced technologically, preferring to rely on abundant supplies of low-cost labor to perform most manufacturing operations. Many industry sources have noted that technology is currently available, especially in the form of computers and advanced woodworking equipment, that would enhance production efficiency; however, this equipment is generally not widely used yet, either in the United States or abroad. Consequently, the U.S. industry is not considered at this time by most industry sources to have any significant advantage vis-a-vis that of most foreign producers in terms of technology level. The costs of raw materials vary somewhat from country to country with no country having a significant advantage in this area. The U.S., Canadian, and Yugoslavian industries use materials principally from within their respective countries. Denmark imports most wood products, and Taiwan and other Far Eastern countries import the bulk of the raw materials, especially wood veneers and finishing materials. Although the Far Eastern countries must pay a larger percentage of their manufacturing costs for materials, their advantage in the cost of labor more than offsets the other additional costs. Government Involvement U.S. household furniture producers report that foreign producers have a competitive advantage in Government policies and regulations which are designed to facilitate exports to the U.S. market. The countries that were cited as benefiting most from these Government policies were Taiwan, Korea, and other Far Eastern countries and Yugoslavia. In addition to the varied favorable policies and financial encouragement alleged by the domestic industry that are given by some national governments, a big advantage is enjoyed by foreign producers that relocated in so called tax havens such as the British Virgin Islands (where tax rates are much lower than in the United States). The U.S. industry has voiced concern about the increasing financial burden of meeting U.S. regulatory requirements, which industry representatives believe put the U.S. industry at a competitive disadvantage. Available information on tariffs suggests that the rates of duty on imports of household furniture into the United States are generally lower than similar rates of our major trading partners. For example, U.S. rates of duty on wood furniture are 3.8 percent ad valorem; those for Canada are 17.5 percent ad valorem, and those for Taiwan are 100 percent ad valorem. Further, U.S. rates of duty are applied against the Customs value of imports, which does not include charges for freight, insurance, and other charges incurred in transporting merchandise from the port of exportation to the port of importation. Foreign tariff rates are usually applied against the c.i.f. value of imports which does include such charges. Hence, numerically equivalent foreign and U.S. tariff rates are not actually equal. 60 Competitive Assessment by U.S. Producers and Importers The following assessment by U.S. producers and importers of wood and upholstered household furniture shows that the overall competitive advantage in the U.S. market between imported and domestically produced furniture varies from country to country and from product to product, as shown in tables 33 and 34. Table 33.--Assessment by U.S. producers and importers of the overall competitive position of U.S.-made wood household furniture and parts versus foreign-made products in the U.S. market, by types, 1979-83 1/ The questionnaire respondents listed the competitive advantage as being "domestic," "foreign," or "same." A score of 3 was assigned to a domestic advantage, 2 to same, and 1 to a foreign advantage. An average rating close to 3.0 indicates that a consensus of the respondents listed a domestic advantage; the closer that the average rating is to 1.0, the greater the consensus is toward a foreign advantage. Source: Compiled from data submitted in response to questionnaires of the U.S. International Trade Commission. For wood household furniture, Taiwan had the competitive advantage in terms of dining tables, dining chairs, other chairs and occasional tables; for the other products, the advantage was held by the domestic industry. Denmark and the United States were rated as being approximately equal for virtually all products under consideration. Domestically-made products were considered by virtually all importers and producers to have a competitive advantage vis-a-vis that of products imported from Canada. Dining chairs and other chairs from Yugoslavia were considered to have a competitive advantage over comparable domestic products; occasional tables and wall systems from Yugoslavia were considered to be comparable with the U.S.-made products, but the U.S. industry was considered to have the overall competitive advantage for dining tables, dining furniture other than tables and chairs, bedroom furniture, and miscellaneous wood household furniture, most of which is imported only in small quantities from Yugoslavia. 61 Table 34.--Assessment by U.S. producers and importers of the overall competitive position of U.S.-made upholstered household furniture and parts versus foreign-made products in the U.S. market during 1979-83, by types 1/ The questionnaire respondents listed the competitive advantage in each factor as being "domestic," "foreign," or "same." A score of 3 was assigned to a domestic advantage, 2 to same, and 1 to a foreign advantage. An average rating close to 3.0 indicates that a consensus of the respondents listed a domestic advantage; the closer that the average rating is to 1.0, the greater the consensus is toward a foreign advantage. 2/ Responses for an assessment of upholstered household furniture from Yugoslavia were statistically insignificant. Source: Compiled from data submitted in response to questionnaires of the U.S. International Trade Commission. Regarding upholstered household furniture, imports of sofas, love seats, couches, and stationary chairs from Canada are considered to have approximately the same level of competitiveness as domestically produced items; U.S.-made sleep sofas, action chairs, sectional furniture, and miscellaneous upholstered household furniture were considered to have a competitive advantage. All U.S.-made upholstered products were considered to have the overall competitive advantage compared with the same items from Taiwan and Denmark. Additional information regarding the competitive assessment by U.S. producers and importers for specific items such as dining tables, dining chairs, other dining furniture, chairs other than dining chairs, occasional tables, and bedroom furniture can be found in app. F. U.S. intermediate purchasers (retailers) of household furniture also believed that Taiwan had an overall competitive advantage, and most of the retailers felt that furniture from Taiwan offered a lower delivered purchase price. 62 Response by the U.S. Industry The U.S. industry is reacting to this competitive challenge in a variety of ways. Old plants are being reexamined for ways to expand production, some new equipment and production methods are being tested, additional funds are being spent on product development and market research, and furniture executives are looking to mergers and other investments to increase efficiency and eventual competitiveness. Although most marketing efforts of domestic producers are concentrated within the United States, it is reported that the U.S. industry is striving to increase its share of foreign markets. Industry representatives have asserted, that the strength of the dollar relative to other currencies has had an adverse impact on the industry's ability to export, but the industry is continuing its efforts in this area. In order to improve their competitive position, some U.S. producers have begun importing parts or even finished products. 62-651 O 86 - 6 |