February 21, 2020
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Here’s my advice for how Maine can take on the challenges facing forest industries

George Danby | BDN
George Danby | BDN

The forest industries in Maine and the Northeast have faced unprecedented challenges. Paper mill shutdowns have occurred that would not normally accompany a national economic recovery. Last week, a federal Economic Development Assessment Team visited Maine. If they were to ask my advice, here are some things I’d ask them to consider:

Wood products manufacturing is manufacturing

Over decades, our view has been far too narrow, built on the assumption that there is something exceptional about wood products manufacturing. I call this “wood products exceptionalism.” It is hurting us. Making things out of solid wood, of course, uses different materials and machines, but many generic issues, such as “just in time” and lean manufacturing, apply widely. We should not fence off the wood sector from Maine’s manufacturing economy.

We can’t deregulate our way out of this

Land use rules, air and water emissions controls or forest practice regulations did not cause the problems we are facing. Still, we need improved regulatory systems to improve predictability, clarity and timeliness of decisions. But the current administration in Augusta has worked hard to earn the distrust of environmental advocates and others, so that even modest and reasonable suggestions generate howls of protest. Many firms have been frustrated by NIMBY barriers raised at local levels — Augusta or Washington cannot fix this.

We can’t trade barrier our way out of this

Trade conflicts are first and foremost a symptom of static or declining markets and of absolute cost differences. Manufacturers who depend heavily on protection against imports are in a chronic position of instability. The battle never ends.

We can’t R&D our way out of this

We can’t afford new technology in the abstract. We need technologies that are cost-effective and that solve a manufacturer or customer problem today without relying on subsidized end use markets. In the past, there has been plenty of “R” but not enough “D.”

In the long run, we can’t tax break our way out of this

Virtually every new business development or expansion nowadays is accompanied by a big tax break or government grant. Communities are desperately giving away their tax base to attract a few jobs. And then residents protest that property taxes are too high. How will roads and services be paid for if we give away tax revenues in advance?

The national economy will not grow our way out of this

Two articles in the July 2016 issue of the Journal of Forestry outline the severe contractions in U.S. demand for paper and wood products. Together, they depict a restrained U.S. demand outlook at least in the near term. I think the authors have it right, so let’s avoid policies that bet against them.

Be honest about Maine’s strengths and limitations

Putting some analytical clarity onto Maine’s strengths and weaknesses will be a key task. Vague sentimental mush is not needed. Some advantages important in the past have now vanished. The world does not owe us jobs, tax revenues and prosperity because of our large stock of biomass.

Global forest-based industries are undergoing serious restructuring. But I never predicted the market downturn of the mid-2000s, the gigantic strides that enabled China to outpace U.S. paper production by 2008, or the collapse of the Soviet Union. All of us so-called “experts” completely missed the unprecedented decline in usage of newsprint and printing and writing paper.

The critical asset is people, not trees

Of all the assets often mentioned, the critical one is people. There are people ready and willing to work hard to get ahead. Finding young people interested in careers in manufacturing or in building new small businesses will be difficult. But look at all the young people entering the craft beer and brewpub industry. Why couldn’t this start to happen in wood products?

Training will be important. But it will need to be more carefully planned and strategically implemented and more tightly linked with employers. In today’s high production logging machines, it takes six months for a good operator to learn it to the point that they can earn a return for the owner.

A trade journal clipping in my files quotes a Finnish executive: “Finland needs the forest industry. The forest industry does not need Finland.” That statement seems applicable to Maine. The government cannot make the forest industry need Maine. Only hard work by Maine people, landowners, entrepreneurs, landowners, trade groups and individual companies can make this happen, all supported by sensible public policies and well-targeted information and well-designed training and R&D programs.

Lloyd C. Irland, a forest products industry consultant, is president of The Irland Group based in Wayne.

 


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