We are 45 days away from the implementation of the announced Russian log Export Tax, an 80% duty that was to be levied on every log shippped out of Russia after January 1, 2009.  The concept was to keep logs, a natural  raw material resource, at home to help build Russia's own finished furniture and flooring industries.  Until now this natural resource was being shipped out of the country, mainly to China, as fast as the loggers could cut.

Enter the global economy and all of a sudden Russia is seeing a major decline in the value of the logs and orders from other countries wanting the material.  Russian log prices hit their all time high in the 4th quarter of 2007 as manufacturers clambered to build inventories before the new taxes started to go into effect.  Since then the decrease in global demand and the threat of the 80% duty have combined to decrease demand and prices to their lowest point in years.  The hoped for development of Russian wood manufacturing industry has been slow and is not ready to use those logs that are available.

Good news?  The Russian government has agreed to delay the Export Tax for at least nine to twelve months.  This leaves the world's largest exporter of logs, still available to supply logs without a restrictive export duty.  But, be careful what you wish for....  With the threat of the Russina duty looming, most countries have found new resources for their log supplies.  Scandanavia has replaced Russia with other Baltic Sea countries who are anxious to export.  So now Russia is left with the decreased demand they had hoped for but it is combined with low prices on exported product, fewer potential customers and a domestic manufacturering industry that is not yet ready to take advantage of their governments grand plan. 

Bottom line, Don't fool with Mother Nature or a Free Market Economy. 

In a recent Press Release from Bona (click here to read it), they announced a new hardwood floor care system, called the "Ultimate Hardwood Floor Care System" and this new Ultimate Hardwood Floor Care Kit is available to purchases at $59.99.  They went on to say:

"Bona's Ultimate Hardwood Floor Care System will be available this October at select Ace Hardware, Do It Best and Kohl's department stores and on bona.com."

What strikes me odd with this last statement is: Why would Bona introduce the "ultimate" hardwood floor care system and not offer it to specialty floor stores and the large home centers first? Personally, I would never think of buying hardwood floor care products at Ace, Do It Best or Kohls department stores. Bona also has it for sale on their own web site for $59.99, which makes me wonder why others online would want to sell it and have to compete directly with their supplier's own web site.

So what do others think?

Too often we are so consumed by what is happening in the USA, we miss changes in the global market that impact us here.  An example is the implementation of an 80% export duty that the Russian government has levied on logs leaving the country.  Since they were the largest exporter of logs in the world, this will have an impact on lumber prices globally.  The purpose of the duty is to entice Russians to develop a value added wood industry for export rather than just ship out raw material.  Don't be surprised if in 5 years the best value wood flooring isn't coming from Russia.

Last month, India and a group of Asian countries including China signed a free trade agreement similar to the North American Free Trade Agreement or the European Economic Union.  This agreement was 5 years in the making and provides for duty free trade between countries and dispute resolution mechanisms.

The Olympics were spectacular and I would not want to be the next city to host these games.  While China performed superbly, their shining moment does not cover up some basic problems in their economy and society.  With over 20% of the world's population, they have only 7% of the world's water.  Many of the old government owned businesses have been turned over to entrepreneurs who are ill equipped to manage profitable businesses.  The assets are carried on the state bank's books at full value; loan defaults are not recognized because state businesses are often sold for a dollar a year plus a balloon at the end of 20 years for the remainder of the value.

An global agricultural agreement promoted by the World Trade Organization fell apart last month when the USA and India objected to the way government subsidies to farmers and crops were being treated differently between countries. 

How will all of this affect you?  Ripple affects will impact businesses here in the USA over the next five years.  Whether it is a company in China that can no longer pay their bills, a new wood floor from Russia, higher food and biofuel costs due to the international agricultural market, global changes will impact your business.  Keeping informed now will help prepare for the future.