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Take the Ax to the Costly Canadian Timber Tariff
By Ron Dzwonkowski, Detroit Free Press Columnist
The United States has been in a long war with ... Canada.
Well, at least at loggerheads with the Canadians, since this ongoing fight is about lumber. It's a war the United States keeps losing, too, most recently in a battle two weeks ago. Yet Uncle Sam won't surrender and, as a result, Americans are probably paying more than they should for new homes and an infuriated Canada keeps talking about turning this into a trade war with its biggest economic partner.
Whether that would lead to skirmishing here, at the busiest border crossing, isn't clear. But anything that slows or reduces traffic isn't going to be in Michigan's best interests, unless it stops the parade of Canadian trash trucks.
This war has escaped notice of much of the U.S. population, maybe because we have other wars on our minds, maybe because most of us buy our lumber a few two-by-fours at a time from Home Depot and don't pay much mind to whether it's U.S. or Canadian. But the "softwood lumber" war has been front-page news for a long time across Canada, where it is seen as yet another example of America's refusal to be bound by the same rules as other countries even when, as in this case, we practically wrote the rules.
In fact, the latest official panel to declare that the United States is wrong under the North American Free Trade Agreement to slap a punitive duty on Canadian softwood lumber comprised three Americans and two Canadians, who made a unanimous decision on March 17. It was the sixth time in three years that a NAFTA panel has sided with the Canadians.
The U.S. government, however, acting at the behest of some American lumber producers, has yet to concede the error of its position that the Canadian government is subsidizing lumber producers who then "dump" their product on the U.S. market below their cost.
The tariffs, which have ranged over the course of this dispute from 27% to the present level of about 10%, remain in place. Canadian companies have paid about $5 billion in these tariffs — which become part of the price of lumber — to export their wood to the United States. This is money that should be refunded to them under the NAFTA rulings the United States refuses to accept. U.S. home builders figure the tariffs add about $1,000 to the cost of a new house.
A little background: Belying its name, "softwood lumber" is the building block of housing and remodeling because of its strength and flexibility. Hardwood is actually more brittle and better suited to furniture and other uses. The U.S. needs annually more softwood timber than we can or want to cut here, and the Canadians grow a better grade of it. Consequently, about a third of all the softwood lumber sold in the United States comes from Canada, and we need it. We'll need more of it, too, once the Gulf Coast Katrina rebuild shifts from cleanup to reconstruction.
The point of NAFTA, for better or worse, is just what its name says: free trade, which means commercial competition irrespective of borders and, in theory, larger markets and opportunities. It is the same basis on which the Bush Administration pushed a similar Central American Free Trade Agreement through Congress last year. The safeguards in NAFTA, and CAFTA, are the international, quasi-judicial panels that settle disputes between the trading nations. You either honor those procedures or invite NAFTA partners to look out for their self-interests, too, and pretty soon your agreement isn't worth the paper it's written on.
The United States has until April 27 to adhere to the latest NAFTA ruling or file yet another appeal.
America has enough ill will directed its way these days without inviting it so close to home over something that shouldn't be such an issue. Besides, we need the lumber.
RON DZWONKOWSKI is editor of the Free Press editorial page. Contact him at dzwonk@freepress.com, 313-222-6635, or in care of the Free Press editorial page.
Reprinted with permission from the Detroit Free Press Inc. Copyright © 2006
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