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U.S., Canada Trade Reps Sign Thorny Lumber Pact
U.S. Trade Representative Susan Schwab and Canadian Minister of International Trade David Emerson on July 1 initialed a text in Geneva that would govern softwood lumber imports. The treaty would require both countries to end all litigation efforts and impose a complex system of border taxes and quotas that would artificially boost lumber prices during periods of normal and slow demand and thereby harm housing affordability. In return, current duties now totaling about 11% on softwood lumber shipments into the U.S. would be eliminated.
The agreement is slated to last for at least seven years and as many as nine. NAHB’s analysis indicates that the pact could increase prices and may create bottlenecks as Canadian producers fight for limited market share.
With the official legal draft still being developed, the possibility remains that the pact will not be signed and implemented. The Canadian Parliament, which is out of session until September, must still approve the agreement and Canadian producers must agree to drop their litigation.
Canada has already achieved several unanimous victories before North American Free Trade Agreement (NAFTA) panels that have ruled that U.S. lumber producers are not threatened with injury from Canadian softwood lumber shipments. The verdicts call on the U.S. to rescind costly tariffs that boost housing costs and to refund to Canada the more than $5 billion in duties that have been collected.
The accord calls for the U.S. to return $4 billion in duties to Canada and would allow it to keep about $1 billion, half of which would go to the domestic lumber firms that originally brought suit against their Canadian competitors.
In order for the agreement to be enacted, at least 95% of the Canadian companies who currently have duties on deposit with the U.S. Customs Service must agree to end their litigation claims, forfeit a portion of their duties to the U.S. and abide by the terms of the accord.
Last month, NAHB testified before the Canadian Parliament urging lawmakers to reject the deal because it would force Canadian lumber producers to fight for a smaller U.S. market share, distort the marketplace and force American consumers to look elsewhere.
Faced with the prospect of new barriers to imports from Canada and increased volatility in supply and prices, Florida home builder Barry Rutenberg told Canadian lawmakers that NAHB feels obligated to facilitate softwood lumber imports from Europe and the use of alternative materials to protect the interests of American home builders and consumers.
Imports from other countries, while still much smaller than those from Canada, have grown rapidly in recent years, and lumber production in Europe is expanding. Imports from Canada grew 5.9% during the first four months of this year, at a time when total lumber shipments from other nations grew by 15.4%.
Rutenberg said that the best strategy for Canada to achieve free lumber trade and to receive a refund of all the duties that have been collected is to continue to pursue its legal cases through the North American Free Trade Agreement process, the World Trade Organization and the U.S. Court of International Trade. Ottawa has already received several unanimous legal victories in its quest to achieve these goals.
“Finishing the litigation would establish important precedents and make it much more difficult for the U.S. lumber coalition to successfully petition for new duties,” said Rutenberg. “We are very disappointed by the willingness of the Canadian government to sacrifice those gains, jeopardize Canada’s share in the U.S. market and effectively provide a handful of U.S. companies with veto power over provincial forest policies.”
For more information, e-mail Michael Carliner at NAHB, or call him at 800-368-5242 x8376.
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