Tentative Timber Accord a Blow to U.S. Consumers
The U.S. and Canada announced on April 27 that they have resolved their long-running cross-border softwood lumber dispute by entering into a tentative managed trade agreement that will be detrimental to housing affordability and millions of U.S. consumers.
Under the framework, Canada would impose a complicated system of export taxes and quotas on its softwood lumber exports when the price of U.S. lumber is below $355 per thousand board feet (the current price is $377). The deal would remain in place for seven years, with an option to renew it for an additional two years.
If the settlement is finalized and results in new trade barriers limiting Canadian lumber shipments into the U.S., NAHB will help builders seek lumber sources from other countries and promote the use of alternative building materials wherever practical.
“From a policy perspective, NAHB will work to increase the supply of German and Swedish lumber, and we will consider options to import Russian softwood from Siberian forests,” said Jerry Howard, the association’s executive vice president and CEO. “In addition, we will encourage interested builders to explore using steel and other building materials and construction techniques.”
While the negotiations were still underway, NAHB launched a media blitz in an effort to show that a managed trade deal would drive up housing costs. Howard was quoted in the Wall Street Journal, Associated Press, the Dow Jones Commodities Service, the Miami Herald and the Deseret Morning News. In addition, he appeared in virtually every major Canadian broadcast and print outlet.
“Such market-distorting trade restrictions would be completely unjustified following four years of litigation that has proved the Canadian lumber industry is not subsidized and does not constitute a threat to domestic producers,” Howard said.
Noting that the framework seems geared toward reaching a political resolution that is acceptable to Washington and Ottawa and to lumber producers rather than considering the impact on consumers, on inflation and on the overall economy, Howard said that “it is certainly no coincidence that the talks deliberately exclude several key stakeholders in the debate — most notably, U.S. consumers, who stand the most to lose.”
North American Free Trade Agreement (NAFTA) panels have repeatedly and unanimously ruled that U.S. lumber producers are not threatened with injury from Canadian softwood lumber shipments, and that there were no significant subsidies provided to Canadian producers. The verdicts call on the U.S. to rescind costly tariffs that harm housing affordability and to refund to Canada the more than $5 billion in duties that have been collected.
Although a NAFTA ruling carries the weight of law in Canada, the U.S. and Mexico, the Administration has failed to implement decisions that invalidate the lumber duties and return all duties paid out by Canadian firms.
This issue is critical because there are not enough trees available in the U.S. to produce the lumber needed for home building. Canadian lumber imports currently constitute about one-third of domestic consumption and are absolutely vital for the construction of affordable new homes and residential remodeling. Imports from other countries accounted for about 5% of the domestic supply in 2005.
“For an Administration that espouses free trade, there is no logical reason to ignore repeated NAFTA rulings and to engage in one-sided negotiations that would provide a massive subsidy to the U.S. timber industry at the expense of millions of American consumers,” said Howard.
The agreement announced by the two governments cannot be made final until all Canadian industry associations and mills drop their litigation against U.S. anti-dumping and countervailing duties, and the pact also requires importers and U.S. industry groups to agree to certain provisions. Just one Canadian firm could scuttle the entire deal by refusing to drop its litigation.
The Canadian parliament will also have to approve legislation that would allow provinces to collect export taxes on Canadian softwood lumber exports, an effort that could take months.
To read an outline of the tentative managed trade agreement between the U.S. and Canada, click here.
In a related development, the U.S. on April 27 filed a last-ditch extraordinary challenge on a NAFTA verdict that found that Canadian lumber is not subsidized and compels the Administration to eliminate its countervailing duty order. The Administration has stated that this challenge would be withdrawn if a deal is finalized.
For more information, e-mail Michael Strauss at NAHB, or call him at 800-368-5242 x8252.