U.S. Builders Urge Canada to Reject Bad Lumber Deal
U.S. home builders on June 19 told Canadian lawmakers that a proposed managed trade softwood lumber agreement would distort the marketplace, harm Canadian companies and workers, and force American consumers to explore the use of alternative materials and look to other nations for a stable and reliable supply of this vital building material.
Testifying for NAHB before the House of Commons Standing Committee on International Trade in Ottawa, Barry Rutenberg, a home builder from Gainesville, Fla., urged Parliament to reject the tentative accord that would harm U.S. consumers and Canadian lumber firms.
Instead of rushing to complete a fatally flawed settlement, Rutenberg said the Canadians should continue to pursue free lumber trade and a refund of all duties collected, just as they have done in the past through their successful and ongoing legal cases before the North American Free Trade Agreement, the World Trade Organization and the U.S. Court of International Trade.
By rushing into a bad deal and abandoning its strong legal claims, Rutenberg said that Ottawa is sending the message that the U.S. lumber coalition’s claims are legitimate and that Canada has been at fault. “We don’t believe this to be true, and we don’t understand why Canada would want to create that impression.”
Complex Border Taxes and Quotas
The framework would result in a complicated system of border taxes and quotas that would force Canadian lumber producers to fight for a smaller U.S. market share.
During the next seven to nine years, the proposed duration of the settlement, NAHB expects the average number of annual housing starts to be about 200,000 lower than in 2005. The outlook is for construction rates similar to 2002 and 2003, when the average lumber price was $308 per 1,000 board feet, despite duties of 27%.
The slowdown in home building, enhanced lumber mill efficiency, increased imports from Europe and greater use of engineered wood products should mean lower prices.
Under the agreement, lumber prices would be higher than they would be under a free market, but may often fall below the $315 threshold where the most stringent fees and quotas would apply.
Pact Could Create Supply Bottlenecks
NAHB’s analysis indicates the pact could increase and destabilize prices and lead to bottlenecks as Canadian producers fight for limited market share and to supply shortages as firms delay shipments in anticipation of a change in duties.
Since quotas would be tied to total U.S. consumption, which is constantly changing and inaccurately measured, lumber mills would not know whether they could meet supply contracts without exceeding the quotas.
“That’s a peculiar notion of stability,” said Rutenberg, responding to proponents of the pact who have argued that it would actually promote supply and price stability.
Since the proposed framework provides no incentive or means for Canadian softwood lumber companies to exit from the terms of the agreement, there is little reasonable expectation that a transition to free trade will be permitted.
Faced with the prospect of new barriers to imports from Canada and increased volatility in supply and prices, 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.
Stay the Legal Course
Rutenberg emphasized that the best strategy for Canada to achieve free lumber trade and a refund of all duties collected is to see its legal cases to their conclusions. Ottawa has already notched several key legal victories in the NAFTA process — at the World Trade Organization and in the U.S. Court of International Trade — that will ultimately realize 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.”
In supporting Canada’s strong legal stance, NAHB has worked avidly to convince U.S. lawmakers and the American public that Canadian lumber is not unfairly traded and that barriers to lumber imports hurt U.S. consumers.
“Several major newspapers across the U.S. — including the Wall Street Journal, the Los Angeles Times, the Detroit Free Press and the Orlando Sentinel — have published editorials reflecting this view, and more than 100 members of Congress have gone on record in support of the consumer perspective,” said Rutenberg.
For more information, e-mail Michael Carliner at NAHB, or call him at 800-368-5242 x8376.