The United States has decided to play hardball over softwood. As a
result, real estate likely will be plunged even further into a
recession that is already slowing new construction and weakening
sales.
In a stunning decision made last week, the U.S. Department of Commerce slapped total tariffs
of 32 percent on softwood lumber imported from Canada. Critics were
flabbergasted by the size of the tariffs, and the only people left
cheering were U.S. lumber mills.
The effects of the tariffs will be far-reaching, raising the costs of
all new construction in the United States, from new houses and
commercial buildings to simple home remodeling projects. The National Association of Home
Builders (NAHB) estimates that the tariffs will add up to $1,500
to the cost of an average new home, which could price nearly a
half-million American households out of the home buying marketplace.
So why are Canadian lumber mills being pounded with a one-third price
increase south of their border? The lumber industry claims Canada is
engaging in unfair trade practices, including predatory pricing,
dumping and subsidies of the Canadian lumber industry by government
agencies.
U.S. lumber interests did want import duties of up to 78 percent
imposed on Canadian lumber. In August, they won a 19.3 countervailing
percent duty based on a preliminary ruling. That number was jacked up
by a 12.58 percent anti-dumping duty after the Trade Commission had
time to consider all of the evidence.
A final provisional rate will not be set until mid-March of next year.
Ironically, all of these numbers are considered "provisional" until a
years-long review process makes them permanent. But by then, consumers
and business already will be out millions.
Controversy has been swirling around the North American lumber trade
for five years, ever since the signing of the U.S./Canada
Softwood Lumber Agreement (SLA). The agreement expired last April,
opening the door for new negotiations between the two countries.
In the past, the North American Free Trade Agreement (NAFTA) has
overridden the SLA by restricting the importation of softwood lumber
from Canada, resulting in higher construction prices for everything
from room additions on single-family houses to highways and mammoth
municipal projects.
The SLA was opposed by a broad-based group of consumer and trade
organizations and companies representing more than 95 percent of
softwood lumber consumption in the nation. On the other hand, big
lumber companies were rather fond of the SLA. After all, it increased
demand for U.S.-made lumber.
"Any way you look at it -- from a consumer standpoint, from an
industry standpoint and from an economic standpoint -- the Commerce
Department's actions to impose preliminary countervailing and
anti-dumping duties totaling 32 percent on Canadian lumber shipments
into the U.S. is bad trade policy, bad economic policy and would act
as a new hidden tax on American home buyers, renters and consumers,"
said Bobby Rayburn, vice president and secretary of NAHB.
"Furthermore, we don't believe the Commerce Department's decisions
will stand up to scrutiny or are consistent with the international
agreements to which the U.S. is committed and expects other countries
to abide by," Rayburn added. "This trade action is being used to try
to pressure the Canadians into a negotiated settlement restricting
trade, and we firmly oppose trade barriers such as export taxes or
quotas."
The British Columbia Lumber Trade Council argues that
thousands of Canadian jobs already have been lost because of the
tariffs, with thousands more soon to be on the chopping block.
"The U.S. lumber industry is making a mockery of the greatest and most
mutually beneficial trading relationship in the world," said John
Allan, president of the BC Lumber Trade Council. "Once again, we are
witnessing a small but well-financed lobby of the U.S. lumber
producers pulling the levers of America's trade laws in a never-ending
quest to drive Canada's top resource industry into the ground.
"Now more than ever, citizens on both sides of the border must call
for a halt to this blatant protectionism. It is killing Canadian jobs,
businesses and communities and the pocketbooks of U.S. consumers and
homebuilders," Allan said.
What's more, Canadian lumber companies are disputing the Department of
Commerce's findings. Weyerhaeuser Company, for example, insists it is not
selling Canadian softwood lumber into the United States at prices
below those in Canada.
The U.S.-based firm is one of six firms with Canadian operations asked
to provide information to Commerce to determine if dumping occurred.
"This matter is about a trade disagreement between the United States
and Canada, and the inability of the two countries to agree on what
rules they want companies like ours to operate under," said Bill
Corbin, Weyerhaeuser's executive vice president for wood products.
"The United States depends on Canada for about one-third of the
softwood lumber used for housing construction and repair/remodel
needs. The right way to solve this trade dispute is for the United
States and Canada to negotiate a long-term, market-driven solution.
They should be able to resolve this dispute through negotiation -- and
not litigation -- in a way that benefits the economies of both
countries," Corbin added.
But the fight is not over just yet, and Commerce is sure to face some
tough battles in the months and years to come.
First, there's the U.S. Congress, where more than 100 members of the
House and Senate have sponsored a congressional resolution calling for
free trade on lumber between the U.S. and Canada.
Secondly, the Canadian government still can fight it out with
Commerce, which won't finalize its ruling until the end of the year.
And then there's always the courts. Canada has threatened to take the
issue to the World Trade Organization, claiming that the U.S. has no
evidence against it and is trumping this whole issue up specifically
to assist big lumber.
In the meantime, however, consumers and businesses will continue to be
slapped around by a huge two-by-four of additional taxation.
For more articles by Lesley Hensell, please press
here.
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