With U.S. and Canadian trade negotiators engaged in 11th hour negotiations to resolve the long-running cross-border dispute over lumber, a delegation representing the interests of millions of U.S. consumers and workers in lumber-dependent industries today called on Canadian Trade Minister Pierre Pettigrew to oppose any border measures such as quotas, tariffs or taxes that would restrict lumber supply and harm consumers by raising prices.
"We support changes to make lumber supply more responsive to market demand and applaud the far-reaching changes proposed by the Canadian provincial governments in the management of their timber that would remove incentives to over-produce during periods of weak demand, and make sales practices more transparent to eliminate suspicions that their timber sales are not market-based," said Susan Petniunas, spokesperson for the American Consumers for Affordable Homes (ACAH), an alliance of 17 American consumer and business groups fighting trade restraints on softwood lumber that harm U.S. consumers.
"However, with Canadian firms facing punitive penalties imposed by the U.S. Commerce Department, we are strongly opposed to the idea of a negotiated settlement for the sake of expediency that institutes any so-called border measures such as quotas, tariffs or taxes. This would be far worse to the interests of consumers than no agreement at all," Petniunas added.
The U.S. Department of Commerce last year imposed preliminary anti-dumping and countervailing duties on Canadian lumber shipments into the U.S. in response to complaints lodged by a handful of U.S. lumber producers. It is expected to issue a final ruling on the cases on March 21. In the meantime, U.S. and Canadian negotiators have been engaged in talks to find a negotiated settlement before the Commerce Department makes its final decision.
"Free trade is the cornerstone of NAFTA and a basic principle of the Bush Administration," said Petniunas. "To extend these duties next month would fly in the face of free trade. That is why it is extremely important that the Canadian government stands firm and does not allow the Coalition for Fair Lumber Imports (the U.S. lumber lobby) to use threats or intimidation to coerce it into making a bad deal that would create distortions in the marketplace, provide windfall gains for timber barons and leave millions of U.S. consumers -- the home buyers, renters and people remodeling their homes -- footing the bill in the form of higher lumber prices."
If the duties were extended in March, history has shown that they are likely to be lower than the tariffs currently in place, and Canada would still have a strong case to present to the World Trade Organization and NAFTA, according to Petniunas.
"Canada has already laid the groundwork for an appeal with the World Trade Organization and with NAFTA, and we think the Canadians have a solid legal foundation," said Petniunas. "There have been three previous countervailing duty cases on this issue, and in each case in which it was taken to a final decision, it was ultimately determined that the Canadian government did not provide unfair subsidies to its lumber industry. As this case moves forward, we believe this conclusion will once again be reaffirmed, and that free trade in lumber between Canada and the U.S. will prevail."
"Trade restrictions on lumber cause artificial price increases and volatile swings in the lumber market, both of which hurt housing affordability, said Bobby Rayburn, a home builder from Jackson, Miss., and vice president and treasurer of the National Association of Home Builders (NAHB), an ACAH member. "Each one dollar increase in the price of framing lumber per 1,000 board feet adds about $20 to the price of an average new home."
If the current duties are fully reflected in U.S. lumber prices, the cost of an average new home would increase by at least $1,500. U.S. Census figures indicate that such an increase could force at least 450,000 prospective American home buyers out of the market.
Reiterating comments he made before the Senate Finance Committee during a Feb. 13 hearing on lumber trade issues, Rayburn told Pettigrew, "Because of the harmful effects of artificial price increases, I want to be clear; we are opposed to border measurers such as quotas, tariffs or export fees that restrict imports of Canadian lumber."
Furthermore, Rayburn said that lumber from Canada is qualitatively different from the softwood lumber produced in the southeastern United States and is used for different purposes.
"The spruce and white pine from Canada is better suited for wall framing," he explained. "Southern yellow pine, the most common domestic species, is more likely to bend and warp, and is used for beams and joists and for outdoor applications requiring pressure-treated lumber. In the absence of Canadian spruce, builders are likely to turn to light weight steel studs or lumber imports from Europe in order to build homes with walls that don't crack."
Retailers are also opposed to the U.S. trade action.
"Home Depot is focused on delivering the right product at the right price to our customers," Annette Verschuren, president, Home Depot Canada, told Pettigrew. "That is why we support free trade and Canada's position on this issue. The Softwood Lumber agreement imposed volatility in the marketplace for consumers. We are encouraging the Canadian government to stay the course and continue to pursue free trade in lumber between Canada and the United States."
In addition to the negative impact on home buyers, others in the industry will be harmed, according to ACAH.
"These duties will reduce the number of new homes being built," Petniunas said. "The seven million people employed in the housing construction sector, manufactured housing builders, employees of lumber yards and mass retailers that supply home builders and others in the manufacturing and supply chain will all suffer."
In addition to NAHB and The Home Depot, other ACAH members include: American Grassroots Homeowners Alliance, Catamount Pellet Fuel Corporation, CHEP USA, Citizens for a Sound Economy, Consumers for World Trade, Free Trade Lumber Council, International Mass Retail Association, International Sleep Products Association, Leggett & Platt Inc., Manufactured Housing Association for Regulatory Reform, Manufactured Housing Institute, National Black Chamber of Commerce, National Lumber and Building Material Dealers Association, National Retail Federation, and the United States Hispanic Contractors Association.