Congressional trade staff today heard that a major flaw in the current trade penalties being applied to Canadian softwood lumber imports is the failure of the Bush administration to consider the significantly negative impacts they cause on consumers. The briefing, hosted by the Cato Institute's Center for Trade Policy Studies, was sponsored by Sen. Charles E. Grassley (R-Iowa), the ranking minority member of the Senate Finance Committee.
"The Department of Commerce effectively levied a federal sales tax on every American family buying a home," said Gary Horlick, prominent trade attorney with O'Melveny and Myers, a law firm representing American Consumers for Affordable Homes (ACAH). The combined countervailing duties and antidumping duties imposed by Commerce amounted to 32 percent for 90 days last fall. In December, countervailing duties lapsed until May 2002, and the current antidumping duty is 13 percent.
ACAH is an ad-hoc alliance of 17 major national consumer groups, businesses and organizations representing at least 95 percent of lumber consumption in the U.S.
"These duties essentially mean that the cost of homes in the U.S. is increased by more than $1,000 per home, which, according to U. S. Census Bureau calculations, means that approximately a half-million American families can not qualify for mortgages to buy a new home," Horlick said. "In 1986, Commerce negotiated a 15 percent export tax with Canada that cost American consumers hundreds of millions of dollars. The Softwood Lumber Agreement, which expired last March, replaced it, adding even more hidden taxes on homebuyers, and pricing hundreds of thousands of families out of the housing market. It is time for the U. S. to give millions of consumers consideration in trade disputes. It is time to get rid of hidden sales taxes and help make homes more affordable."
Horlick also said that the U. S. is not following World Trade Organization or North American Free Trade Agreement rules in making its preliminary countervailing and antidumping decisions. "The U. S. position has significant flaws," he said. "It uses cross-border comparisons, for example, to calculate the duties. Cross-border comparisons are not allowed under international trade rules."
Following hearings before the Commerce Department and the International Trade Commission in late February and March, final determinations will be made on both countervailing and antidumping duties in May.
"What the protectionist forces in the U.S. are asking Commerce to do is to force Canada to agree to an export tax on softwood lumber, collect it and keep it in Canada," Horlick added. This means that a foreign government will impose a tax on lumber bought by U. S. homebuilders and consumers."
Congressional staff members were also told that spruce pine fir from Canada does not compete with southern yellow pine produced in the U. S. The properties of the two species are significantly different, and their uses in a home are different. Representatives of homebuilders, lumber dealers and other consumer groups told the International Trade Commission (ITC) last summer that Canadian lumber is used for framing because it will not twist or warp. Southern yellow pine is not suitable for framing, and is used in decking, for example.
Horlick noted that both Canadian softwood lumber and U. S. southern yellow pine are needed to build U.S. houses, so raising the price of Canadian lumber reduces the number of houses built, and thus, the amount of U. S. lumber ultimately used.
Additionally, the U. S. supply of softwood lumber has been significantly depleted or is now locked up in state and federal forests.
Twelve U.S. Senate and two House leaders recently sent a letter to President George W. Bush and Commerce Secretary Don Evans urging them to overturn the duties that are harming consumers, the housing industry and the overall economy.
In addition, more than 100 Members of Congress have expressed support for free trade in lumber between the U.S. and Canada by sponsoring H. Con. Res. 45 or S. Con. Res. 4.
ACAH members include American Homeowners Grassroots Alliance, Catamount Pellet Fuel Corporation, CHEP USA, Citizens for a Sound Economy, Consumers for World Trade, Free Trade Lumber Council, The Home Depot, International Mass Retail Association, International Sleep Products Association, Leggett & Platt Inc., Manufactured Housing Association for Regulatory Reform, Manufactured Housing Institute, National Association of Home Builders, National Black Chamber of Commerce, National Lumber and Building Material Dealers Association, National Retail Federation, and the United States Hispanic Contractors Association.