What's driving the softwood lumber dispute?
The U.S. federal government announced Monday that it’s imposing “countervailing duties” on Canadian softwood lumber of up to 24.12 per cent.
Observers warn that could mean thousands of jobs lost in Canada’s forestry sector, because our exports will suddenly become that much more expensive for Americans to buy.
But what exactly is driving this dispute?
A “countervailing duty” is a tariff collected when a product enters the U.S. to make up for a perceived subsidy by a foreign government.
The U.S. Lumber Coalition argues Canadian producers are subsidized due to the fact that Canadian lumber is harvested from Crown land and auctioned off by provincial governments, while most American lumber producers have to buy lumber from private landowners who charge more.
Canada argues this is not a subsidy and has successfully challenged the U.S. on this point at the World Trade Organization (WTO), the North American Free Trade Agreement (NAFTA), and in U.S. courts.
The new U.S. tariffs range from three to 24.12 per cent, depending on where the lumber exporters operate in Canada. The five companies being taxed are: Canfor (20 per cent), Irving (3 per cent), Resolute (13 per cent), Tolko (20 per cent), and West Fraser (24 per cent).
Those companies will start paying the new duties immediately, until Canada has the chance to challenge them at NAFTA and WTO panels in 2018.
Alexandre Moreau, a public policy analyst with the Montreal Economic Institute, tells CTV News Channel that the U.S. countervailing duties are really just a protectionist measure.
Moreau says such protectionist measures allow politicians to make announcements about the jobs they have supposedly saved, while ignoring the fact that consumers are hurt when the product ends up costing more.
International trade lawyer Dan Ujczo expects the move by the U.S. Department of Commerce will add “hundreds of millions” to the cost of lumber for U.S. home builders as build peak construction season ramps up.
He says, while some of that extra cost will be passed on to consumers, jobs in the construction industry will be put at risk as materials become more expensive. Payroll cuts in that lucrative U.S. sector could risk unwelcome political consequences stateside as Trump touts his prowess to protect U.S. jobs.
“U.S. homebuilders will be squeezed,” Ujczo told CTV’s Your Morning on Wednesday. “They are projecting several thousand jobs could be impacted in the U.S. homebuilding industry.”
Moreau said the U.S. softwood lumber move is part of a “political negotiation” at a time when U.S. President Donald Trump has vowed to re-open the North American Free Trade Agreement governing bilateral trade.
While U.S. Commerce Secretary Wilbur Ross has said the White House hoped to get the softwood lumber dispute out of the way before NAFTA renegotiations begin, Ujczo says the Trump administration’s recent remarks about trade with Canada suggest otherwise.
“That’s really the concern, that one issue over here will start affecting areas that we will be talking about in the broader NAFTA negotiation,” he said.
Canada, for its part, continues to staunchly oppose the new duties on softwood lumber imports. Prime Minister Justin Trudeau spoke with Trump on the phone Tuesday, as tensions continue to rise over both lumber and dairy.
Trudeau said his job is standing up for Canadian interests “whether it's softwood, or software.” NDP Leader Tom Mulcair said the government has not done enough to prepare, since Trudeau had 18 months to work on a plan to support the lumber Canadian industry.
Moreau said the solution to the softwood lumber dispute may be for Canada to give up its “supply management” on agricultural products, which makes it more expensive for American producers to export to Canada.
“We’re quick to criticize Trump for tariffs on softwood lumber,” he said. “But at the same time we’re imposing tariffs of up to 300 per cent on the dairy products.”
Ujczo remains optimistic that long-term Canada-U.S. trade relations will not be irreparably damaged despite the emergence of some of the bitterest language in the three-decade-old trade.
“Michael Jackson had just put out the Thriller album when we started officially arguing over this. That’s how long it’s been,” he said. “The overwhelming majority of the Canada-U.S. relationship has a very tidal nature. The tide come in and goes out every day. It’s very harmonious.”