December 20, 2017
I just completed a teleconference with interested Mayors and the Council of Forest Industries (COFI), the agency that fights our softwood-lumber battles at the level just below Government. As you probably know by now, the International Trade Commission (ITC), a decidedly un-international commission whose reason to be seems to go no farther than protecting US lumber producers, has once again ruled against Canada in the perennial wrestling match to dominate US markets.
Let’s be a little more charitable. Canada is not trying to dominate US markets. But Canada is interested in maintaining a reasonable share of a market that US producers cannot satisfy.
There are a number of factors at play in this dispute: US producers have not adequately reinvested in their industry (a lapse of business sense that they do not acknowledge); Canadian producers have reinvested. This gives Canada a legitimate and defensible competitive advantage in the US market. US and Canadian producers operate in environments that are not exactly parallel. However, in past disputes, our negotiators have consistently prevailed in showing that the playing fields are essentially the same. And Canada consistently has won at the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) tribunals.
On Canada’s side in the US in this dispute is the National Association of Home Builders, a consumer lobby advocating for fair pricing of lumber. If the US lumber producers win this dispute it will mean that consumers in the US will be at the untender mercy of the local producers and will be paying higher prices for softwood lumber which will push up the cost of housing.
At stake for Canada is the prospect of indefinitely paying the 20.83% duties imposed on Canadian softwood imports and due to be implemented within days. Of course 20.83% is easier to absorb than 30% or 40% but the duty still stings.
Easing the sting somewhat is the robust market for lumber in the US (which US producers fall short of supplying by 20% to 30%). The market has been, and will continue to be boosted by renovation and rebuilding needs, the spinoff of recent hurricanes and present fires in the US. Housing starts are up and the remodeling sector is growing. It is a sad commentary on this world that we profit from others’ disasters but that is the way life seems to run, subject as we are to the second law of thermodynamics (ever hear that term before today?). It is good to be able to help. Imagine the outcry if Canada was actually excluded from the US market and the need consistently exceeded the supply by 20% to 30%.
One further mitigating circumstance is the value of the Canadian dollar. While it strokes our national ego to have our currency on par or above our neighbour’s currency, it’s not an unmixed blessing.
For the time being, we can expect the duties to hold while the legal challenges through NAFTA and the WTO grind on. We are treading uncertain waters with NAFTA as Mr. Trump’s final decision on that body remains to be seen. Oh the uncertainties that surround us in this uncertain world! COFI will continue its strong support for softwood lumber; our Governments will continue their negotiations. We have allies across the border. Keep your chins up and your gas tanks full. Have a happy Christmas in spite of international tensions.
Oh, by the way, if we were to go back in time 100 years and ask a logger what he’d like for his winter work in the woods he’d probably, after a bit of musing, suggest a horse that was twice as strong and ate only needles of the trees he was harvesting. How things have changed! And the trade disputes with the US were in full swing even then.
Merlin Nichols, Mayor