05.06.17

Daily Inter Lake: Lumber industry backs softwood tariffs

Late last month, the U.S. Department of Commerce announced plans to begin placing duties on softwood lumber imports from Canada, a move many in the statewide industry hope will bring Canadian producers to the table to renegotiate a new trade deal after the last agreement expired in 2015.

Following a one-year grace period after the softwood lumber agreement’s sunset, the U.S. Lumber Coalition last November filed petitions with the department and the U.S. International Trade Commission, requesting the tariffs and alleging that cheap Canadian lumber products flowing across the border were the result of unfair subsidies by the Canadian government.

On April 24, U.S. Commerce Secretary Wilbur Ross announced a preliminary determination siding with domestic producers. The tariffs vary by company, but average around 20 percent for most Canadian producers.

The decision was hailed by the U.S. lumber industry, as well as Montana’s congressional delegation, which has consistently pushed for a renewed trade agreement to protect the Treasure State’s struggling mills, already suffering from an industry-wide decline.

“President Trump has taken decisive action to put America first and protect against unfairly subsidized lumber that harms Montana mills,” Sen. Steve Daines, R-Mont., stated in a press release following the announcement. “For too long Canadian softwood lumber has had a significant negative impact on Montana jobs. Canada needs to play by the same set of rules that Montanans do.”

Sen. Jon Tester, D-Mont., in his own statement said, “I applaud President Trump for taking this decisive step in our effort to ensure Montana mills are getting a fair price for their quality product. I look forward to working with the President and the Canadian government to forge a new softwood lumber agreement that works for Montana. A new softwood lumber agreement will provide good-paying jobs for Montanans.”

Attempts to re-start negotiations over a new lumber agreement appeared stalled in recent months. Last summer, then-President Barack Obama and Canadian Prime Minister Justin Trudeau issued a joint statement laying out a loose framework for a workable compromise, but optimism waned in the following months as no deal materialized.

In the past year, Canadian exports of softwood products have slowly risen, pushing U.S. prices down and putting pressure on stateside lumber mills. Chuck Roady, the general manager of Stoltze Land & Lumber Co. in Columbia Falls, said that while he maintains cordial relations with his industry colleagues north of the border, there was little incentive for them to reinstate a new trade deal.

“There was no leverage to bring the Canadians to the table,” Roady said. “Canadians were enjoying a very huge advantage.”

The absence of a binding trade agreement has historically favored Canada, with U.S. tariffs successfully challenged in international courts by Canada, which has denied allegations that it subsidizes the price of timber cut from provincial government-owned land.

“We almost always get decided against in the International Court of Arbitration,” Roady acknowledged. But, he added, “I don’t think that will happen this time; it’s so blatantly obvious.”

The Commerce Department’s announcement was not received as warmly north of the border.

Shortly after Secretary Ross’s statement was issued, the Forest Products Association of Canada and other Canadian lumber groups released statements vowing to fight the tariffs in court.

“These duties are unwarranted, and this determination is completely without merit,” Susan Yurkovich, President of the British Columbia Lumber Trade Council, stated in a press release. “This new trade action is driven by the same protectionist lumber lobby in the U.S. whose sole purpose is to create artificial supply constraints on lumber and drive prices up for their benefit, at the expense of American consumers.”

Yurkovich and other Canadian lumber interests have argued that the trade action will harm the booming housing market in the U.S. That assessment was backed up by the main homebuilders’ trade group in the U.S., which noted that Canadian imports make up a third of the lumber supply in the U.S.

Todd Morgan, the director of forestry industry research at the University of Montana’s Bureau of Business and Economic Research, said that argument is likely overblown.

“There’s some validity to that, sure, lumber is a component of new-home construction costs, but it’s not the driving factor,” he said. “Even if lumber prices go up 10 or 15 percent as a result of the tariff, I don’t see that having a major impact on new-home construction.”

Morgan also expects the duties will generate a renewed push for a new softwood deal, noting that similar actions by the U.S. helped to drive the previous agreement that was in place from 2006 to 2015.

“It seems like this should be an incentive to get them to come to the table. Hopefully it’s not so severe that it does the opposite and shuts them down, so they say, ‘Let’s just deal with this in court,” Morgan said. “I would think that this is an incentive for both sides to seriously get together and talk.”


By:  Sam Wilson
Source: Daily Inter Lake