US and Canada Bicker, yet Again, About Soft Wood Lumber (by V. Nader)

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Trudeau is clearly displeased with Trump’s anti-subsidy tariff on softwood lumber imports! Photo Credit

 

Last month, on April 24, 2017, President Trump announced that his administration would impose a tariff of up to 24 per cent on imported Canadian softwood-lumber effective September 07, 2017. This, unsurprisingly, evoked disapproval from the Canadian federal government and a joint statement released by Jim Carr, Minister of Natural Resources, and Chrystia Freeland, Minister of Foreign Affairs, which stated, “The Government of Canada disagrees strongly with the U.S. Department of Commerce’s decision to impose an unfair and punitive duty. The accusations are baseless and unfounded.” However, this is not the first time Canada and the United States disagreed over softwood-lumber. In fact, it is one of many dating back to the early 1980s. As pointed out in The Canadian Environment in Political Context, the trade dispute “is arguably the most significant one between Canada and the United Sates and one of the most notable trade disputes worldwide in the twentieth century” (Olive 2016, page 162).

Prime Minister Trudeau’s objection to the tariff can be seen in the following Tweets:

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In the first Tweet, he provides a read out of his phone call to Trump in which he expresses that he “will vigorously defend the interests of the Canadian softwood lumber industry, as we have successfully done in all past lumber disputes with the U.S.”

Shortly after, he urgently speaks with premiers about the issue.

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A week later, he makes it known that supporting softwood lumber producers is a priority across Canada.

The disparate patterns of land ownership in the US and Canada is partly a cause of the dispute. Both the US and Canada have a mixed market economy, but the US’s economic system is based on private ownership whereas Canada combines private enterprise with government regulation. Therefore, “in the United States, the market determines the cost of harvesting most wood because most timber is taken from private land…In Canada, where most timber is harvested from Crown land under provincial control, the price to harvest trees is set by the provinces” (Olive 2016, page 163). As a result, the US accuses Canada of violating the North American Free Trade Agreement (NAFTA) as they are under the impression that Canada’s provincial and federal government unfairly subsidizes the lumber. Canada disagrees because, although the stumpage fees is set by administrative regulations opposed to market competition, the low fees cannot be considered subsidies since the lumber is used in various industries.

I doubt this policy will be effective because it serves to ensure larger profits for American landowners and lumber mills, but to the detriment of American consumers and workers. The joint statement mentioned earlier expressed that the tariff “will negatively affect workers on both sides of the border, and will ultimately increase costs for American families who want to build or renovate homes.” In anticipation of new tariffs, lumber prices have jumped 22 per cent adding nearly $3,600 to the cost of a new single-family home… each $1,000 increase in the median price of a new home makes homeownership unaffordable to 150,000 households.

The US is heavily reliant on softwood lumber imports from Canada because they do not produce enough lumber to meet the nation’s needs. According to the US Department of Agriculture, 33 per cent of the lumber used in the US was imported of which more than 95 per cent came from Canada. Although America is the largest exporter of hardwood lumber (raw lumber), it is too costly for them to produce finished goods (such as softwood lumber) due to high labour costs, hence why they import from Canada. Despite Trump’s interest to endorse protectionism and free enterprise, the tariff can be costly to the livelihood of both Americans and Canadians.

Trump’s desire to renegotiate NAFTA stems from the fact that he wants to ensure that the US fully benefits from the deal. Previously, Trump referred to NAFTA as the “worst trade deal” and wanted to rescind America’s involvement in the agreement altogether, but has decided to renegotiate instead. Since the fees associated with softwood lumber is in a grey area in relation to NAFTA, Trump wants to offset Canada’s low stumpage fees by imposing the anti-subsidy duty. The duty is supposed to ensure that the American forestry industry thrives and that jobs within the US are protected, but it has the potential to do more harm than good as the joint statement revealed. This is part of Trump’s efforts to make America “great again,” although he could very much so be doing the complete opposite.

It can be observed in Trump’s Tweet, which was made three days after his announcement, that he almost threatening both Canada and Mexico by making an ultimatum. It’s either his way or nothing.

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This relates to the environment because softwood lumber is an environmentally friendly building material that satisfies a need for more housing without increasing greenhouse gas emissions. For this reason, Canada’s International Trade Minister, Francois-Philippe Champagne, visited China to expand and strengthen lumber trade with the country shortly after Trump’s announcement. Champagne believes “there’s an imperative in China to have more green building material” to combat the issue of climate change. The US knows that they are largest importer of lumber and that the industry is of utmost importance to Canada which is why they are under the impression that Canada will submit to their demands, however Canada is refusing to be bullied and this is seen on Canada Trade’s Twitter page! Only a day after Trump’s announcement, the page made the following Tweets boasting about their softwood lumber trade relations with China and Asia:

 

It is evident that Canada is not willing to settle, once again in this long-winded dispute, and is showing off to the US that they have options (China) and will be more than fine without them. This almost reminds me of an on-again, off-again relationship where a couple fights and tries to inadvertently prove that they can be better off without the other by flaunting their new beau/belle, but secretly want the other to become jealous to get them back. Matter of fact, there should be a reality TV show starring Trump, Trudeau and other related political actors which follows their fun squabbles called Keeping Up With The Soft Wood Lumber Dispute!

 

 

 

 

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