The trouble with tariffs: Understanding the lumber dispute between U.S., Canada (letter)
August 30, 2018
Editor's note: Find a cited version of this letter at http://www.vaildaily.com.
In his Sunday, Aug. 5, article, "Trade wars, Trump tariffs start to show ripple effects locally," writer David O. Williams brought home to Vail Daily readers the real-world impacts of one of the year's most wide-ranging (and often misunderstood) stories: Tariffs and how the Trump Administration's actions are being felt by real people locally and beyond.
As Consul General of Canada in Colorado, I thank Mr. Williams for what was clearly a deeply researched and well-put together article. However, there is one section I'd like to elaborate on to present a fuller picture.
In a section discussing building costs, Mr. Williams categorized Canada's softwood lumber industry as "deeply subsidized." We reject that description. The story accurately reports the timeline of the United States-Canada softwood lumber dispute and that disagreements surrounding this issue stretch back long before our current administrations. But where our differences arise is not from unfair subsidies but from the simple fact that we use two different systems of management.
In Canada, most timber is owned by the provincial governments, who in turn set the price to harvest lumber on government land by law at a single rate (called a stumpage fee). In the United States, lumber is produced from privately owned lands and the private market sets the price per stump.
The United States argues that Canada's provincial stumpage fees are too low, harming U.S. producers. However, Canada has taken past U.S. actions on softwood lumber tariffs to the World Trade Organization several times and won every time. Canada has once again taken the current U.S. countervailing and anti-dumping duties to the WTO for resolution, and we are confident we will prevail again. But in the meantime — as Mr. Williams noted — the negative effects on construction and on homebuyers are being felt in the Vail Valley, across Colorado and around the United States.
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The reality is that American lumber producers can only supply about 70 percent of U.S. domestic demand for lumber. American construction and other businesses need to import the remaining 30 percent. The net effect of the U.S. administration's duties, which are really import taxes, is to make these imports more expensive. These extra costs are passed onto homebuilders and, ultimately, to consumers.
The U.S. National Association of Home Builders (NAHB) estimates that these duties will ultimately lead to a loss of over 9,300 U.S. jobs this year alone. NAHB also identifies tariffs on Canadian lumber as the primary driver behind the $9,000 increase in the price of a typical family home. The only winners are U.S. lumber producers, who benefit from the higher market prices.
Canada abides by its international commitments. We do not dump our lumber or other products into the United States or other markets, and we don't unfairly subsidize their production. We are confident that a negotiated settlement to the current softwood lumber dispute is not only possible, but that it is in the best interests of both countries.
Consul General of Canada in Denver