May 16, 2005

By Michael Fanning
 

Trading places: Speaker Wilkins' skills needed in Ottawa

Diplomacy is needed on trade disputes between the U.S. and Canada. Encomiums have flowed for House Speaker David Wilkins ever since he was nominated by President Bush to be the next U.S. ambassador to Canada. The speaker has been praised for his steadfast leadership, his willingness to "take the time and listen" and his ability to act in a fair and responsive manner. When confirmed and sworn in, Ambassador Wilkins surely will need these strong qualities to navigate the current challenges in trade relations with Canada, our largest trading partner and South Carolina's top foreign market.

Two intertwined and fractious trade disputes, if not managed properly, threaten to escalate into a major trade war: the thorny softwood lumber dispute, which has dragged on for years, and the failure of the U.S. Congress to repeal the Continued Dumping and Subsidy Offset Act, or the "Byrd Amendment." This ill-conceived law, named after Sen. Byrd of West Virginia, redirects trade duties collected by U.S. Customs from the U.S. Treasury to private companies that brought or supported the cases.

Softwood lumber is a huge export for Canada to the United States — with more than 19 billion board feet of lumber shipped in 2003 alone. Canadian softwood lumber is used in more than one-third of all homes built in our country.

U.S. lumber producers, claiming that the Canadian government unfairly subsidizes its lumber industry, have sought to restrict imports by petitioning the U.S. government to impose duties on softwood lumber. Following the expiration in 2001 of the U.S.-Canada agreement that limited Canadian exports to the United States, the U.S. lumber industry petitioned our government to impose duties on Canadian softwood lumber for the fourth time in 20 years. To date, the United States has collected more than $4 billion in import duties from Canadian companies.

As a result of legal challenges by Canada, provincial governments and Canadian producers, however, a North American Free Trade Agreement tribunal and the World Trade Organization both have ruled that the United States was wrong in imposing the duties. Yet the duties continue to be collected, to the tune of about $3 million per day.

This issue clearly would have been resolved before now if not for the Byrd Amendment. The U.S. lumber companies that filed the duty petitions against Canada stand to collect a Byrd Amendment jackpot of at least $4 billion. Despite the WTO and NAFTA rulings, the United States has refused to return the duties already collected because of lobbying by U.S. producers, who want the money in their pockets. Canada rejected a U.S. settlement proposal that renewed export quotas on Canadian lumber and would have allowed the United States to distribute about half of the billions in softwood duties collected since 2002.

Just weeks ago, Ottawa and the Canadian lumber industry launched a legal maneuver to block the U.S. government from handing the billions in duties to its rivals in the United States. In addition, the Canadian government has imposed retaliatory tariffs, sanctioned by the WTO, on $14 million worth of U.S. exports on oysters, cigarettes and other products in response to the failure by Congress to repeal Byrd.

The Byrd Amendment hurts American consumers as much as it hurts Canadians. Americans pay for duties in the form of higher prices. As Canadian lumber becomes scarcer, prices for U.S. lumber go up, too.

American consuming industries (home builders, retailers, developers and others) end up footing the bill for this corporate welfare plan, as revenues destined for the general treasury account are siphoned to Byrd Amendment petitioners (eight companies received more than 50 percent of total Byrd payouts in 2004). General treasury revenue pays for discretionary spending that provides for our national defense and homeland security, upgrades our energy and transportation infrastructure, and provides for several other federal programs. This vital revenue fund is faced with a shortfall that must be made up from other sources — namely tax revenue or increased government borrowing.

Thus, the failure by Congress to repeal the ill-advised Byrd Amendment and the consequent refusal by the U.S. government to return the softwood lumber duties create difficult challenges for Speaker Wilkins when he arrives in Ottawa. It is no surprise that President Bush chose a man of Speaker Wilkins' caliber to handle these tough problems.

Wilkins undoubtedly will need his considerable diplomatic and persuasive skills to navigate these trade disputes in the coming months. We should all work to make his life easier by getting the Byrd Amendment repealed as quickly as possible.

Michael Fanning is chairman of the Consuming Industries Trade Action Coalition, a Washington, D.C. — based organization whose goal is to ensure that consuming industries and manufacturers in the United States have access to reliable supplies of globally priced materials. He is also vice president of corporate affairs for Michelin North America.

Reprinted with Permission from The Greenville News.