Why the Lumber Trade Dispute Matters to Consuming Industries

American home buyers and other consumers of lumber currently face the very real prospect of higher prices and reduced supply that will combine to take thousands of American families out of the housing market. It is this market that has help to keep the U.S. recession mild by historical standards. Such a hit could therefore be very damaging to economic recovery.

The U.S./Canada Softwood Lumber Agreement of 1996 (SLA), which imposed export quotas and taxes on softwood lumber exported from Canada to the United States, expired on March 31, 2001 (a history of the U.S.-Canada lumber trade dispute can be found in the February CITAC newsletter and at www.acah.org). American Consumers for Affordable Homes (ACAH) and CITAC criticized the SLA not only because it cost American consumers more than $2.7 billion per year and resulted in extreme price volatility, but because it was inappropriate for the United States to use the SLA to offset alleged subsidies to the Canadian lumber industry in lieu of other more appropriate U.S. procedures (specifically, U.S. trade remedy laws).

After the SLA expired, U.S. lumber producers started that trade remedy process by filing countervailing duty (CVD) and antidumping (AD) petitions. On August 10, 2001, the Bush Administration announced preliminary 19.3% countervailing duty margins on Canadian softwood lumber imports. Preliminary antidumping duties averaging 12.6 percent were announced in November. The next step in the process is for the Administration (through the Commerce Department) to make any corrections necessary to those preliminary margins based on a closer examination of the facts, and for the U.S. International Trade Commission to decide whether the dumped and/or subsidized imports are causing or threatening to cause injury to U.S. producers. Only if final margins are determined and the ITC makes a positive finding of injury or threat of injury will the penalty duties be imposed. It is as likely that they will be dismissed altogether as imposed if the process is allowed to go forward, rather than be settled with an agreement between the governments and the industries.

CITAC joins ACAH in opposing a settlement agreement that imposes restraints of any kind on softwood lumber imported from Canada. First, restraints would hurt home building and remodeling projects underway throughout the United States. Specifically,

  • New home buyers could pay approximately $1,000 more per house.

  • If the combined 32 percent countervailing duty and antidumping duties are not dismissed, nearly 500,000 American families might not qualify for mortgages to buy a new home. Most impacted would be first-time homebuyers and seniors moving to more affordable retirement housing.

Second, unilateral export or import restraints would slow the home building industry. In a November 9 letter to President Bush, 12 U.S. Senators and Congressmen Kolbe and Hoyer stated that the result of the preliminary rulings by the Commerce Department could reduce the U.S. Gross Domestic Product (GDP) by at least 0.05 percent to 0.11 percent at a time when the U.S. economy contracted 0.4 percent in the third quarter. Home building has been the economic driver of our economy, and we cannot afford to let the trade restraints on lumber undermine this sector of the economy.

Finally, lumber trade restraints would encourage home builders to use lumber substitutes such as steel and concrete. As steel and concrete are made of non-renewable resources, this substitution would be damaging to the environment.

In short, it is essential that the Administration consider all sides of this issue, including the likely impact of trade restrictions on consumers, the economy and the home building sector, before negotiating a new lumber agreement with Canada. It is equally essential that Members of Congress continue to express their concerns to the Administration that trade restraints typically embodied in such agreements are harmful to users of lumber in the United States.





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