Jun 20 2006
U.S. home builders told Canadian lawmakers today that a proposed managed trade softwood lumber agreement would distort the marketplace, harm Canadian companies and workers, and force American consumers to explore the use of alternative materials and look to other nations for a stable and reliable supply of this vitalbuilding material.
Testifying before the House of Commons in Ottawa on behalf of the U.S. National Association of Home Builders (NAHB) and their more than 8 million employees, Barry Rutenberg, a home builder from Gainesville, Fla., said the flawed framework would result in a complicated system of border taxes and quotas that would force Canadian lumber producers to fight for a smaller U.S. market share.
During the next seven to nine years, the proposed duration of the settlement, NAHB expects the average number of annual housing starts to be about 200,000 lower than in 2005. The outlook is for construction rates similar to 2002 and 2003, when the average lumber price was $308 per thousand board feet, despite duties of 27 percent.
Under the agreement, lumber prices would be higher than they would be under a free market, but below the $315 threshold set forth in the settlement where the most stringent fees and quotas would apply.
"Simply put, it would mean Canada's share of the U.S. market would shrink," said Rutenberg. "Provinces operating under the framework option that dictates a combination of quotas and fees would face quotas based on a 30 percent Canadian market share. Since 1993, Canada's share of the U.S. market has never fallen below 33.4 percent."
Provinces operating under the other option in the framework would face high fees that will erode their ability to compete, he added. Since quotas would be tied to total U.S. consumption, which is constantly changing and inaccurately measured, lumber mills would not know whether they could meet supply contracts without exceeding the quotas.
"That's a peculiar notion of stability," said Rutenberg, responding to proponents of the pact who have argued that it would actually promote supply and price stability.
Since the proposed framework provides no incentive or means for Canadian softwood lumber companies to exit from the terms of the agreement, there is little reasonable expectation that a transition to free trade will be permitted.
Faced with the prospect of new barriers to imports from Canada and increased volatility in supply and prices, Rutenberg said that NAHB feels obligated to facilitate softwood lumber imports from Europe and the use of alternative materials to protect the interests of American home builders and consumers.
Rather than rushing to complete a fatally flawed settlement, Rutenberg said that the best strategy for Canada to achieve free lumber trade and to receive a refund of all duties collected is to continue to pursue its legal cases through the North American Free Trade Agreement process, the World Trade Organization and the U.S. Court of International Trade. Ottawa has
already received several unanimous legal victories in its quest to achieve these goals.
"Finishing the litigation would establish important precedents and make it much more difficult for the U.S. lumber coalition to successfully petition for new duties," said Rutenberg. "We are very disappointed by the willingness of the Canadian government to sacrifice those gains, jeopardize Canada's share in the U.S. market and effectively provide a handful of U.S. companies with veto power over provincial forest policies."
In supporting Canada's strong legal stance, NAHB has worked avidly to convince U.S. lawmakers and the American public that Canadian lumber is not unfairly traded and that barriers to lumber imports hurt U.S. consumers.
"Several major newspapers across the U.S. -- including the Wall Street Journal, the Los Angeles Times, the Detroit Free Press and the Orlando Sentinel -- have published editorials reflecting this view, and more than 100 members of Congress have gone on record in support of the consumer perspective," said Rutenberg. "This deal sends the message that the U.S
lumber coalition's claims are legitimate and that Canada has been at fault. We don't believe that to be true, and we don't understand why Canada would want to create that impression."