Trump revives lumber wars

President Trump’s decision to slap a 20 percent tariff on Canadian softwood lumber is igniting a dispute between logging interests and the nation’s homebuilders.

The move was expected after the U.S. and Canada fell short of inking a new agreement before the end of the Obama administration, but lobbying groups are still pressing policymakers to make their positions clear as talks continue.

{mosads}The primary battle — part of a fight going back to the 1980s — is occurring between the U.S. Lumber Coalition, a collection of American sawmills, and the National Association of Homebuilders (NAHB), which represents companies that depend on lumber products.

U.S. Lumber argues that the Canadian government subsidizes lumber exported from the country, making its prices artificially low and hurting American workers and companies. 

But groups such as the NAHB say that tariffs only serve to drive up prices for U.S. consumers, an argument also made by Canadian lumber interests. 

It’s all occurring against the backdrop of Trump’s promise to get tough on trade and renegotiate the North American Free Trade Agreement (NAFTA), a sweeping 23-year-old trade deal between the U.S., Mexico and Canada. 

“My own sense is that, based on the narrative of what this administration has said on trade, this is kind of the poster child for unfair trade practices,” said a lobbyist familiar with the issue, who asked for anonymity in order to speak freely.  

“You’ve got lots of U.S. lumber manufacturers located in rural towns … exactly the kind of jobs that everyone is trying to figure out how to support,” the lobbyist said. 

“This is a place where I think you’re going to see a lot of Trump voters,” the lobbyist added. “As they’re looking to solve the issue, ultimately, that’s the politics of it.”

The NAHB argues that the tariff on softwood lumber imposed by the Trump administration would result in a loss of jobs and millions of dollars in lost taxes and wages if kept in place through 2017.

“Many of the jobs are in construction, but the effects are not limited to a single industry, as wages and jobs are also lost in businesses that sell and transport building materials, provide architecture and engineering services,” wrote Paul Emrath, senior economist at the NAHB, in a blog post. “Some jobs are gained in the U.S. sawmill industry, but this is almost entirely offset by losses in other manufacturing industries.”

The Canadian government, seeking to capitalize on infighting between U.S. industries, promoted the post from the homebuilders in a press release.

Despite negotiations between both governments and the lumber industries in Canada and the United States, a new agreement remains elusive. Talks fell apart last year and have been slow to restart under the new administration. 

The situation is made more complicated by the fact that Trump’s pick for U.S. trade representative, Robert Lighthizer, has not been confirmed by the Senate.

While there is some speculation that the softwood lumber issue could be folded into Trump’s NAFTA negotiations, lumber interests are opposed to that idea. 

Lumber was left out of the original trade deal because it would limit the United States’ ability to impose duties.

Zoltan van Heyningen, executive director of U.S. Lumber, said that there are only two answers to the problem: either the Commerce Department levies duties on Canadian lumber to offset government subsidies, or the two governments negotiate an agreement that allows two different systems to coexist. 

U.S. Lumber, which filed a trade petition against Canada in November, is making a case that any agreement should remain separate from a NAFTA reboot. 

“We would view that as a bad idea to be part of NAFTA, which is a massive agreement dealing with all sorts of issues,” van Heyningen said. 

The preference for American lumber companies, moving forward, is for a separate deal that would place volume restrictions on Canadian lumber imports. That step has been taken in past agreements. 

That is exactly what the U.S. and Canadian governments are discussing, van Heyningen said. 

The softwood lumber dispute goes back to the 1980s, when an agreement between Canada’s conservative-led government and the United States promised the deal would usher in free trade and ward off punitive measures in the future. But those promises have not come true.

U.S. Lumber said Trump’s decision last week “confirms that Canadian lumber mills are subsidized by their government and benefit from timber pricing policies and other subsidies, which harm U.S. manufacturers and workers.”

In Canada, companies pay a fee to harvest trees that are grown on public lands, which the U.S. industry argues is a government subsidy that allows Canadian producers to send cheaper wood into the United States. Canadian lumber represents about 31 percent of the U.S. market.

Several decisions in international courts have landed on the side of Canada. However, U.S. companies have fiercely lobbied for — and won — several rounds of countervailing duties on Canadian imports on many occasions. 

Taking those decisions into account, said Howard, the federal government must acknowledge that its stance is “fundamentally incorrect.”

The cost of Canadian softwood lumber has been rising over the last year, as the industry anticipated the U.S. government would slap duties on imports of the product. Rising costs could be troubling ahead of the “building season” that happens in the spring and summer, Howard said.

Susan Yurkovich, president of the British Columbia Lumber Trade Council, said her group is frustrated because the same suggestions, such as restraining the amount of lumber coming from Canada, are being made by the U.S. lumber industry. 

With more preliminary duties next month, a new deal is needed, she said. 

“We would very much like to get back to discussing an agreement that will provide certainty for producers and consumers on both sides of the border,” Yurkovich said.

The homebuilders, pushing back against the lumber companies, have two primary goals: increasing domestic supply in the United States and convincing producers to sell in the American market. The group wants Congress to hold hearings to address those issues.

The NAHB has been meeting with lawmakers since the most recent lumber trade pact ended in 2015, educating them about what would happen once that deal expired, and recently met with the Trump administration.

“Well, now it’s happened, and now it’s time to act,” said Jerry Howard, the CEO of the group, whose members will be coming to Washington next month for its annual legislative conference.

Derek Nighbor, CEO of the Forest Products Association of Canada, said that discussions are ongoing across the Canadian provinces about what an agreement would look like.  

“We’re working with our members and all parties across the country to ensure that we’re pulling in the same direction,” Neighbor said. “We’re quite confident we can do right by our economy and bring a win to yours.”

Last year, Canadian officials said they met more than a combined dozen times with U.S. Lumber and the U.S. government on an agreement, arguing U.S. lumber has been too rigid in its demands.

The National Lumber & Building Material Dealers Association has also been lobbying on the issue but is staying neutral on policy prescriptions.