Congress Protests After Canadian Lumber Dispute Escalates

by Mike Godfrey, Tax-News.com, New York

14 November 2001

Yesterday twelve US Senate and two House leaders sent a bipartisan letter to President George W. Bush and Commerce Secretary Don Evans urging them to overturn duties on Canadian lumber imports imposed by the Commerce Department that they say are harming consumers, the housing industry and the overall economy at a time when the nation is struggling to avert a recession.

The ostensible objective of the duties, which since last week amount to nearly 32%, is to protect the jobs of US lumber workers against supposedly 'dumped' Canadian exports, but the letter points out that there 25 times more US workers involved in lumber-dependent businesses than in the primary supply trade, including home builders, remodelers, lumber dealers and workers in industries such as wood pallet manufacturers, window frame and bed makers, all of whom depend on a steady, reliable supply of affordable softwood lumber for their livelihood. The effect of the duties is to increase their costs dramatically, at the very worst possible moment.

The letter points out that consumers, particularly those that are first-time homebuyers and senior citizens seeking less expensive retirement homes or manufactured housing, will bear the brunt of what amounts to a hidden federal sales tax on essential framing lumber for housing.

"Uncertainty created by the lumber tariffs results in increased price volatility in the market as companies attempt to make provisions to incorporate what amounts to a 32% tax imposed by the Commerce Department on the price of lumber," the lawmakers said. "We urge you to assess this situation, and factor in how Commerce's preliminary determination is negatively impacting the housing sector, one of the only strong segments of our economy, and one which accounts for five percent of GDP."

At the end of October, the Commerce Department issued a preliminary ruling imposing average anti-dumping duties of 12.6% percent which, when added to the 19.3% countervailing duty the Department imposed in August, amounts to a 31.9% federal sales tax on American lumber consumers.

Commenting on the countervailing duty alone, the congressmen said, "This could reduce US GDP by at least 0.05% to 0.11% at a time when the US economy contracted 0.4% in the third quarter." The Senate and House members declared that tacking on an additional 12.6% in anti-dumping duties "will further harm consumers by increasing housing costs even more."

Signatories to the letter were: Don Nickles (R-Okla.), Charles E. Grassley (R- Iowa), Richard J. Durbin (D- Ill.), Jim Bunning (R- Ken.) Jon L. Kyl (R- Ariz.), Evan Bayh (D- Ind.), Jeff Bingaman (D- N.M.) Chuck Hagel (R- Neb.), James M. Inhofe (R- Okla.) Jack Reed (D- R.I.), Peter G. Fitzgerald (R- Ill.),Richard G. Lugar (R- Ind.).

From the House, signatories were were Rep. Jim Kolbe (R-Ariz.) and Rep. Steny Hoyer (D- Md.), lead sponsors of House Concurrent Resolution 45, which has 90 Members as co-signers, calling for an end to trade restraints on Canadian softwood lumber.

Leading a 17-member alliance of consumer and business groups fighting the trade restraints is American Consumers for Affordable Homes (ACAH). "Enacting new trade barriers that drive up the cost of housing and all kinds of wood products for millions of consumers and workers in lumber-dependent industries at a time when the economy is struggling to stay afloat makes absolutely no economic sense," said Susan Petniunas, spokesperson for the ACAH.

The letter from Congress adds that the countervailing and anti-dumping duties are "contrary to the Administration's stated position for free trade and the position of more than 100 members of the House of Representatives and Senate that are sponsors of H. Con. Res. 45 and S. Con. Res. 4 that call for no new trade restraints and free lumber trade to benefit US consumers and affordable housing."

The letter concludes by urging President Bush to "consult with Commerce Secretary Evans and reverse this preliminary decision as Commerce continues its review of countervailing and anti-dumping petitions. Consumers must be considered in this issue. Consideration also must be given to the negative impact that the proposed duties are having on our nation's economy, which is so reliant on a strong housing market."

Although the Commerce Department has perhaps gone too far in response to producer pressure, officials in British Columbia, the source of much of the cheap Canadian lumber, have admitted that felling in Province-owned forests doesn't always bear its full share of costs, giving what would be an illegal trade subsidy under WTO (World Trade Organisation) rules. The issue has gone before the WTO, but that body's dispute resolution procedures can take years, however worthy the eventual results. It certainly seems strange that the two leading members of NAFTA should be unable to co-operate in supporting efficient production of a vital building material, and instead have to resort to anti-trade 'dumping' measures, which is the trade equivalent of throwing rocks at each other.

Said Susan Petniunas: "It is time for free trade under NAFTA. Any duty or limitations, including negotiated deals or so-called bridge agreements, end up as a tax on U.S. consumers."

Recently the National Hispanic Contractors Association, an organization with 130,000 member firms in the US, made a similar appeal to members of Congress, pointing out that: "We also are appealing to our US producers to support their customers and to end these senseless turf battles between our two countries. We should be working together to expand the market for wood, and compete against the growing use of wood substitutes, such as steel."

The duties have been imposed by the Commerce Department based on petitions from a handful of US producers, led by International Paper, Sierra Pacific, Potlatch and Temple Inland, along with southern landholders, who petitioned Commerce to impose the duties when the US/Canada Softwood Lumber Agreement expired in April. That agreement put quota restrictions on the amount of lumber imported into the US over a five-year period. Quotas are scarcely less antediluvian than anti-dumping duties.

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