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Debate continues over fairness of Canadian timber tariffs

The heated debate over Canadian lumber import tariffs was marked recently by a ruling from the World Trade Organization (WTO) that has Canadian and U.S. officials not even in agreement about what the ruling means.

The Canadian government hailed the ruling as a victory, stating that a WTO panel determined that the U.S. failed to prove that imports of Canadian softwood lumber threaten to harm the U.S. industry. But U.S. officials said details of the ruling have not been finalized or made public, and that preliminary results are mixed with the WTO panel ruling for the U.S. in at least one critical area.

Mississippi’s timber industry supports the tariffs, alleging that the Canadian government unfairly subsidizes their industry. State homebuilders oppose the tariffs which they believe unfairly increase the cost of lumber building materials for homes.

Bobby Rayburn, owner of Rayburn and Associates in Jackson, is currently playing a pivotal role in this debate while serving as president of the National Association of Home Builders (NAHB).

Rayburn said the WTO ruling concluded the same thing that the homebuilders have been saying for years: the tariffs are not legal. However, whichever side you believe about the recent WTO ruling, both agree that it doesn’t have the force of law. Rayburn said a ruling on the issue is expected soon from a NAFTA panel, and NAFTA rulings have the equivalencies of law in the U.S.

“The big ruling is the one we expect soon from the NAFTA panel,” Rayburn said. “That is the one we are really waiting on because we think they will tell the International Trade Commission it hasn’t proved its point. Now it is time to cut all the tariffs and duties off because you did not make the case.”

Earlier this year the construction industry in the U.S. saw some of the steepest increases in costs for building materials ever recorded. Rayburn said the highest cost increases haven’t been for the softwood being imported from Canada, but for plywood and oriented stand board (OSB) being produced in the U.S. He said OSB mills simply aren’t producing enough product to meet the demand generated by an estimated two million house starts in the U.S. this year.

“We are part of our own problem in that starts are so good that prices are being pushed upwards,” Rayburn said. “It is a supply and demand issue.”

The Coalition for Fair Lumber Imports, which has a number of members in Mississippi including the former president of the organization, Charles H. Thomas Jr., vice president of Shuqualak Lumber, states that America’s lumber mills, their workers and American tree farmers face a mounting crisis from Canada’s long-standing practice of dumping government-subsidized lumber on the U.S. market. About 90% of forest land in Canada is owned by the government.

The Coalition for Fair Lumber Imports opposes “Canada’s unfair trade practice of virtually giving away its forestlands to companies that export lumber to the U.S., the world’s largest wood products market.”

The coalition alleges Canada’s lumber subsidies are destroying the U.S. lumber industry, threatening its workers with mounting unemployment and denying many tree farmers a market for their timber crops.

Thomas, in a letter to the U.S. Commerce Department on this issue, said his company has been in operation since 1949 and “has endured hard times in the past, but never to the extent of the past two to two-and-a-half years. Canadian lumber mills have dumped lumber into the U.S. market at unbelievably low prices. Shuqualak Lumber Company has incurred the worst two years financially in our long history! …The Canadian Government must be forced to cease all subsidization of Canadian lumber manufacturers or there will be no U.S. lumber manufacturers left in existence.”

Shuqualak Lumber employs 180 people.

The Coalition for Fair Lumber Imports says the impact of the subsidies is apparent everywhere. Despite a strong home building market, U.S. lumber prices are touching new lows, bankruptcies and mill shutdowns are high and climbing higher, while Canada’s share of the U.S. market approaches 35%, a near record high.

The Pontotoc County Forestry Association is another group in Mississippi that has sent in a letter protesting the alleged unfair subsidies.

“Canada is giving its timber away,” states a letter from Jimmy Robbins, president of Pontotoc County Forestry Association, and Harry D. Patterson, secretary. “Canadian producers buy timber at greatly government-subsidized rates that do not reflect market forces and are unfairly low.”

The position of the Pontotoc County Forestry Association, representing 144 landowners with 34,000 acres of land in Pontotoc County, is “the enormous problem of unfair Canadian lumber trade will only be solved when the Canadian government and mills understand very clearly that they must stop their unfair practices or the U.S. government will fully offset the unfair trade.”

Rayburn said mills in the Southern part of the U.S. don’t compete directly with lumber from Canada. He said the Southern yellow pine produced in the South is not used for purposes such as studs in wall. Instead, that type of wood is imported from Canada.

And Rayburn claims that the Canadians have better prices on their wood products because they have invested to upgrade their mills with the latest cost-saving technology.

“If the American companies had done what the Canadian firms did, constantly upgrade their mills so they truly have state-of-the-art mills, then American companies would be in the same situation as Canada and be able to produce timber cheaper,” Rayburn said. “I’m sorry if someone has been sucking the money out when they should have been upgrading. The Canadian mills cost almost as much to run at 50% as opposed to 100%. So that is why Canada has been producing flat out. Plus it makes good business sense to produce at a time when there is a tremendous demand, which there is now. “

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

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