Problems Of The Softwood Lumber Industry

Examines state of U.S. lumber industry in terms of Canadian competition and internal regulatory and transportation problems. Reviews possible remedial measures: shipping subsidies, improved price regulation, tariffs, and quotas.

Softwood lumber imports from Canada have been a persistent concern for Congress for decades. Canada is an important trading partner for the United States, but lumber production is a significant industry in many states. U.S. lumber producers claim they are at an unfair competitive disadvantage in the domestic market against Canadian lumber producers because of Canada's timber pricing policies. This has resulted in five major disputes (so-called lumber wars) between the United States and Canada since the 1980s. The current dispute (Lumber V) started when the 2006 Softwood Lumber Agreement (SLA) expired on October 12, 2015. Under that agreement, Canadian softwood lumber shipped to the United States was subject to export charges and quota limitations when the price of U.S. softwood products fell below a certain level. After a year-long grace period, a coalition of U.S. lumber producers filed trade remedy petitions on November 25, 2016, which claim that Canadian firms dump lumber in the U.S. market and that Canadian provincial forestry policies subsidize Canadian lumber production. These petitions subsequently were accepted by the two agencies that administer the trade remedy process: the International Trade Commission (ITC) and the International Trade Administration (ITA). In a preliminary determination on April 24, 2017, the ITA determined that the Canadian industry was subsidized and then imposed preliminary countervailing duties upward of 20% on Canadian lumber. Final determinations are due by September. Tension between the United States and Canada over the softwood lumber trade has been persistent and may be inevitable. Both countries have extensive forest resources, but they have quite different population levels and development pressures. Vast stretches of Canada are still largely undeveloped, whereas relatively fewer areas in the United States (outside Alaska) remain undeveloped. These differences have contributed to different forest management policies. For decades, U.S. lumber producers have argued that they have been injured by subsidies given to their Canadian competitors in the form of lost market share and lost revenue. In the United States, the majority of the timberlands are privately owned; private markets dominate the allocation and pricing of timber, although federally owned forests are regionally significant. In Canada, forests are largely owned by the provincial governments and leased to private firms. The provinces establish the price of timber through a stumpage fee, a per unit volume fee charged for the right to harvest trees. U.S. lumber producers argue that the stumpage fees charged by the Canadian provinces are subsidized, or priced at less than their market value, providing an unfair competitive advantage in supplying the U.S. lumber market. The Canadian provinces and lumber producers dispute the subsidy allegations. Directly comparing Canadian and U.S. lumber prices is difficult and often inconclusive, however, due to major differences in tree species, sizes, and grades; measurement systems; requirements for harvesters; environmental protection; and other factors. The softwood lumber trade between the United States and Canada is of interest to Congress due to the controversy between Canadian and U.S. lumber producers and the larger implications it might have on trade between the two countries. The potential renegotiation of the North American Free Trade Agreement (NAFTA) may provide Congress an opportunity to weigh in on this issue, given its constitutional authority over trade policy, as well as authority granted under the 2015 Trade Promotion Authority (TPA). Congress may consider legislation or conduct oversight on these issues.

Committee Serial No. 20. Discusses the impact of lumber imports on the U.S. softwood lumber industry. Apr. 26 hearing was held in Columbia, S.C.; Apr. 27 hearing was held in Atlanta, Ga.; and May 4 hearing was held in Shreveport, La.

As a forester interested in economics and policy, Daowei Zhang followed the softwood lumber dispute between the U.S. and Canada for nearly 20 years. Dubbed the 'Softwood Lumber War,' the conflict enveloped politicians and business leaders on both sides of the border and placed strains on the historically close economic and political relations between the two countries. This book is an unprecedentedly detailed evaluation of how the conflict began and how it was sustained for such a long period of time. The book considers the implications that may follow from the 2006 agreement between the nations, and the broader lessons that might be learned about international trade conflicts. The early 1980s was a difficult time for U.S. lumber producers. Finding their domestic market share in decline, they requested restrictions on Canadian lumber imports. Alleging that the Canadian producers were being subsidized, they eventually secured a 15 percent export tax on Canadian lumber in 1986. A long series of trade battles followed against a background of shortages in the U.S. timber supply, changing international markets, and the establishment of the North American Free Trade Agreement and the World Trade Organization. Canada and the United States are the world's largest trading partners, but, as Zhang demonstrates, it is a relationship in which domestic pressure groups, different institutional structures within each government, and differences in the relative economic power of each country remain extremely important determinants of foreign policy. The fact that the softwood lumber dispute has taken so long to resolve-and the prospect that the 2006 agreement has the potential to be undone by continuing litigation and trade friction-raise important questions about international relations in a world that is supposedly moving toward free trade.