President Donald Trump’s trade agenda may be causing some concern in B.C., considering the province relies on the American market to consume more than 50 per cent of its exports. But the new administration also brings a big opportunity that the province must not overlook: a fresh shot at resolving the simmering softwood lumber dispute.
In the 15 months since the Canada-U.S. Softwood Lumber Agreement expired, Canadian companies have, finally, been operating under free trade — unencumbered by export duties and buoyed by a low Canadian dollar that has increased profits.
Unfortunately, this free-market blip is about to end. The U.S. Commerce Department is investigating countervailing and anti-dumping charges against the Canadian softwood lumber industry. This is a formality it must undertake before it can impose duties on imports of Canadian lumber, which it will almost certainly do. It is a scenario that has repeated itself many times since the 1930s.
Obtaining a new softwood agreement is crucial for B.C., the province that supplies more than half of all Canadian softwood exports to the U.S. The provincial government must continue to work with Ottawa to include softwood in the list of top issues to raise with the incoming U.S. administration. A new U.S. president — particularly this one — is the best chance to get a new agreement.
Trump takes office unbeholden to the powerful U.S. lobby groups that sway the debate inside the U.S. Plus, it is Trump’s powerbase of voters who will be among those hurt most from the escalating dispute. Heaping duties on Canadian exports will not only increase housing prices within the U.S., but also lead to lost jobs and wages — the opposite of what Trump campaigned on during the election. Canadian negotiators need to stress this story to their American counterparts — and soon.
The softwood dispute is accelerating. In November, the U.S. Lumber Coalition petitioned the Commerce Department to place duties — high ones — on Canadian softwood lumber, for the sole reason of raising the price of lumber. While this benefits the U.S. domestic industry, homeowners and other consumers are the ones who will lose out. For example, under the former Softwood Lumber Agreement, American producers earned more than $4 billion Cdn from the duties that ranged from zero to 15 per cent, according to analysis from the Montreal Economic Institute. American consumers, on the other hand, paid an extra $6 billion.
If duties are imposed on Canadian lumber this spring, it is expected they will be a whopping 25 per cent or higher. That translates not just into higher housing prices in the U.S., but lost jobs and wages in the construction and other related sectors. According to the U.S. National Association of Home Builders, a 25 per cent duty translates into close to 8,000 lost jobs in the U.S., or $450 million US in lost wages.
Higher housing prices makes home ownership less attainable. The U.S. National Association of Home Builders also projects that for every $1,000 added to the price of new homes, more than 150,000 Americans can no longer afford to purchase a home.
Restricting the supply and increasing the price of Canadian softwood lumber in the U.S. economy will also impede one of Trump’s key economic promises — to raise GDP growth to four per cent a year. A robust housing market is one of the best ways to stimulate economic growth. The U.S. economy only began to recover from the 2008 recession when the housing market did, and Canadian softwood lumber played a major role in the upswing. Since the U.S. does not have enough of its own lumber to meet domestic demand, it relies on Canadian imports to top up its supply.
If Trump is serious about growing the U.S. economy for the millions of Americans who voted him into office, he should not let the softwood dispute escalate any further. The federal and provincial governments must work together with the new administration to craft a softwood trade deal and make clear the point that restricting our softwood will hurt the people who voted Trump into office. It is an opportunity we cannot afford to let slip by.
Naomi Christensen is a senior policy analyst with the Canada West Foundation, a non-partisan think tank focused on the concerns of western Canadians and Canada as a whole. cwf.ca