While Georgia timber growers say Canada’s softwood lumber practices hurt the state’s lumber business, Canadian consul general in Atlanta Malcolm McKechnie feels the United States should abide by a recent Nafta ruling in order to uphold the efficacy of the free trade agreement and preserve the otherwise healthy trade relationship between the two countries.
He added that Georgia retailers and homebuilders would likely welcome lower-priced Canadian lumber, and consumers here would enjoy the lower home prices that could result from solving the dispute.
“The U.S. should recognize its obligations under Nafta. This is not the first time Nafta and the World Trade Organization have ruled that the U.S. is not justified in its claim nor in applying duties to Canadian imports,” Mr. McKechnie said of the U.S.’ claim that Canadian softwood lumber imports cause material injury to U.S. producers. A Nafta arbitration panel ruled recently that U.S. tariffs against imported Canadian softwood lumber violate the free trade agreement and that the U.S. must pay back $5 billion in tariffs collected since 2002.
“Canada wants a durable, long-term solution and is now taking a measured and appropriate response to the U.S.’ lack of compliance and one that recognizes Nafta’s authority,” Mr. McKechnie said. “There is a risk of undermining Nafta entirely if the U.S. doesn’t comply.”
Canada’s trade negotiators have halted talks with their U.S. counterparts on the issue amid heated reactions from Canadian lumber interests. The Canadian government is even threatening trade sanctions on U.S. agricultural products in retaliation.
Canadian Prime Minister Paul Martin has said he plans to speak with President Bush soon about the matter after consulting with the provinces most affected by the issue, including British Columbia, Quebec and Ontario.
Mr. McKechnie said that although the dispute is not a new one – over the past several decades, five separate international tribunals have ruled that Canadian imports of softwood lumber do not cause injury to U.S. producers, and the U.S. has refused on four occasions to comply – this is the first time the issue has escalated to such a serious level.
“Five billion dollars is not pocket change, so there’s a sense of frustration in Canada,” Mr. McKechnie said. “Consumers in Georgia, too, want lower prices and better quality lumber. We just want free trade in lumber,” he noted, adding that revoking the U.S. tariff would lower the cost of homebuilding.
David Ellis, executive vice president of the Greater Atlanta Homebuilders Association, confirmed that the National Association of Homebuilders estimates the average construction cost of a new home would be reduced by some $1,000 if the U.S. would repeal the duties it is charging for Canadian lumber imports.
This latest Nafta ruling is consistent even with U.S. law and findings related to the dispute, Mr. McKechnie said. He cited a recent U.S. Department of Commerce study that showed just a 1.12 percent duty applied to Canadian lumber imports would level the playing field, compensating for the Canadian government’s free or discounted provision of timber to its lumber mills that the U.S. claims is unfair. The current U.S. tariff being applied to each shipment of Canadian softwood lumber crossing the border is 21-27 percent.
This is a serious issue, Mr. McKechnie said, because the forest business is a $10 billion industry in Canada, and one that is vital to the national and provincial economies. Canada exported $595 million in wood products to Georgia in 2004, most of which ($42 million) was softwood lumber. This was a 27 percent increase from the year before. Conversely, Georgia exports of wood products to Canada fell 16 percent from 2003-04 to $41.5 million. Most of these exports were value-added items such as door and window components.
The current lumber dispute is really the only controversial trade issue between Georgia and Canada, Mr. McKechnie noted. Other trade between the regions, like computers and auto parts, typically goes fairly smoothly, he said.
The same is normally true at the national level. When the U.S. banned Canadian beef imports last year, Canadian industry lost some $2 billion, but that issue was resolved rather easily, and the ban was lifted in March, he added.
The U.S. and Canada have the largest trading relationship in the world. Georgia alone has $9 billion per year in two-way trade with Canada, which is greater than with its next three top trading partners – Mexico, Japan and the United Kingdom – combined. This trade supports some 150,000 jobs in Georgia. One of every five Georgia exports is purchased by Canadians, and more than 100 Canadian companies have operations in the state.
Contact Mr. McKechnie at (404) 532-2000 or Malcolm.McKechnie@international.gc.ca