Canadian Trade Minister Urges Tariff Cuts

By Claudio Mendonca
The reduction or elimination of tariffs on Canadian lumber could decrease construction costs in South Florida, according to that country’s trade minister and a US homebuilders’ group.

But a 27% tax on softwood imports is to remain in effect until at least March. This week, in a presentation in downtown Miami, Canada’s minister of international trade James Peterson urged the end of duties on some of his country’s products.

"Protectionism is good for no one," he said. "Evidence shows the border should have been open long ago. NAFTA [North American Free Trade Agreement] panels have found Canadian companies shouldn’t be paying duties when softwood lumber crosses the border."

Used for framing, softwood accounts for 20% of the cost of materials while building a house, according to the National Association of Home Builders in Washington, DC.

A typical 2,000-square-foot new wood-framed house takes about 16,000 board feet of lumber and 6,000 feet of structural panels such as plywood. At $400 per 1,000 board feet, for example, a lumber package for a 2,000-square-foot house ends up costing nearly $10,000.

And lumber costs are on the rise.

Today, the composite price is $348 per 1,000 board feet, up from $333 in 2003, according to Michael Carliner, an economist speaking on behalf of the National Association of Home Builders.

Minister Peterson said that if tariffs were lowered, Floridians would pay less for lumber-related products. He also said the US action on Canadian products has negative repercussions in both countries.

"Canada has lumber to sell," he said. "Construction is booming in South Florida, not just due to recent hurricanes but also because tourism has rebounded in the state. When the US imposes duties on Canadian lumber, it harms American builders and homebuyers."

In August, a NAFTA panel ruled that Canadian imports show no threat to the American lumber industry. Consequently, the panel ordered the US International Trade Commission to reverse its injury determination doing it so, on Sept. 10. A final decision on the lumber impasse is expected in March, with duties possibly being eliminated or slashed by spring.

"North America is in many respects a single market of consumers," the Canadian minister said. "That’s is why resolving these issues is a top priority for me and why I look forward to working with my counterparts in the Bush administration to that end."

Along with the Canadian government, the Florida Homebuilders Association is also supporting the ban of duties on Canadian imports.

"By eliminating tariffs, lumber prices will be reduced and supply will pick up in Florida as well," said Edie Ousley, a spokesperson of the Florida association. "With four hurricanes, problems with receiving construction material has exacerbated this past year."

Ms. Ousley said the US Commerce Department is considering reducing tariffs but there are no guarantees there will be a change.

"In a preliminary ruling it seemed like tariffs would be cut in half," said Mr. Carliner. "Right now, there is not an adequate supply in the US."

In addition to rising prices of lumber, builders’ associations are also aiming to reduce or eliminate tariffs on Mexican cement. Both the state and national associations say banning duties will help to increase the shortened supply of liquid and powdered components.

Because, of strong demand in China, imports have been disrupted, limiting the number of ships bringing the product to US ports.

Currently, the US imports more than 20% of its cement to meet its domestic needs, most of it coming from producers in Asia and Europe.