U.S. and Canada’s Ongoing Lumber Dispute
Since 1982, the softwood lumber market has been a hot topic between the United States and Canada. Both countries are heavy producers with the United States producing an average of 2.9 billion board ft. (bbf) per month and Canadian sawmill’s producing 2.37 bbf/month.
Softwood lumber is a versatile product used for a wide variety of woodworking projects, from interior furniture and cabinets to exterior decking and even structural framing. It is easy to grow, considered renewable and sustainable, as well as easy to work with and economical.
For the past few decades, softwood lumber has been a thorn in the substantial trade relationship between the neighboring countries. The U.S. argues that Canadian lumber exports are unfairly subsidized by both the federal and provincial governments and, in response, placed Anti-dumping and Countervailing duties against lumber imports to protect domestic suppliers.
Last year, the U.S. Commerce Department imposed new anti-subsidy tariffs averaging 20 percent on Canadian softwood lumber imports. Canada, for its part, has argued against what Foreign Minister Chrystia Freeland described as “protectionist trade practices” and has begun challenging the tariffs under NAFTA and through the World Trade Organization.
While the impact of the newly minted U.S.—Mexico—Canada Trade Agreement on softwood is not yet analyzed, both the U.S. and Canadian administrations consider a new agreement on softwood trade to be vital. So far, both sides have failed to reach a consensus and any final lumber agreement is likely to be outside of the pending USMCA.
U.S. Pining for Canadian Softwood
Meanwhile, the economic effects of these tariffs have, so far, been limited. Robust U.S. demand for new houses and renovation materials have allowed Canadian producers to recoup the costs of the tariffs while still maintaining market share.
According to Descartes Datamyne’s U.S. trade data, 83 percent of U.S. softwood imports come from Canada and the value of these imports are trending up. From Jan. 2016 through Sept. 2018, imports have consistently gained value, with a 24.6 % increased in total FOB value between the two periods. In June, Imports reached a peak FOB value of $608 million U.S.
This consistent growth can partially be attributed to the expiration of the last softwood lumber agreement between the two countries expiring in 2015, fully opening the U.S. market to Canadian producers.
Canadian Exports Branching Out
Amidst the growing tensions and trade disputes between the U.S. and Canada, Canadian lumber producers are seeking to diversify their markets, reducing their dependence upon the U.S. and, instead, opting for growing markets in other regions like Asia.
While these markets are still quite small compared to the United States, with more than 65% of Canada’s exports going to the U.S., the demand is there. Softwood exports to countries other than the U.S. had a total FOB value of $6.78B from 2015 through 2017. China and Japan lead these markets with total values of $3.1B and $2.2B respectively.
Keeping Pace with Current Trends
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Date posted: November 30, 2018