Revisiting Lumber Pact Would Impact Housing Afford

Washington, DC, February 23, 2007--In a development that could have negative repercussions for housing affordability and American consumers, the U.S. government may be attempting to squeeze even more concessions out of Ottawa less than four months after a trade pact went into effect that governs softwood lumber imports from Canada, according to the National Association of Home Builders (NAHB).

“In what appears to be a bid to put new pressure on the Canadian government to consider even more onerous concessions that would further harm its lumber industry and hurt American consumers in order to make a handful of major U.S. lumber producers happy, Washington seems to be alleging that Ottawa is trying to subsidize its lumber industry through lower utility rates,” said Jerry Howard, executive vice president and CEO NAHB.

The two nations concluded a seven-year deal last fall that imposes an export tax of 15 percent on this vital commodity at current prices, which essentially helps domestic producers and harms housing affordability by artificially boosting lumber prices during periods of normal or slow demand.

U.S. Trade Representative Susan Schwab last week cast doubt on the viability of the long-term treaty, testifying that the “deal with Canada is threatened by provincial governments.” A published report said that Washington is apparently alleging that reduced electricity rates in Ontario is providing an unfair trading advantage for Canadian lumber producers.

“If it is true that the U.S. is willing to go out on a limb to say that lower utility rates in Ontario pose an unfair advantage to Canadian lumber producers, then the Canadian government ought to reasonably conclude that the U.S. is not committed to honoring this agreement and is looking for any excuse to re-open the accord to achieve even more favorable terms for domestic lumber producers,” said Howard.

Such a development would almost surely bode poorly for the Canadian industry and American consumers alike, he noted.

“The current agreement is bad for American home builders and consumers because it will increase volatility in supply and prices, said Howard. “Further attempts at tampering will only exacerbate this situation. “If the U.S. is seeking any pretext to charge that Canada is cheating, perhaps it is in the best interests of Ottawa to look at exercising its options to withdraw from this agreement.”