NCPA - National Center for Policy Analysis

Unintended Consequences of Softwood Lumber Tariffs

May 14, 2003

Two years ago, U.S. lumber companies accused Canadians of selling softwood lumber at below-market prices and unfairly benefiting from government subsidies in the form of low stumpage fees, the prices paid to harvest trees from forests.

Canadian companies say they have other costs -- such as road building, reforestation and firefighting -- which are borne by the federal government in the United States.

The Bush administration imposed tariffs on Canadian softwood imports nearly a year ago:

  • Canadian firms have paid nearly a billion dollars in U.S. duties.
  • Tariffs totaling 27 percent on $6.8 billion of Canadian softwood exports have led to sawmill closings, and the loss of more than 11,000 Canadian jobs.

However, the duties have had unintended consequences, including sinking lumber prices and increased Canadian imports.

  • Canadian wood accounts for about a third of the softwood lumber Americans use each year for new homes, furniture, etc.
  • Canada shipped 68 percent of its production south in 2001.
The tariffs encouraged some Canadians to boost output:
  • In British Columbia, many timber companies have added shifts and are running mills seven days a week.
  • They increased production to reduce their average fixed costs -- which will lower their future anti-dumping duties -- and improve efficiency.

U.S. manufacturers are also suffering. For example,

  • Shakertown, a Winlock, Wash., maker of cedar shingle panels, has laid off 34 of its 48 workers and hiked prices because of the duties. The company has yet to find any U.S. suppliers of cedar and Douglas fir plywood.
  • And U.S. multinational Weyerhaeuser Co., one of the world's largest lumber producers, has paid more than $80 million in duties because 40 percent of its lumber in North America comes from its Canadian mills.

Source: Katherine Yung, "Toppled by tariffs," Dallas Morning News, May 11, 2003.


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