Storms drive push to ease soft­wood tar­iffs

The Globe and Mail (BC Edition) - - REPORT ON BUSINESS - SHAWN McCARTHY ADRIAN MORROW

Pres­sure from in­dus­try mounts as af­fected states look to be­gin re­build­ing

The U.S. gov­ern­ment is fac­ing in­creas­ing pres­sure to reach a deal with Canada on soft­wood lum­ber, as de­mand for con­struc­tion ma­te­ri­als is ex­pected to spike higher in Texas and Florida in the wake of hur­ri­canes Har­vey and Irma.

While the U.S. lum­ber in­dus­try is dug in on its de­mand for tar­iffs, its cus­tomers ar­gue that do­mes­tic sup­plies can­not meet their needs, which will drive up the cost of re­con­struc­tion in the states that sus­tained many bil­lions of dol­lars in storm dam­age in re­cent weeks.

The Cana­dian gov­ern­ment is hop­ing the added do­mes­tic pres­sure re­sult­ing from the hur­ri­canes will help pave the way for a deal, Nat­u­ral Re­sources Min­is­ter Jim Carr said on Thurs­day.

“We know that [the loom­ing re­con­struc­tion] has an in­flu­ence on mar­kets and on de­mand,” Mr. Carr said af­ter speak­ing at the Coun­cil of Forestry Min­is­ters meet­ing in Ot­tawa.

“And we also know that Cana­dian pro­duc­ers of­fer a very good sup­ply of soft­wood lum­ber in the United States. That’s an eco­nomic re­al­ity. Mar­ket forces are im­por­tant, so we think that will al­most cer­tainly have some im­pact on think­ing.”

How­ever, dur­ing a visit to Wash­ing­ton on Thurs­day, On­tario Pre­mier Kath­leen Wynne said that a res­o­lu­tion to the soft­wood stand­off cur­rently looks un­likely.

Ms. Wynne met with U.S. Com­merce Sec­re­tary Wil­bur Ross at his of­fice in Wash­ing­ton.

“He didn’t hold out, I would say, a clear hope that there is an easy res­o­lu­tion on the hori­zon,” the Pre­mier said in an in­ter­view at the Cana­dian em­bassy.

The two sides were close to a deal over the sum­mer, in which Canada would have agreed to a cap on the amount of soft­wood it would ex­port to the United States. That quota, one source said at the time, would have been a lit­tle more than 30 per cent of U.S. mar­ket share to start, fall­ing to slightly less than 30 per cent over five years, then hold­ing steady for an­other five.

But talks dead­locked over whether Canada would able to ex­ceed its cap in the event that U.S. in­dus­try couldn’t pro­duce enough to meet the rest of the de­mand.

Cana­dian Am­bas­sador to the United States David MacNaughton said this is still the stick­ing point in a deal. He pointed out that, as it stands, the United States is im­port­ing more lum­ber from Ger­many and Rus­sia be­cause it can­not pro­duce enough to fill the mar­ket gap left by its puni­tive du­ties on Cana­dian wood.

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“We’re right down to the last is­sue that needs to be re­solved, which is what we call a ‘hot-mar­ket pro­vi­sion,’ ” he said in a panel dis­cus­sion at a Wash­ing­ton event hosted by on­line news source Politico. “Rather than tak­ing lum­ber from Rus­sia, why wouldn’t you take it from Canada?”

Mr. MacNaughton ac­cused the U.S. in­dus­try of de­lib­er­ately stonewalling a deal “be­cause they’re mak­ing a lot of money right now.

“It’s un­for­tu­nate that we’re in a sit­u­a­tion where the price of lum­ber right now is sky-high. It is to the ben­e­fit of a few lum­ber barons. We are end­ing up in the United States with peo­ple not be­ing able to af­ford to buy new homes or to con­struct new homes,” he said.

The Na­tional As­so­ci­a­tion of Home Builders – which has long op­posed tar­iffs – tes­ti­fied at hear­ings in Wash­ing­ton this week that the pro­posed trade ac­tion would un­der­mine the re­con­struc­tion ef­forts and drive up the cost of hous­ing.

In a hear­ing this week, Texas home builder Ed­die Martin – an ex­ec­u­tive of the builders’ as­so­ci­a­tion – said that the U.S. in­dus­try can­not even meet cur­rent de­mand for some key soft­wood prod­ucts. Based on strong de­mand, av­er­age prices for soft­wood lum­ber have risen 22 per cent since the be­gin­ning of 2016 and some prices are at his­toric highs, the as­so­ci­a­tion notes.

“Mov­ing for­ward, there is go­ing to be a lot of re­build­ing,” Mr. Martin, the chief ex­ec­u­tive at Til­son Home Corp., said in his tes­ti­mony. “Tens of thou­sands of peo­ple, like my em­ploy­ees, are go­ing to be in a bad place fi­nan­cially and in­creases in ma­te­rial costs will have a real and last­ing ef­fect on their abil­ity to have homes.”

The chief ex­ec­u­tive of the U.S. lum­ber coali­tion ac­cused Ot­tawa of us­ing the hur­ri­canes as a “po­lit­i­cal ploy.”

“Amer­i­can towns, cities and, com­mu­ni­ties should be re­built us­ing Amer­i­can prod­ucts, Amer­i­can work­ers, and the Amer­i­can spirit of com­ing out stronger in the face of ad­ver­sity,” coali­tion CEO Zoltan van Heynin­gen said in an e-mail. “To the ex­tent that soft­wood lum­ber is needed to re­build, there is am­ple ca­pac­ity in the United States to sup­ply Amer­i­can wood to re­build Amer­i­can homes af­fected by these storms.”

MIKE STOCKER/AP

Dev­as­ta­tion wrought by hur­ri­canes Har­vey and Irma on com­mu­ni­ties across Texas and Florida, re­spec­tively, add a new di­men­sion to con­tin­u­ing soft­wood-lum­ber ne­go­ti­a­tions be­tween Canada and the United States.

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