By Peter Nicholas and Paul Vieira
The Trump administration is taking retaliatory action against
Canada over a trade dispute, moving to impose a 20% tariff on
softwood lumber that is typically used to build single-family
homes.
In an interview Monday, Commerce Secretary Wilbur Ross said the
tariff will be applied retroactively and imposed on Canadian
exports to the U.S. of about $5 billion a year. He said the dispute
centers on Canadian provinces that have been allegedly allowing
loggers to cut down trees at reduced rates and sell them at low
prices.
The determination that Canada improperly subsidizes its exports
is preliminary, and the Commerce Department will need to make a
final decision. In addition, the U.S. International Trade
Commission will need to find that the U.S. industry has suffered
injury. But even a preliminary decision has immediate real-world
consequences, by discouraging importers from buying lumber from
Canada.
"We tried to negotiate a settlement but we were unable," Mr.
Ross said, adding that previous administrations have also been
unsuccessful in resolving the dispute.
He said the Trump administration has notified Canada of its
decision.
A spokesman for Canadian Foreign Minister Chrystia Freeland, who
is in charge of U.S.-Canada relations, wasn't immediately available
for comment. Canadian Prime Minister Justin Trudeau said last week
that, when it comes to trade irritants, from lumber to dairy, he
would present the facts to Washington and aim to work
constructively on making improvements to the North American Free
Trade Agreement.
Cameron Krauss, senior vice president of legal affairs at the
U.S. Lumber Coalition said, "We appreciate today's actions by the
Department of Commerce." The group represents large and small
American lumber producers.
The trade row between the U.S. and Canada over lumber dates back
decades, although the countries struck a deal in 2006 that stopped
the U.S. from imposing additional duties. Under that arrangement,
which expired in late 2015, Canadian forest producers agreed to
accept either a quota on U.S.-bound exports or pay a tax on goods
shipped to the U.S. in exchange for no tariffs.
The U.S. lumber industry filed a complaint last fall to the
Commerce Department, alleging that Canadian lumber is unfairly
dumped -- or sold at less than market value -- into the U.S.
market. The complaint also alleges that Canada heavily subsidizes
its timber industry by offering Pacific Coast producers access to
wood from government-owned land at below-market prices.
The prospect of U.S. duties on Canadian lumber imports has
roiled prices so far this year. Lumber futures rose more than 25%
in the early months of 2017, peaking at their highest point in over
12 years.
President Donald Trump's heightened rhetoric over Canada's
treatment of U.S. lumber and dairy producers in recent days marked
a sharp pivot on America's northern neighbor and its second-largest
two-way trading partner, after China, with nearly $545 billion in
goods and services crossing the border in 2016.
During the election campaign and in the weeks following, Mr.
Trump focused much of his trade ire against Mexico, China and
Germany. When Mr. Trudeau visited the White House in February, Mr.
Trump spoke of the U.S.'s "outstanding" trade relationship with
Canada and how only some tweaking would be required to Nafta when
it came to Canada.
But pointed comments -- in particular Mr. Trump's dislike of how
Canada restricts U.S. producers in accessing its dairy market --
and his move Monday to slap a new tariff on Canadian lumber suggest
Nafta's renegotiation could be more complicated than initially
believed.
Mr. Ross said those disputes illustrate the shortcomings of the
free-trade agreement, which he said has restricted dairy products
that Americans can export to Canada, yet allowed Canada to "dump
lumber here."
"That is not a very satisfactory agreement," Mr. Ross said.
In 2016, the U.S. ran a trade deficit of $5.28 billion with
Canada on products from sawmills. That is a category that includes
softwood lumber.
In the lead-up to the decision on lumber duties, U.S.-Canada
trade watchers said the Trump administration's move on timber could
serve as an opening gambit in laying out what Mr. Trump wants
Canada to put on the table as part of the Nafta renegotiations,
which have yet to begin in earnest.
The president "is using his skills as a negotiator to set the
bar very high and highlight a problematic area for U.S.-Canada
trade," said Laura Dawson, director of the Canada Institute at the
Washington-based Wilson Center, a nonpartisan think tank.
The issue is important for U.S. lawmakers in the Pacific
Northwest, including Sen. Ron Wyden (D., Ore.), the top Democrat on
the Senate committee that oversees trade policy -- and the panel
that has delayed a vote on Mr. Trump's nominee for U.S. trade
representative, Robert Lighthizer.
A spokesman for Mr. Wyden didn't immediately respond to a
request for comment.
The Canada dairy dispute has also caught the attention of
powerful lawmakers in border states, including House Speaker Paul
Ryan, a Wisconsin Republican, and Sen. Chuck Schumer of New York,
the Senate Democratic leader.
The Commerce Department handled subsidies and dumping cases in
the Obama administration with little fanfare, but Mr. Ross has
sought to raise the profile of these ordinary industry cases and
work toward filing unilateral cases against trading partners.
Write to Peter Nicholas at peter.nicholas@wsj.com and Paul
Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
April 24, 2017 20:28 ET (00:28 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.