Dateline: 03/22/02

Less than a month after taking similar action on imported steel, the United States has imposed duties of 29 percent on lumber imported from Canada. Critics argue the new fees will result in higher costs to U.S. new homebuyers.

While the duties are intended to protect the U.S. lumber industry from unfair foreign competition, the American homebuilding industry argues they will increase the price of a new home to the consumer by an average of at least $1500.

Used in virtually every part of new homes from framing to cabinets, the $6 billion worth of Canadian softwoods, mainly spruce, pine, fir and red cedar, entering the U.S. annually represents about one-third of the total American lumber market. The new tariffs will result in higher lumber prices to U.S. builders and will be passed along to consumers, say the homebuilders.

U.S. officials have long contended that Canada's provincial governments unfairly subsidize logging and production processes, resulting in artificially low prices for exported lumber. The new U.S. duties could devastate smaller logging towns, according to Canadian officials.

Both President Bush and Canadian Prime Minister Jean Chretien had urged negotiators to reach a compromise in talks that had been underway for weeks.

In a Dow Jones Newswire story of March 21, Canadian Trade Minister Pierre Pettigrew blamed the U.S. for failure of the negotiations, calling U.S. demands "quite unreasonable."

"The demands of the Americans were clearly intrusive in Quebec and British Columbia and other provinces," Pettigrew was quoted as saying. He also indicated that Canada would probably present challenges to the tariffs before the World Trade Organization or NAFTA review boards.

A senior U.S. trade official acknowledged the importance of Canada as the nation's main trade partner and was quoted by Reuters as saying, "The United States will remain committed to negotiating a solution to the underlying problems here."

"In some ways, it (the lumber tariff) takes away one piece of uncertainty and it may actually make the sides better able to assess the benefits and costs of an agreement," he said.

Earlier this month, the White House announced a maximum 30 percent tariff on imported steel products believed to be hurting U.S. steelmakers. Japan has already challenged that action before the Word Trade Organization.

Where Tariffs Come From
U.S. tariffs on all imported goods are established in the Harmonized Tariff Schedule of the United States. The U.S. International Trade Commission (USITC), an independent, nonpartisan, quasi-judicial federal agency, determines whether U.S. industries are injured by imports that benefit from pricing at less than fair value or from subsidization and advises the president accordingly. The USITC was originally established by Congress in 1916 and given broad investigative powers on matters of trade.