U.S./Canada
trade disputes
entangle softwood
and drywall markets
Anti-dumping disputes on both sides of the border
create cost challenges for the construction industry
Canadian Design and Construction Report staff writer
The U.S. has approved additional preliminary anti-
dumping duties averaging around seven per cent on
Canadian softwood lumber exports as construction related
trade pressures increase in an environment of increasing
American protectionism under the Trump administration.

Combined with the countervailing duties of around 20
per cent announced in April, the combined duties amount
to an averaged total of 26.75 per cent, Business in
Vancouver has reported.

The softwood issue, combined with Canadian
assertions that U.S. manufacturers have been dumping
drywall in Canada, have set the stage for contentious
negotiations and litigation; and higher construction costs
on both sides of the border.

The Forest Products Association of Canada (FPAC),
reported the latest duties announced on June 26 for
Canada’s major lumber companies are 7.72 per cent for
Canfor Corp., 7.53 per cent for Tolko Industries, 6.76 per
cent for West Fraser Timber and 4.59 per cent for Resolute
Forest Products. Other Canadian producers will have to
pay 6.87 per cent.

While the industry expected the anti-dumping tax, FPAC
CEO Derek Nighbor said it’s still unwarranted action that
the Canadian government needs to dispute.

“What we’re hearing from some people is that the
numbers might be a little bit lower than they expected on
the anti-dumping, but overall, this remains a frustrating
12 – Summer 2017 — The Canadian Design and Construction Report
process,” Nighbor said. “It’s a process where we’re at the
mercy of the Americans, and once again, we’re confident
that we will be proven right and that these duties are
simply unwarranted.”
Canada is expected to appeal to both the World Trade
Organization (WTO) and a North American Free Trade
Agreement arbitration panel, likely after the final duties are
known in early 2018, The Canadian Broadcasting Corp.

(CBC) has reported.

CBC reports that Canada’s lumber industry enjoyed a
rare stretch of tariff-free trade with the U.S. in 2016, after
the previous softwood lumber agreement expired. Its U.S.

market share rose to 32 per cent, but has dropped to about
27 per cent after the new duties.

Three-quarters of Canada’s exports go to the U.S.

Figures cited this week by the Montreal Economic
Institute said that between January and May of 2017, the
price of lumber in the U.S. increased by 17 per cent. The
increase has caused the cost of a single family home there
to increase by $2,400.

“It is still too soon to evaluate these effects over the
long term since there is much uncertainty in the market,
with each player pursuing its own strategy,” MEI analyst
Alexandre Moreau said in a release. “For the moment, the
weakness of the Canadian dollar, the strong demand on
the American side and high prices are allowing Canadian
producers to partially absorb the effects of the tariffs.”
Trade lawyer Todgham Cherniak told the CBC that the
U.S. industry is banking on both duties inflicting real pain.




The April finding of “critical circumstances,” which allowed
duties to be applied retroactively, was meant to add to the
cost of not settling yet, she said.

“It’s hard for anybody to get their head around the
dynamics of this administration,” Todgham Cherniak says.

U.S. commerce secretary Wilbur Ross said he would
like softwood lumber to be resolved before NAFTA
renegotiations begin later this summer.

“I think you’ll see negotiations start in earnest on
softwood throughout the rest of the summer,” CBC quoted
trade lawyer Dan Ujczo as saying. However, he believes
there is only a 50/50 chance of a deal.

The problem: There is a hypocritical Canadian argument
about the effect of lumber tariffs on homebuilding costs,
Ujczo asserts.

Ujczo told CBC he will testify at NAFTA consultations in
Washington on behalf of several clients, including the
Western Canada Alliance of Wall and Ceiling Contractors,
which has complained about the Canadian government’s
own anti-dumping duties on gypsum board that has
increased costs, especially in western Canada.

“Part of it is that Canada wants a negotiating chip,”
Ujczo said in the CBC interview, but “it’s very dangerous
for Canada to be playing this game right now.”
Putting rising construction costs for U.S. consumers at
the heart of its softwood lumber argument in the U.S. may
merk@merx.com backfire, he indicated.

“‘Start at home first before you come talk to us’ would
easily be the U.S. position on that,” Ujczo said.

“The U.S. doesn’t care if it’s hurting the Canadian
forestry industry. It’s protecting to make America great
again, right?” CBC has quoted Ujczo as saying. “Mexican
drywall is coming into Canada to fill that demand,” he said.

“That’s red meat for the Trump administration.”
Canadian negotiators indicate they have seen little
evidence of serious negotiation to date from the
Americans. Foreign affairs minister Chrystia Freeland
confirmed in June that the two sides remain far apart.

Canada could easily take the drywall issue off the table
but that won’t be enough, the lawyer said.

When he reviewed the math of the April countervailing
duties decision, he saw that the Commerce Department
is targeting B.C.’s raw log export restrictions for private
land. Ujczo described it as an “antiquated protectionist
measure” that Canada should be prepared to deal away.

The larger NAFTA renegotiation is “inextricably
intertwined” in the minds of many members of the U.S.

Congress, he said.

“Softwood lumber has always had the potential to
throw everything off the rails,” he said. “It certainly can
change the tenor and tone of the NAFTA negotiations.”
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The Canadian Design and Construction Report — Summer 2017 – 13