Ragout on Softwood Lumber Tariffs

My welcome to Chef Ragout extends on his excellent post One Reason Why Houses are So Expensive, which notes:

The U.S. imports about a third of its lumber from Canada and imposes a 27% tariff, arguing that Canada subsidizes its lumber industry by selling trees from government owned land too cheaply. The tariffs were imposed by the Bush administration in 2001, hoping to win some votes from the lumberjacks and sawmill owners, I suppose. Before that, the Clinton administration imposed quotas on Canadian lumber. The US has lost a series of NAFTA and WTO cases, most recently last month, but continues to appeal, dragging out the issue and keeping the tariffs in place.

His post links to this history of trade protection on imports of softwood lumber from Canada. It notes that the Coalition for Fair Lumber Imports has been a group of U.S. lumber producers primarily funded by Georgia Pacific and International Paper. Not only has the Bush White House granted protectionist favors to these two companies but some in the Clinton White House had been willing to limit free trade.

The 10-K filings for Georgia Pacific and International Paper are available here. Both companies sell forest and paper products. International Paper has manufacturing operations in the United States, Canada, Europe, Asian, and Latin America. The company has harvesting rights on 7.9 million acres of government-owned forest lands in Canada and operates wood products plants in the Canada were it produces 1.2 billion board feet of lumber and 450 million square feet of plywood annually.

Georgia Pacific produces 6.5 billion square feet of softwood lumber in 20 plants throughout the southeast of the U.S. The production represents 32% of North America’s capacity. Georgia Pacific also produces gypsum in Canada, some of which is sold to U.S. customers. Georgia Pacific also sells approximately $3 billion of its products each year abroad primarily to Canadian customers.

Both companies benefit from NAFTA in two ways: selling U.S. made products to Canadian customers and producing some of it products from American customers in Canada. Yet, these two companies have induced U.S. policy makers to protect their softwood lumber operations from Canadian competition.