MONTREAL - Tariff barriers imposed on Canadian softwood lumber have cost U.S. consumers $6 billion, says the Montreal Economic Institute, a Canadian public policy research center.
Protective tariffs imposed since an agreement lapsed between the two nations is also enriching a limited group of producers, the center contends in a viewpoint issued September 15, 2016. Some U.S. softwood lumber producers are calling for the imposition of limits and tariffs on Canadian imports, arguing that Canadian softwood represents unfair competition because it is subsidized.
Hearings before the World Trade Organization and NAFTA tribunals have not supported this position, according the the Montreal Economic Institute, which says that if no agreement is ratified before October 12, 2016, imports from Canada could be subject to tariffs of up to 25 percent. Both U.S. President Barack Obama and Canadan Prime Minister Justin Trudeau have called for a settlement of the dispute.
"Since the entry into force of the latest Softwood Lumber Agreement between Canada and the United States, tariffs at the border have reduced Canadian exports and have allowed American producers to increase their market shares," the group said in a statement. "The latter thus registered additional net earnings of US$4.31 billion between 2006 and 2015."
U.S. consumers are the biggest losers economically, since the Canadian lumber targeted by the agreement is used primarily for residential construction on the American market, As a result, says Alexandre Moreau, Public Policy Analyst at the Montreal Economic Institute, builders have had to get wood from more expensive sources, raising home construction costs, and home prices.
"They are rarely mentioned in this debate, but American consumers also pay the price of protectionist measures adopted by their government," says Moreau, Public Policy Analyst at the MEI and author of the publication. "Between 2006 and 2015, they spent US$5.92 billion more than they would have under free trade."
The case of softwood lumber illustrates how protectionism generally benefits a small number of interests, the MEI says in its Viewpoint. Download it here>>
"Trade barriers impoverish the entire economy, both in Canada and in the United States," adds Jasmin Guénette, Vice President of the MEI. "Even if workers associated with the American softwood lumber industry benefit from this situation, many millions of consumers are penalized. In the end, the losses suffered by consumers will be much greater than the gains enjoyed by softwood lumber producers."
Note that American producers are still calling for the imposition of limits and tariffs on Canadian imports. If no agreement is ratified before October 12, imports from Canada could be subject to tariffs of up to 25 percent.
The Viewpoint entitled "The Economic Costs of Protectionism: The Case of Softwood Lumber" was prepared by Alexandre Moreau, Public Policy Analyst at the MEI. This publication is available on our website.
The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.
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