The countdown is on. In less than a month, the U.S. International Trade Commission will make a decision that could either drastically raise or lower the cost of construction in the United States.

Controversy has been swirling around the lumber industry with regards to our neighbors to the north for five years, ever since the signing of the U.S./Canada Softwood Lumber Agreement (SLA). The agreement expired early this month, opening the door for new negotiations between the countries.

In the past, the North American Free Trade Agreement (NAFTA) has overridden the SLA by restricting the importation of softwood lumber from Canada, resulting in higher construction prices for everything from room additions on single-family houses to highways and mammoth municipal projects.

The SLA was opposed by a broad-based group of consumer and trade organizations and companies representing more than 95 percent of softwood lumber consumption in the nation.

On the other hand, big lumber companies were rather fond of the SLA. After all, it increased demand for U.S.-made lumber.

Now, however, a full-out fight has broken out during negotiations between the two countries. The lumber industry claims Canada is engaging in unfair trade practices and wants tariffs. Meanwhile, homebuilders and other consumers of lumber don't want any action that will boost their cost of doing business.

Early this week, the U.S. International Trade Commission heard testimony from both sides and from both countries. U.S. lumber companies sought to prove that Canada has engaged in dumping and predatory pricing, as well as subsidies of the Canadian lumber industry by government agencies. These firms are calling for import duties of up to 78 percent on Canadian lumber -- 40 percent as a "countervailing" duty and 28 to 38 percent as an anti-dumping duty.

Meanwhile, groups like the Consuming Industries Trade Action Coalition (CITAC) urged the International Trade Commission to consider the impact on U.S. consumers before placing any restrictions on softwood lumber imports from Canada.

"Any new quotas, taxes or fees would endanger the competitiveness of homebuilders, lumber dealers, furniture manufacturers and many other American companies and threaten the jobs of some 6 million workers they employ," said Jon Jenson, chairman of CITAC.

CITAC and other groups contend that the SLA amounted to a hidden lumber tax on U.S. consumers that prevented an estimated 300,000 American families from buying new homes.

The petitions now before the ITC would add approximately $2,000 to $4,000 to the cost of a new home, which according to U.S. Census statistics, could exclude 1.2 million American families from the housing market, CITAC says.

The impact for large-scale construction projects, which use 10 to 1,000 times the amount of lumber as a new home, would be enormous. Additional costs could add up to millions for commercial real estate developers.

It is estimated that a 78 percent duty on imports of Canadian lumber would reduce the level of imports by 34 percent. Such a duty would raise the price of lumber by 33.2 percent, compared to the price under conditions of free trade, according to anti-tariff groups. Economists predict that the price increase would cause U.S. consumption of softwood lumber to fall by 5.6 percent. U.S. softwood lumber production would increase by 13.3 percent.

The cost to the American consumer would be an estimated $6.10 billion per year. Of this, $4.02 billion would go to the U.S. lumber producers and the net loss to the U.S. economy would be $2.08 billion per year.

"Canada clearly has a comparative advantage in lumber, so the best scenario for lumber consumers and homebuyers is open trade in lumber," Jenson said. "If the domestic industry persists in trying to hinder trade in lumber, our government should make certain that the process is fair, transparent and open to all affected parties. Without the participation of consuming interests, fairness is not possible."

Workers associated with the consumers of lumber outnumber lumber-producing workers by 25 to 1 in the United States, according to the U.S. Department of Labor.

In addition, of course, environmental issues are throwing a wrench into negotiations between the United States and Canada. U.S. trade representatives insist that Canada must bring its environmental and forestry policies into line with the U.S. system, which is more sensitive to endangered species like the grizzly bear, woodland caribou, bull trout, and Pacific salmon native to both countries.

While the International Trade Commission will make its decision soon, negotiations between Canada and the United States are expected to drag on and cause much hand-wringing for the next several months, or even years. In the meantime, real estate developers of all stripes are sure to suffer.

For more articles by Lesley Hensell, please press here.

Published: April 26, 2001

Use of this article without permission is a violation of federal copyright laws.

Lesley Hensell covers commercial real estate and financial issues for Realty Times. Based outside of Dallas, Lesley works with high-tech and real estate clients as an independent marketing and public relations consultant. She also writes for several publications, including the Dallas Morning News. E-mail Lesley at: lhensell@earthlink.net