Supply Caps on Canadian Lumber Could Be More Harmful than Tariffs

Filed in Economics by on May 25, 2016 0 Comments

100653773Barriers that restrict trade on softwood lumber from Canada have a direct impact on U.S. consumers and home builders.

A builder pays approximately $15,000 for the softwood lumber used to build an average, single-family home. Restrictive trade agreements that impose quotas, tariffs and other border tax measures raise the cost and limit the supply of lumber, which hurts housing affordability.

A nine-year softwood lumber agreement between the U.S. and Canada that imposed punitive tariffs against imported wood from Canada of up to 15% expired last October.

The two nations are now engaged in a “cooling off” period – meaning no trade disputes can be filed by either country regarding softwood lumber imports – until Oct. 12, 2016.

However, both countries have their eyes set on the next agreement and plan to announce a path forward by June 12. NAHB believes any new agreement must be mindful of the U.S. housing market to ensure American consumers have access to a stable, dependable and affordable lumber supply.

U.S. and Canadian negotiators are meeting in Ottawa tomorrow to discuss the parameters of a new agreement, and the U.S. will be advocating for a supply cap. A cap of 25% is perhaps the most modest volume the U.S. would consider, since the most recent data show Canadian imports accounted for about 28% of softwood lumber sold to U.S. customers in 2014, consistent with data from previous years.

As NAHB Senior Economist Paul Emrath reports in a recent Eye on Housing blog post, if a 25% volume cap on softwood lumber imported from Canada had been in place in 2014, it would have resulted in a loss of:

  • 8,941 full-time U.S. jobs
  • $510 million in wages and salaries for U.S. workers
  • $364.9 million in taxes and other revenue for governments

The NAHB study further shows that the resulting loss of 8,941 U.S. jobs under this “modest” cap is considerably greater than the 4,666 jobs lost under a 15% tariff.

View more analysis on how volume caps and quotas on imports of Canadian softwood lumber would reduce investment in new housing and result in the net loss of wages, taxes and jobs.

For more information, email Paul Emrath at NAHB or call him at 800-368-5242 x8449.

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