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News Release
July 6, 2000
Trade barriers against Canadian lumber should be allowed to expire
Study says potential home owners, lumber users sacrificed to benefit
domestic producers
The United States likes to lecture the world about the importance of free trade but sometimes ignores its own advice. A case in point is the U.S.-Canadian Softwood Lumber Agreement, a little-known trade barrier that imposes steep surcharges on Canadian lumber above preset import limits. In a new Cato Institute study, three trade experts take aim at the SLA, calling it "a boondoggle that benefits a few lumber producers here in the United States at the expense of millions of workers in lumber-using industries -- not to mention millions of American homebuyers."
In terms of the value of the trade affected, the SLA is roughly equivalent to steel-quota legislation considered and rejected by Congress last year. The Cato analysis -- by Brink Lindsey, director of Cato's Center for Trade Policy Studies; Mark Groombridge, a research fellow at the trade center; and Prakash Loungani, an economist with the International Monetary Fund -- examines the impact of the SLA on downstream lumber-using industries and American buyers of new homes and home furnishings. Among the findings:
- Trade restrictions boost lumber prices by anywhere from $50 to $80 per thousand board feet, adding between $800 and $1,300 to the cost of a new home.
- Many Americans who dream of homeownership are priced out of the market. According to the U.S. Census Bureau, for every $1,000 increase in housing prices, an additional 300,000 families are unable to purchase a home. The bulk of those 300,000 are, of course, lower-income families.
- Employees in lumber-using industries such as lumber dealing and home building pay a price for trade barriers, even though they outnumber employees in lumber-producing industries such as logging and sawmills by more than 25-to-1.
The study, "Nailing the Homeowner: The Economic Impact of Trade Protection of the Softwood Lumber Industry," notes that the SLA is scheduled to expire in April of next year. The authors say it should be allowed to do so. "In the end, the claims that Canadian producers enjoy an unfair advantage over their American rivals are not persuasive and certainly are not compelling enough to justify saddling American lumber users with costs artificially inflated by trade restrictions," they write.
"Nailing the Homeowner: The Economic Impact of Trade Protection of the Softwood Lumber Industry"
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