Nailing the Homeowner: The Economic Impact of Trade Protection of the Softwood Lumber Industry

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Even though Canada is the United States' largest trading partnerand most goods flow freely across the border, one U.S.industry--softwood lumber--continues to lobby successfully for theimposition of trade barriers against our neighbor to the north.Although there is a long history of trade barriers in thisindustry, the most recent manifestation is the Softwood LumberAgreement, which was signed in 1996. The SLA imposes special feeson any softwood lumber imports in excess of 14.7 billion boardfeet. The SLA is set to expire in April 2001, and the U.S. andCanadian governments are considering options that might replace theSLA.

The best policy course is to simply let the SLA expire and notimpose any new barriers. We calculate that trade restrictions addan estimated $50 to $80 per thousand board feet to the price oflumber, which drives up costs and shrinks profits for lumber users.The resulting addition of $800 to $1,300 to the cost of a new homeprices some 300,000 families out of the housing market, denyingthem the dream of home ownership.

Protectionist trade barriers in the softwood lumber industryimpose great costs on businesses and consumers here in the UnitedStates in order to enrich a few lumber producers. To put employmentfigures in perspective, it is noteworthy that workers in the majorlumber-using sectors outnumber logging and sawmill workers bybetter than 25 to 1.

Advocates of protectionism claim that trade barriers arenecessary to offset unfair subsidies enjoyed by Canadian lumberproducers, but such claims do not withstand scrutiny. Neither doarguments that free trade in lumber would harm the environment. Itis time for the United States to stop lining the pockets of a fewproducers here at the expense of U.S. homebuilders and families whodream of owning their own homes.

Brink Lindsey, Mark A. Groombridge, and Prakash Loungani

Brink Lindsey and Mark A. Groombridge are, respectively, director of and research fellow at the Cato Institute�s Center for Trade Policy Studies. Prakash Loungani is an economist with the International Monetary Fund. The views expressed in this paper are those of the authors and do not necessarily represent those of the IMF or IMF policy.