Tariff’s, Blacklisting, and Global Warming – Canada’s Self-Inflicted Challenges on their Wood Industry

You may have recently heard about President Trump imposing tariffs on wood imported from Canada.  The story broke in April, 2017 in the New York Times.

The Trump tariffs are not a reaction to new developments.  According to the Times article, the US and Canada have been at odds on this issue since 1982.  Trump’s order picks up where an agreement that expired in 2015 left off.

Basically the issue is that Canada and US treat their wood industry differently.  In Canada, trees are harvested from government owned land, but in the US, Federal lands cannot be harvested.  Mills in the US must own the land they harvest.  This distinction and the fact that Canada charges their mills a very low fee to harvest trees, adds up to a government subsidy that allows Canada’s wood to be sold at a far lower rate.

Adding to Canada’s woes in the wood industry is a recent story published by Desmog Canada reporting on a David and Goliath tale.

The story reveals the plight of a small forestry consultant battling against the province of British Columbia.  Martin Watts, an independent forestry consultant working in the industry for 25 years, claims he has been blacklisted by BC’s Ministry of Forests for raising concerns about the accuracy of timber volumes.

Watts has now filed a civil claim raising the focus on this issue.  According to Watts, the Ministry has been overestimating the volumes available for harvesting.  This overestimation is a concern for the future of the wood industry and ecosystem of Canada.  In addition, because Canada subscribed to the Copenhagen Accord (a non-binding agreement to reduce carbon emissions), Canada purchases carbon offsets which now may have been underestimated raising financial implications for our neighbors to the North.

The net effect of these inaccuracies further reinforce President Trump’s move to impose tariffs on Canadian wood imports.  Despite all the negative attention this matter has raised for Trump, the facts seem to support claims from Trump that Canada has engaged in unfair practices “exploiting naive American trade policies”.

As for our friend Mr. Watts, only time will tell if his cries will be heeded or whether his block from consulting for the BC Forestry Ministry will be lifted.

For those of us in construction, keeping abreast of these global events give us insights into future financial implications on the industry.

From this series of events we should anticipate wood prices will increase.  Some studies suggest increases to the cost of lumber will raise home prices by 4%.  As Trump advances his “Buy American” initiative, we can be sure that other commodity manipulators will come to the fore with even greater potential for financial impact on construction.

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