As lumber prices sizzle, WTO rules in favor of Canada

The World Trade Organization (WTO) has ruled that the United States inappropriately applied countervailing duties on Canadian softwood lumber.

This ruling arrives at a time when lumber prices have rocketed, fueled by strong housing and DIY demand.

The WTO finding is in response to Canada’s challenge of the U.S. Commerce Department’s imposition of countervailing duties on Canadian softwood lumber in 2017, after the countries failed to reach a new agreement on softwood lumber.

Now the WTO is asking the Commerce Department to reassess duties imposed on Canadian softwood lumber in a way that conforms with international obligations under the World Trade Agreement.

U.S. Trade Representative Robert Lighthizer strongly criticized the panel report and says it would protect Canada’s massive lumber subsidies from U.S. action imposing countervailing duties to support the U.S. softwood lumber industry and its workers.  

“This flawed report confirms what the United States has been saying for years: the WTO dispute settlement system is being used to shield non-market practices and harm U.S. interests,” Lighthizer said in a prepared statement.  “The panel’s findings would prevent the United States from taking legitimate action in response to Canada’s pervasive subsidies for its softwood lumber industry.” 

The National Association of Home Builders said the WTO report could lead to talks resuming between both nations, however.

“The WTO report could not have come at a more important time,” said NAHB Chairman Chuck Fowke. “America’s home builders need a sound trade agreement to ensure a consistent supply of reasonably priced lumber. The WTO ruling could provide the impetus for a resumption of trade talks between the United States and Canada.”

Rising lumber prices are taking their toll on home builders and home prices. 

Rapid increases in lumber have caused the price on the average new single-family home to increase by more than $16,000 since April 17, according to the NAHB’s standard estimates of lumber used to the build the average home. Simultaneously, the average new multifamily home has increased by more than $6,000 during the same period.

Random Lengths, the lumber pricing guide, reported that the price of framing lumber climbed beyond $800 per thousand board feet as of Aug. 21. This is a 130% increase since mid-April.

The U.S.-Canada Softwood Lumber Agreement expired in October 2015, and the National Association of Home Builders (NAHB) has been urging U.S. officials to find a new agreement.

Earlier this month, the NAHB sent letters to Commerce Secretary Wilbur Ross, Zoltan van Heyningen, executive director of the U.S. Lumber Coalition, and Lighthizer, requesting a long-term agreement on softwood lumber that word for both nations.

The NAHB is also seeking increases in U.S. lumber production to meet strong demand.

Additionally, the NAHB has recruited assistance from the White House and sent President Donald Trump a letter that outlines concerns over the soaring prices of lumber along with the supply shortage. 

In Canada, the WTO’s ruling was met with praise but the realization that the dispute continues.

“While this decision is a victory for B.C.’s lumber producers, immediate relief is unlikely,” British Columbia Premier John Horgan said. “Our work continues until we bring an end to the unfair U.S. duties on Canadian softwood exports.”

The latest WTO softwood lumber report is available here.