6 Comments

1. 
   user-6811621 | May 26, 2017 12:20pm | #1

   tariffs on competition to prop up uncompetive production
   usually doesn't end well. I'd like to buy that cheap Canadian lumber already subsidized by the Canadian taxpayers. I guess I'd better get started on my double stud wall build. Thankfully, my house plan is relatively compact and lumber prices have decreased pretty steadily since early April peak.

2. 
   RMaglad | May 29, 2017 09:44am | #2

   "subsidy" has been claimed by
   "subsidy" has been claimed by the US dating back to the 60's. The Canadian lumber industry does not receive a direct subsidy. The dispute stems from the fact that most canadian lumber is harvest from crown land, owned and controlled by the provinces. The provinces set a fixed charge for permission to harvest. The US considers this a subsidy, since in its own markets, the forests are owned by private land owners and must be purchased/leased at fair market rate in order to produce and harvest. Remember fair market rates are simply whatever the land owner is willing to accept. US Lumber resources are much more scarce than Canada's, making its own lumber more valuable. While labour costs are significantly lower in the US, Canadian lumber benefits from a (typically) lower exchange rate, and cheaper access to forests (claimed subsidy by US).

   The only subsidy was to cover losses and legal expenses in 2005 after 3 years long disputes and was entirely based on the invalidated duties.

3. 
   StollerB | May 31, 2017 11:45pm | #3

   Absolutely Correct Ryan.
   Ryan's comments are exactly correct. Canada has cheaper lumber for three reasons: they have much more available forestry land (larger supply means lower prices); the land is not typically owned by private companies that have an interest in reaping larger profits off it's use; and the Canadian dollar is worth less, so any readily available commodity that Americans buy from Canada is cheaper than if it comes from their own country. It is not unfair trade practice; it's just inherent differences between the geography and socio-economic paradigms of our countries that make it look like the practice is somehow unfair. Because the US government is caving into the outcry of the lumber suppliers in the States, every single builder and housing consumer in the country is going to suffer for the benefit of those very few lumber suppliers. But, this happens every single time the softwood lumber agreement needs to be renewed, so it's not exactly news. . .

4. GBA Editor
   Martin Holladay | Jun 01, 2017 06:04am | #4

   Response to Ryan Magladry and Burke Stoller
   Ryan wrote, "Canadian lumber benefits from a (typically) lower exchange rate."

   Burke wrote, "Canada has cheaper lumber for three reasons: ... the Canadian dollar is worth less."

   These statements show a fundamental misunderstanding of currencies and exchange rates.

   Let's imagine three countries: The U.S., Princistan, and Denzostan.

   The currencies are the U.S. dollar, the Princistan peso, and the Denzostan dinar.

   One U.S. dollar = 2 pesos.

   One U.S. dollar = 0.50 dinars.

   Where is lumber cheaper?

   There is no way to know. Although it's true that a dollar can buy 2 pesos, that doesn't mean that a 2x4 is cheaper in Princistan than in the U.S. Maybe a 2x4 costs $2 in the U.S., but it costs 6 pesos in Princistan. The exchange rate matters when doing the calculation, of course, but the exchange rate tells you nothing about the cost of living or local prices.

   Americans get confused on this point because the name used for Canadian currency is the dollar. But the principle applies to all countries and prices.

   Having a currency called "the dollar" does not help Canada. Nor does the fact that the exchange rate may be 1 U.S. dollar = 1.10 Canadian dollar. The exchange rate tells us nothing.

   In Princistan, a 1-pound loaf of bread might cost 2 pesos. The same loaf of bread might cost 0.50 dinars in Denzostan. But it would be silly to say, "Wow! Bread is so much cheaper in Denzostan than it is in Princistan!"

5. 
   JamesBoy360 | Aug 23, 2017 08:18am | #5

   Martin, I agree, however, you
   Martin, I agree, however, you need to take it a couple of steps further - even if Canada's dollar was 50x that of the US, there is an exchange rate which makes the same product a certain price in USD. One of the major components of that is the exchange rate. Given the CDN is far less and the same product sells for a comparable price in both countries...the Canadian Lumber suddenly becomes less expensive.

6. GBA Editor
   Martin Holladay | Aug 23, 2017 08:29am | #6

   Response to James B
   James,
   I guess your basic point is that anyone who wants to compare the price of a 2x4 in Montreal with the price of a 2x4 in Boston has to express both prices in the same currency. That's obvious.

   The same situation arises when you attempt to compare the outdoor air temperature in Montreal with the outdoor air temperature in Boston: before making the comparison, you have to make sure that either (a) both temperatures are expressed in Fahrenheit, or (b) both temperatures are expressed in Celsuis. That's true, of course -- but most international travelers get that.