To: Snowshoe who wrote (73 ) 8/23/2001 8:58:49 PM From: Snowshoe Respond to of 1293 Timber tariff is a mistake (editorial from Cleveland Plain Dealer)cleveland.com 08/20/01 What sector has been the star performer as the rest of the U.S. economy has slowed to a crawl? The answer is housing, where July starts were up nearly 3 percent to a near-record 1.67 million. Perhaps that's why President George W. Bush's administration thinks it can get away with slapping a punitive tariff increase of nearly 20 percent on Canadian lumber. After all, in a Senate where securing the votes of lumber-state Democrats and less-than-enthusiastic big-woods Republicans is a presidential priority, what's the tariff's cost - another thousand dollars or so per structure - on the backs of home buyers and other construction interests? That's a curious approach for a president who proclaims his support of both free trade and NAFTA, considering that the softwood lumber tariff is a direct violation of both the spirit of the former and the letter of the latter. For years, some U.S. lumber producers have claimed that Canada unfairly subsidizes its lumber industry, which exports about 18 billion board-feet to this country each year. The facts, according to various independent studies, are that the two countries account costs differently. While Canada makes its forests available to loggers at costs lower than U.S. producers must meet, the U.S. Forest Service spends lots of taxpayer dollars - $126 million in 1998 alone -underwriting its domestic lumber industry. The ultimate cost of this piece of protectionist interference could be far, far greater than Bush has calculated. For openers, the wholesale price of framing lumber shot up 5 percent this week, an anticipated reaction to the constrictive tariff. And that is raising fears among some in the construction industry, who already see a bubble forming in housing prices, that the tariff might be the straw that pierces the market. But of much larger concern should be the anger with which Canadians are receiving the news. Softwood exports form a fourth of British Columbia's export market, and represent tens of thousands of jobs across the country. Canada had some reason to expect Bush to do away with the tariff, as many of his economic advisers had recommended. Instead, he raised it from 15 percent to 19.3 percent. Retaliation is blowing in the northerly winds. Canada controls trillions of cubic feet of natural gas and has the capacity to generate millions of megawatts of electricity craved by U.S. consumers. "They can not demand unfettered access to energy while at the same time slamming the door on our lumber," warned Gordon Wilson, British Columbia minister of forests, in the Seattle Times. Without that Canadian energy, said a former timber company executive in the Vancouver Sun, the United States had best "learn to speak Arabic and read by candlelight." As these words show, if Bush insists on pursuing this ill-considered tariff he may trigger a trade confrontation far larger than he anticipates. He would be well advised to rethink its ramifications before it is finalized in December.