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Neighborhood Trade War

November 05, 1986

For the second time in five months, the United States has imposed tariffs on wood products from Canada, its largest trading partner. In May it was cedar shingles and shakes. In October it was softwood lumber.

In neither case is there proof of unfair practices on the part of Canada, although unfair subsidies for softwood exports are alleged. The only fact that is undisputed is that Canada had been seizing an ever-growing share of the U.S. market--about 73% of cedar shakes and shingles, about 32% of the softwood. That tough competition has been beneficial for American consumers, contributing significantly to the control of inflation and to lower housing costs.

But the competition has not been welcomed by some segments of the U.S. wood-products industry, troubled by declining domestic demand, high costs and reduced exports.

The benefits of the protectionism will be limited. The damage will be extensive, already setting in motion retaliation that seems to have hurt at least as many Americans as may have been helped by the tariffs. A more constructive course would be to accelerate the negotiations already under way to eliminate the barriers that remain to a free-trade association between the two nations. Both nations would benefit from free and open competition.

There is still time to find a better solution for the fight over softwood imports. The verification process is now under way, seeking substantiation of the International Trade Administration's finding of subsidies. To judge by the voluminous preliminary finding, there is little substance to the charge, and good reason to reaffirm the more reasoned contrary finding of 1983.

But the issue has been clouded by what appear to be premature offers from inexperienced new ministers in the provincial government of British Columbia who are suggesting that they might raise the fees charged the lumber companies for access to the province-owned forests. Canada insists that this was not an admission of unfair pricing practices. In the meantime, the 15% tariff will be held in escrow until the end of the year just in case there is no verification of the subsidy allegations.

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