Winners and losers in the Ganadian trade agreement

A FTER 15 years of accusations, ll,threas and temporary tariffs, the U.S. and Canadian governments finally seem on the verge of signing a fiveyear deal to cap softwood imports. Building Products Digest asked a wide range of industry experts to identify who will be affected by the pact - and how:

Mack Singleton (New South Inc., Conway, S.C.) Chairman Coalition for Fair Lumber Imports

"The U.S. lumber industry and its customers can expect greater stability during the five-year agreement, especially since the Administration is committed to taking immediate trade action through Section 301 if the agreement is violated. If the levels of commitments provided in the agreement are not met, the Administration has committed to the industry to take prompt and effective U.S. enforcement actions to ensure that subsidized imports return to the levels contemplated by the agreement."

Randy Smith (Walnut Creek, Ca., home builder) President National Association of Home Builders Washington, D.C.

"When the tentative agreement was announced in February, we asked President Clinton to re-examine the agreement with U.S. home buyers, our economy and our nation's resources in mind. That wasn't done. This agreement was reached with the benefit of one U.S. party in mind - America's large lumber producers. They will benefit as Canadian imports are limited and the price for domestic lumber rises."

Gary Donnelly President National Lumber & Building Material Dealers Association Washington, D.C.

"It's really anybody's guess, although I suppose any time you artificially restrict supply there is going to be upward pressure on price. U.S. producers should prosper from the agreement as the price increases flow to their bottom lines. After all. that is what this whole countervailing duty issue is primarily about, profits for U.S. producers."

paul F. Ehinger President

Paul F. Ehinger & Associates Eugene, Or.

"U.S. softwood lumber consump tion varies widely, with peaks and valleys, and Canadian imports have behaved similarly:

U.S. Consumption (million M.ft.)

1987 50,557 (all time high) l99l 42,225 t994 48,103 t987 14,565 l99l I1,650 t994

Canadian imports (million bd.ft.)

16,M2 ft. to the quota in a given year. Prices are at that level today.

"The agreement permis imports of 14,700 million M. ft. without penalty from the four key producing provinces: British Columbia, Alberta, Ontario, Quebec. The remainder of the provinces have no restriction and a good estimate of their annual shipments to the U.S. is 925 million bd. ft. This gives Canada a regular quota of 15.625 billion M. ft.

"This is higher than their level of exports to the United States with the exception of 1994 and 1995. Canada exceeded this level bv 437 million bd. ft. in 1994 and bv an estimated 1,315 million bd. ft. in 1995. An additional 92 million bd. ft. per quarter can be shipped if the market attains certain price levels which could add as much as 368 rnillion M.

"There are other factors that can offset the Canadian lumber limit if necessary, such as (1) southern production, which declined 300 million board feet last year and may return to earlier levels, and if (2) western production continues to decline. If the U.S. Forest Service in the West met its minimum budgeted timber goals, this would add to the supply.

"Foreign lumber exports from the U.S. have declined steadily since 1989 from 3.318 down to 2.187 billion bd. ft. in 1994 and predicted to go below 2 billion in 1996. Imports from other countries besides Canada have grown from 102 million in 1989 to 730 million bd. ft. in 1994.

"The Canadian lumber along with other sources has simply filled the void left by the decline in federal timber sales in the West. If the loss of some Canadian lumber occurs, the void will be filled from somewhere else, although the adjustment period may cost the consumer for a short period of time."

Robert H. Hunt President Western Wood Products Association Portland, Or.

"The overall objective of the agreement, from the U.S. side was to remove government subsidization of the Canadian product from the sales equation and create a level playing field in the marketplace. As proposed, the agreement should support this opportunity for western sawmills to reclaim some lost markets. They certainly have the efficient production facilities to do so.

"However, as I answer this question, not all the details of the trade agreement have been finalized, especially the essential enforcement/monitoring aspects, which provide the teeth. This is key to making the agreement viable over five years."

ed to the administration of volume allocations and monitoring. Ultimately, the American consumers will face higher prices for their lumber. The U.S. lumber industry is unable to meet market demand in the U.S. and Canadian lumber rvill be required to fill the gap. Until the issue of volume

Story at a Glance

Proposed five-year pact limiting Canadian softwood lumber imports: who it helps, harms ... will it last?

allocation is resolved on the Canadian side, it is difficult to fully assess all the ramifications the agreement will have on softwood lumber shipments to the U.S. The Canadian lumber industry has always been able to respond to markets and to maintain competitiveness and there is no doubt that it will do so again in spite of all roadblocks erected by the American industry."

Leonard Guss President

Leonard Guss Associates. Inc. Woodinville. Wa.

"The obvious and desired effect is to raise the prices of all softwood lumber since otherwise there is no reason for a ceiling on Canadian supplies. I do not believe there will be a significant increase in the volume of U.S. lumber. since we are at the same time making strenuous and successful efforts to limit timber supply from both public and private forests.

for millwork; OSB is replacing plywood; engineered wood products such as LVL, glulams, wood I-joists and Parallam are replacing their softwood equivalents. So we are using less wood per function.

"Secondly, commodity lumber typically undergoes vast swings in price based on supply and demand. Swings of 5OVo or more routinely occur every few years. So the price rise will often be obscured by such cyclical swings.

"Finally, wood costs are becoming a decreasing proportion of housing costs as land costs soar due to regulation. The net impact on a median price house might be only $1,000 to $3,000, which would be lost in other price shifts due to demand and regulation.

"In sum, you won't notice the impact, but a few U.S. mills will."

Bob Weiglein Executive Vice President Wood Moulding & Millwork Producers Association Woodland, Ca.

"Our members do not expect the five-year agreement with Canada on softwood lumber shipments to really have much of an impact on our industry. The supplies that our members use as a raw material source will still be available. The reduction in amounts will be minimal.

"The real benefit from this agreement will be for sawmills in the U.S., who ars going head-to-head on species produced in Canada, which at times flood the U.S. market creating havoc in the marketplace. Our hat's off to Mack Singleton for his efforts in helping to set up this agreement."

R.H. Rivard Executive Director Canadian Lumbermen' s Association Ottawa, Ontario, Canada

"There is no question that the agreement will increase cost to the industry on account of the penalties to be imposed on exports in excess of 14.7 billion bd. ft. and the costs relat-

"Most lumber mills outside of the U.S. South are already operating well below capacity; the limit is timber, not demand or physical plant capacity. In fact, if the Sierra Club has its way in the suggestion that all logging cease in federal forests we will see a great increase in softwood lumber prices and probably a lifting of the Canadian agreement to supply U.S. needs.

"However, you should be aware of some countervailing forces. First, the use of reconstituted materials has tempered softwood lumber price rises from any source. MDF is replacing molding and shop grades of lumber

Alan J. Campbell President National Wood Window & Door Association Des Plaines, Il.

"On the surface, any effort to restrict supply (and control competition) could result in a tighter market and possibly increased prices.

"However, the reality is that most Canadian softwood lumber shipments currently are dimensional lumber. Within our industry, we rely much more heavily on shop lumber and the expectation is that there will not be a measurable impact on shop lumber supply as result of this action."