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Canadian Lumber Is Heavily Subsidized and Unfairly Displaces U.S. Manufacturing

One effect of Canada's lumber subsidies on U.S. business.

Canadian provincial governments maintain timber-sale programs designed to sustain artificially high employment and production levels in their lumber industry. The provinces have been providing massive subsidies to the Canadian lumber industry by under-pricing government timber (a Canadian taxpayer resource worth billions of dollars that virtually is being given away to a single industry), and have maintained policies which effectively prevent Canadian lumber companies from adjusting their production levels based on actual demand.

The subsidies programs are possible because the Canadian provinces own the vast bulk of merchantable timber in Canada. Managing these forests allows the provinces to set prices for public timber far below market value, thus lowering production costs for Canadian lumber companies. The government-set price of Canadian timber is only a fraction of the market-determined price of identical timber in U.S. border regions.

In addition to providing subsidies, Canadian provinces have instituted policies designed to maximize jobs and production in the Canadian industry - including minimum harvest requirements, domestic processing mandates, and log export restrictions - resulting in artificially high timber harvesting and lumber production even when the market is oversupplied.

Canadian companies unload their excess production into the U.S. market at a cost of thousands of good-paying American jobs. Through subsidies and policies that induce uneconomical manufacturing, the provinces export production cutbacks, mill closures and job losses to the United States. When demand falls and lumber prices decline, U.S. companies cut back on operations at a higher proportional rate than Canadian companies, because the provinces keep them at artificially high production levels through low timber costs. The market share of unfairly traded Canadian imports has increased steadily for three decades, checked only when trade restraints offset the subsidies and dumping.

U.S. workers, industry, and landowners should not be forced to pay the enormous costs of this Canadian social policy. In short, Canada's social programs must stop at the border.

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