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About the U.S. Lumber Industry

 

The American wood products and forestry industries are critical elements of the U.S. manufacturing base and state economies. The U.S. sawmills and wood preservation industry employs over 80,000 workers across America. This represents an annual payroll income of close to $3 billion which supports the economies of thousands of communities nationwide. An additional 230,000 American workers directly depend on the sawmills for their employment. There are more than 1,400 manufacturing facilities operating in the sawmill, wood product manufacturing, and wood preservation sectors. Approximately 11 million U.S. private landowners, managing approximately 640 million acres of family-owned timberlands, depend on a strong domestic lumber industry.

The U.S. Lumber Industry Is Highly Competitive

The U.S. softwood lumber industry is under severe strain from unfairly traded imports of lumber from Canada. Canadian lumber producers claim that any disadvantage for U.S. producers is due to inefficiency in the U.S. industry. But, the U.S. lumber industry is highly competitive and is rated among the most efficient lumber industries in the world. Independent studies, including Canadian studies, show that the cost of manufacturing lumber in the United States is comparable to or lower than the cost in Canada. The Canadian industry's only real advantage over the U.S. industry is access to taxpayer-subsidized Canadian timber, which dramatically -- but artificially and unfairly -- lowers Canadian production costs.

The U.S. competitive market naturally discourages inefficiency. Operating in a market, U.S. mills that cannot compete effectively will not survive. In a competitive market, the cost of timber accounts for 60-70% of variable manufacturing costs and will rise as lumber prices rise. In stark contrast, the Canadian government -- which owns virtually all timberland in Canada -- shields Canadian lumber companies from market forces by artificially lowering those companies' wood costs by charging noncompetitive, below market prices for government timber and by distorting private log markets.

Thus, the alleged efficiency advantage of Canadian lumber is based solely on the massive subsidies enjoyed by Canadian lumber manufacturers. The Canadian regulatory system provides special breaks for failing mills and discourages competition through limits on tenure transferability. This regulatory system, along with other systemic economic distortions, helps keep Canadian mills with high cost structures in business, facilitating uneconomic production and unfair competition.

In addition to providing unfair subsidies, Canadian provinces have instituted other 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 levels of timber harvests and lumber production even when the market is oversupplied.

The end-result is that Canadian companies unload excess production into the U.S. market at a cost of thousands of good-paying American jobs. Through the subsidies and policies that induce uneconomical manufacturing, the provinces export production cutbacks, mill closures and job losses to the United States. Efficient U.S. sawmills and workers cannot and should not be expected to pay the price for Canadian provinces' efforts to protect Canadian mills from market realities and competition.

 
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