September 15, 2016
SLA: Canadian producers are still losing out
By Montreal Economic Institute
The tariffs applied following the latest deal allowed American producers to register additional net earnings of C$4.63 billion, while Canadian producers and American consumers lost over $2 billion and $6.36 billion respectively.
“The case of softwood lumber is a perfect illustration of how protectionism generally provides benefits for a small number of people while harming a majority,” points out Alexandre Moreau, Public Policy Analyst at the MEI and author of the publication.
American producers have long criticized Canada for lacking a market mechanism that is deemed appropriate for determining the level of royalties paid for timber harvested from public forests. Indeed, to respond to this criticism, Quebec and British Columbia have implemented public auction mechanisms.
“The fact that these two provinces have implemented market mechanisms to determine royalty levels should in theory allow them to avoid the possible imposition of tariffs by the United States,” adds Mr. Moreau.
However, American producers are still calling for the imposition of limits and tariffs on Canadian imports. If no agreement is ratified before October 12, imports from Canada could be subject to tariffs of up to 25%. But even with a new agreement that would impose lower tariffs, American producers would still be the big winners.
“Trade barriers impoverish the entire economy, both in Canada and in the United States,” adds Jasmin Guénette, Vice President of the MEI. “The forestry sector is important for regional economies, and for Canada as a whole. We must therefore embrace free trade, and stop harming consumers and companies.”
The Viewpoint entitled “The Economic Costs of Protectionism: The Case of Softwood Lumber” was prepared by Alexandre Moreau, Public Policy Analyst at the MEI. This publication is available on our website: www.iedm.org
The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.