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Friday, September 24, 2004

One Reason Why Houses are So Expensive

I'm spending a few days in Canada and as usual, I'm hearing about the dispute over U.S. tariffs on Canadian softwood lumber imports. The issue doesn't get much coverage in the U.S.: a Google news search shows that U.S. papers just reprint the wire services story, if they run anything at all. But there's tons of coverage in Canada, where it wins us no friends.

The facts are pretty simple: the U.S. imports about a third of its lumber from Canada and imposes a 27% tariff, arguing that Canada subsidizes its lumber industry by selling trees from government owned land too cheaply. The tariffs were imposed by the Bush administration in 2001, hoping to win some votes from the lumberjacks and sawmill owners, I suppose. Before that, the Clinton administration imposed quotas on Canadian lumber. The US has lost a series of NAFTA and WTO cases, most recently last month, but continues to appeal, dragging out the issue and keeping the tariffs in place.

While this isn't the most important issue facing us, it's not trivial either. There's about $5000-7000 of lumber in a typical house, so homebuilding industry estimates that these tariffs increase the cost of a new house by $1000 seem pretty reasonable.


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