Thursday, April 27, 2017

Tough On . . . Canada?

National Review Online
Wednesday, April 26, 2017

Donald Trump wants to take the Canadians to the woodshed.

The Trump administration has announced that it intends to impose a silly and potentially destructive retaliatory tariff on imports of some Canadian timber, which U.S. timber companies insist — contrary to the facts — is unfairly subsidized by the Canadian government.

This is, unhappily, as familiar as it is foolish.

The U.S.–Canada “soft”-wood dispute (“soft” wood means wood from conifer trees) is very old, and it stems from the fact that timber is harvested differently in the two countries: In the United States, most timber is harvested on price land, where the “stumpage” price is relatively high; in Canada, most timber comes from Crown (i.e., public) lands, where costs are determined through an auction system, meaning that they reflect market rates. Canada is a big place with lots of trees and a population the size of California’s — and, as it turns out, it is a little less expensive to harvest wood in that context.

Wilbur Ross, the secretary of commerce, says that this dispute shows that the North American Free Trade Agreement is not working as it should. What it has shown is in fact the opposite: The question of Canadian timber subsidies has been challenged by the United States under both NAFTA and the World Trade Organization, and in both cases there were credible, fair-minded studies that concluded the U.S. complaints were without merit. That is exactly how these trade accords are supposed to work — but, sometimes, U.S. business interests will lose. And, sometimes, they deserve to.

The Trump administration is not the first to go down this road. The George W. Bush administration did the same thing, and it also presaged Trump’s fixation on steel imports. That did not start a destructive trade war, as critics feared, but neither did it achieve anything of real substance to benefit the U.S. economy. It is ordinary populist nonsense.

But the thing about populism is, it is popular.

Unless you buy a lot of wood. If you are a homebuilder, then the Trump administration is simply going out of its way to make your raw materials more expensive, taking the wood to your bottom line. Trump used to sympathize with those who put up buildings. But there are nefarious Canadians to be policed.

If this is simply Trump revisiting dumb ideas from previous administrations, then that is unfortunate but not unexpected. If this is the opening salvo in a campaign against NAFTA and the WTO, then that is another matter entirely, and a much more serious one. For the moment, there is not much reason to believe that this is much more than shallow symbolism in the service of populist rhetoric.

But shallow symbolism is not without costs. Tariffs are not a tax on foreigners. They are a tax on American consumers and, in the case of raw materials such as timber, a tax on American producers, too. They are a tax on American workers and a brake on the productivity of those workers. How many construction jobs would the Trump administration be willing to sacrifice in the cause of looking tough on . . . Canada?

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