Is a 'Perfect Storm' Brewing for Northern Border CMs?

US Trade Representative Meets with Canadian Lumber Executives

Canadian lumber and government officials told the U.S. trade representative that any new softwood lumber agreement must reflect the differences in forestry regimes across the country.

The chief executives of 10 lumber producers and Canadian International Trade Minister Chrystia Freeland met Wednesday in Toronto with Michael Froman.

Resolute CEO Richard Garneau declined to provide details of what was discussed but said he conveyed that changes to Quebec's forestry regime means the province should have free and open access to the U.S. market, said spokesman Seth Kursman.

The Canadian government says it continues to negotiate and explore all possible approaches.

Attending the meeting also were the chief executives of Canfor, West Fraser, Interfor, Tembec, J.D. Irving, EACOM, Tolko, MLTC Industrial Investments and Kalesnikoff Lumber.

The meeting took place a week before the expiry of the 2006 softwood lumber agreement and a one-year standstill period on Oct. 12 that is expected to push the U.S. to begin the process of imposing tariffs on Canadian lumber imports.

U.S. producers could then start petitioning Washington to impose new duties on Canadian softwood in about six months that could result in mill closures and layoffs in Canada.

Few industry observers expect the Americans will budge from their quest for quotas to reduce Canada's share of the U.S. softwood lumber market.

Canada has traditionally accounted for about one-third of the U.S. lumber market, but the U.S. is rumoured to want that to gradually decrease to 22 per cent, Garneau said in a recent interview.

Canadian Government Concerned over Housing Market

The Canadian government is closely monitoring the country's housing market, which some analysts fear is overheated, Prime Minister Justin Trudeau said on Friday.

"It's something that we are never finished doing, we continue to work very closely with all partners to ensure that Canadians have confidence in their homes and in the future," Trudeau said during a news conference before a Reuters Newsmaker event in Toronto.

The federal Liberal government, which took power late last year, said on Monday it would tighten mortgage rules and close a tax loophole on home sales, seeking to rein in both foreign investors and indebted consumers.

"I think the important messages is one of stability and responsible action that will ensure that Canadians can continue to have confidence in their investments in their homes," Trudeau said. 

Editor’s Note: Based on the news below, if the softwood lumber tariffs on Canadian imports end up coinciding with a Canadian housing market slump, component manufacturers (CM) in Canada will be strongly motivated to sell structural building products into the U.S.  An uneven currency exchange, which make Canadian products even cheaper, will only exacerbate this situation.  This should cause concern for CMs in northern border states, who should continue to monitor these developments closely, and even consider opportunities to control their own destinies. One thing to consider: the strong U.S. dollar only helps CMs who may want to expand their operations into Canada.

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