Early “saber rattling” as the Trump administration prepares to renegotiate the North American Free Trade Agreement (NAFTA) is resulting in continued local spikes in construction prices and uncertainty in the region’s dairy farming and logging industries.
“When you get down to the regional level, you really start to see the unintended consequences,” said John Bartow, executive director of Empire State Forest Products Association.
U.S. Commerce Secretary Wilbur Ross recently announced anti-subsidy duties averaging 20 percent on softwood lumber products imported from Canada.
Most of the lumber used for framing houses locally comes from Canada.
Ross, in justifying the soft wood lumber duties, said Canada already had instituted duties on filtered milk protein products, used in cheese making, imported from the United States.
Lumber and dairy trade between the two countries is relatively minimal, in comparison to other industries, said former U.S. Rep. Bill Owens, D-Plattsburgh, a lawyer who specializes on U.S.-Canada trade and border issues.
“Throw that all into the NAFTA picture and those things are relatively small by comparison. They are almost immaterial,” Owens said.
Yet the two issues, which affect New York and Wisconsin in particular, are at the forefront of debate.
“I think we all expected some saber rattling with out foreign neighbors,” said Bartow, of the Empire State Forest Products Association. “We’re right now advocating for clarity and predictability.”
Prices of lumber imported from Canada had already been climbing, due to weather conditions and uncertainty about the expiration of a long-standing soft wood lumber agreement between the United States and Canada.
Higher lumber prices will likely be the norm, for the foreseeable future.
“It’s (the tariff) going to raise the price of lumber sales in the United States as a reaction to what is perceived as (Canada) dumping lumber here,” Bartow said.
The issue has a double impact on the region’s economy, because many Quebec lumber mills buy logs from New York.
If Canadian lumber mills cut back on production because of higher costs to sell lumber into the United States, loggers in the region would lose virtually their only market for that type of wood, Bartow said.
The uncertainty already is deflating wood prices.
Lower overall wood prices, in one respect, benefits area paper mills, which buy pulp wood to make paper, Bartow said.
But it also threatens the sustainability of the logging industry that supplies the paper mills.
“When there’s an over supply, prices go down,” he said. “That’s good for the mills, not so good for the loggers and haulers.”
In New York, the Canadian tariff on filtered milk protein, at this point, is primarily impacting farms in western New York that sell to two large processors, said Steven Ammerman, a spokesman for New York Farm Bureau.
But long-term, it could deflate milk prices statewide.
“Big picture — now the milk that was going into Canada is going to have to find another home. And any time you increase supply, that is only going to dampen prices. And prices have already been low for the past couple of years,” he said.
“Certainly the White House as well as our congressional delegation and the governor have all been putting pressure on the Canadian government,” Ammerman said.
There’s an interesting wrinkle in the debate, because Canadian interests are split geographically between the two tariff issues, Owens said.
“For Canada, in effect it would be a trade off of benefiting either eastern Canada on dairy or western Canada on soft wood lumber, or the reverse. That creates some real interesting tension on the Canadian side of this equation,” Owens said. “My guess is that when this all gets sorted out that they reach some sort of compromise that maybe reduces the tariffs for Canadian lumber coming in and reduces the tariffs for American dairy products going into Canada, as opposed to one issue winning and the other issue losing.”