Montreal, September 15, 2016 – The tariff barriers imposed on Canadian softwood lumber cost American consumers a fortune, all while enriching a limited group of producers, shows a Viewpoint published today by the Montreal Economic Institute (MEI), a Canadian public policy research center.
Since the entry into force of the latest Softwood Lumber Agreement between Canada and the United States, tariffs at the border have reduced Canadian exports and have allowed American producers to increase their market shares. The latter thus registered additional net earnings of US$4.31 billion between 2006 and 2015.
American consumers, however, are the big losers of this deal. Since the Canadian lumber targeted by the Agreement is used primarily for residential construction on the American market, American consumers have had to get their wood from an alternative and more expensive source.
“They are rarely mentioned in this debate, but American consumers also pay the price of protectionist measures adopted by their government,” says Alexandre Moreau, Public Policy Analyst at the MEI and author of the publication. “Between 2006 and 2015, they spent US$5.92 billion more than they would have under free trade.”
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, highlights the Viewpoint.
“Trade barriers impoverish the entire economy, both in Canada and in the United States,” adds Jasmin Guénette, Vice President of the MEI. “Even if workers associated with the American softwood lumber industry benefit from this situation, many millions of consumers are penalized. In the end, the losses suffered by consumers will be much greater than the gains enjoyed by softwood lumber producers.”
Note that 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%.
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.
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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.
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