Canada crossing fine line between fair and unfair trade

As former senators representing Montana and New Hampshire, both of which border Canada, we experienced firsthand the value in a close relationship with America’s northern neighbor as a friend, strategic ally and trading partner.

While the U.S. and Canada have had policy disagreements about nuanced issues, our strong relationship means that, generally, we work them out. This includes one of today’s most talked about topics: free trade. To work appropriately, free trade must also be fair trade. Otherwise, one side of the trading partnership loses drastically. 

{mosads}There is a very fine line between fair and unfair trade, and finding a balance between the two can take some work. For example, Canada’s domestic policy is to subsidize its lumber producers, thus they produce softwood lumber materials below market prices.

This becomes problematic when Canada exports its lumber to the global market, as it can leverage government subsidies to sell its lumber cheaper than other countries (like the United States), that instead rely on prevailing market rates to price their goods. This is simply unfair and gives Canada an artificial advantage over other producers.

To be clear, we are not advocating for special privileges or advantages for American companies. We firmly believe trade policy should exist to ensure that all parties — domestic and international — are competing on a level playing field. This fosters an economic system where companies thrive because of their own ingenuity, efficiency and skill.

In the case of softwood lumber, Canadian federal and provincial governments subsidize their lumber operations, sheltering producers from market lows and giving advantages during market highs.

When the market is good, Canadian producers enjoy bigger profits and the increased ability to invest for the future. When markets are down, they face significantly less pressure to cut production or reduce labor hours.

Canada maintains these advantages over American producers not because of more efficient lumber production or superior technologies, but because of the subsidies they receive from their government.

Our experience as border-state senators has enabled us to witness firsthand how this dynamic causes real harm to American workers, companies and communities. We’ve seen how a very innovative and competitive U.S. industry thrives in a free market, but when a foreign government subsidizes its businesses, U.S. workers and business owners lose their jobs and livelihoods.

To ensure that communities across the U.S. — from Missoula to Manchester — can compete fairly on the global stage, action is needed so that trade laws and agreements are properly enforced to fully address unfair practices. The U.S. must utilize tariffs or trade agreements to ensure everyone is using the same rulebook, allowing for an equal chance at success. 

Investigations conducted this year by the U.S. Department of Commerce determined that the Canadian government subsidizes softwood lumber production and that Canadian exporters sell softwood lumber at less than fair value.

Earlier this year, the U.S. International Trade Commission made a preliminary finding that Canadian imports injure the American industry and will make a final determination this month. These findings are consistent with the United States’ obligations under World Trade Organization rules. 

We believe the tariff rates determined by the government are fair and simply offset the advantages our friends up north have enjoyed for years. 

Through dozens of trips across the country, it’s clear that the U.S. lumber industry’s opportunity to compete is hampered only by its inability to match artificially low prices while maintaining fair wages for the over 350,000 individuals employed by this important U.S. industry. 

Subsidized Canadian lumber imports are a violation of our trade laws. We were encouraged by the Department of Commerce and International Trade Commission’s enforcement actions.

Through their actions, we’re one step closer to restoring fair trade and ensuring that the best businesses survive because of their ingenuity and hard work, not government subsidies.

Sen. Max Baucus (D-Mont.) served in the Senate from 1978-2014 and was the ambassador to China under President Obama. Sen. Judd Gregg (R-N.H.) served in the Senate from 1992-2010 and was the state’s governor in 1988.