We’ve heard a lot of disconcerting things about trade from the Trump administration, but in an interview with CNBC Commerce Secretary Wilbur Ross may have just topped them all.
It was about a new tariff the administration just put on Canadian lumber.
“I wouldn’t regard the Canadian situation as being anything like the war with ISIS, but it certainly is a very precise set of tariffs on a very precise set of imports. The reason we’re putting it on is Canada’s forests are owned by the various provinces, and the provinces charge very discounted, we believe, very subsidized prices to the lumbermen, which in turn lets them get a subsidized low price coming into the U.S.,” he said.
He continued (and this is that part that should actually be more upsetting than the ridiculous ISIS reference, emphasis ours): “It simply seems unfair because in the US most of the forests are privately owned and therefore pay full price market rate for the stumpage.”
Oh, now we slap tariffs on countries because something simply “seems” unfair?
That’s not exactly how this works.
The privatization of US timber lands goes all the way back to the Homestead Act of 1862. We chose a private model for that industry, and no other country can make us change it. Canada chose a different model, and no country can make them change it.
And, as Carnegie Mellon economist Lee Branstetter pointed out to Business Insider, this reality has been a sticking point for US and Canada for a while for the same exact reason Ross cited — it seems unfair. But the thing is, according to World Trade Organisation rules, it’s not.
Here’s a relevant passage from the”General Agreement on Tariffs and Trade”, WTO, 1947 and 1994 to explain (via Reuters):
“The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.”
In other words, member nations can’t enact laws that favour domestic industry’s over foreign ones, but this isn’t a law. This is simply the nature of Canada’s logging industry. It seems unfair. But technically it’s not.
E tu Wilbur?
So now we’re doing trade policy based on how things feel? I saw this coming from the head of the White House’s National Trade Council, Peter Navarro, who has said over and over again that he feels our trade with Germany is unfair because it negotiates as a member of the E.U. rather than by itself.
But billionaire investor Ross? Less so. Then again, last month he told CNBC he was “
horrified to learn that billions of dollars of [WTO] duties that have been won after … hard fought cases have never been collected.”
In other words, he’s a newbie here just like everyone else in the White House now — a newbie with a boss looking for wins anywhere they can be found. Maybe that means starting fights out of thin air, maybe it doesn’t.
But that’s sure what it seems like.
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