Thank you for having me.
Good afternoon. My name is Barry Rutenberg. I'm president of Barry Rutenberg Homes, a home building business in Gainesville, Florida. I currently sit on the executive committee and the board of directors for NAHB, the National Association of Home Builders.
I appreciate the opportunity to appear today on behalf of the 225,000 corporate members—not individual members, but corporate member firms—and their more than eight million employees in all 50 states. On behalf of the NAHB, I've been very active in this file since 1994.
NAHB and other U.S. consumers represented by American Consumers for Affordable Homes, ACAH, continue to have serious concerns with this managed trade agreement and the impact it would have on lumber consumers. As a reminder, the home building industry in the U.S. is the largest single consumer of U.S. softwood lumber, accounting for at least 70% of the U.S. consumption.
When I testified before this committee on June 19, I spoke about four key points:
First, abandoning the successful litigation in favour of a negotiated agreement meant forsaking an approach that promised to give a more favourable outcome to the current dispute, by eliminating the duties and refunding 100% of the duties already paid; and additionally, walking away from the litigation would sacrifice key legal precedents that will be critical in any future disputes.
Second, changes in the marketplace would move the price of lumber into the range where high fees and stringent quotas would be triggered under the agreement.
Third, the agreement would not produce stability and predictability in the market but instead would disrupt the market and invite continuing conflict, with the half-billion-dollar giveaway to the U.S. lumber coalition used to underwrite future challenges.
Fourth, the agreement would perpetuate the impression in the U.S. that Canadian lumber is subsidized and unfairly traded, undermining our efforts in the U.S. to overcome that prejudice in our Congress.
In the intervening six weeks since I was here last time, events have underscored each of those four key reasons for rejecting the agreement initialled in Geneva.
With regard to the litigation, the suspension of the extraordinary challenge has blocked the near-certain confirmation of the NAFTA rulings against the subsidy allegations. Since then, two key decisions by the U.S. Court of International Trade have placed ultimate victory within reach. Any legal claim by the U.S. lumber coalition to the duties has been eliminated, and a three-judge panel has unanimously found that the ploy used by the U.S. government to avoid implementing the NAFTA decision on injury was illegal.
When I testified on June 19, the price of lumber had already fallen to $320 per thousand board feet, and I said that the continuing slowdown in the U.S. home building activity implied further price declines. As Mr. Cameron already pointed out, as of last week the price was $302. Under the agreement, the most severe penalties would apply whenever prices are below $315.
Our association has begun to accelerate our current work on alternative sources of supply and materials. The last-minute insertion of a provision allowing the U.S. to terminate the agreement after 23 months is only one indication of the fact that the agreement does not ensure stability and predictability.
The only predictable thing about conditions under the agreement is that the U.S. lumber coalition will seize every opportunity to undermine market forces and harass Canadian producers and provincial governments.
The litigation track is important not only because of the legal precedents being established, but because of the likelihood that the current duties will be terminated and fully refunded. The rulings by NAFTA, the WTO, and the U.S. courts provide valuable support for the efforts by NAHB and other lumber consumers to discredit unfounded allegations that Canadian lumber is unfairly traded and to build support in the U.S. Congress for free trade in lumber.
Those efforts are devastated, however, by an agreement that looks like a confession of Canadian wrongdoing. It's been argued that even if the current duties were eliminated as a result of litigation, the U.S. lumber coalition would just start another case and have new duties imposed—Lumber V.
In 2005, Canadian lumber represented only 33.4% of U.S. consumption, the smallest market share—I repeat, the smallest market share—in more than a decade, as imports from Europe surged. Meanwhile, provincial timber sales, especially in B.C., have become more transparently based on market value.
Along with the legal precedents from the current cases, those circumstances would make it much more difficult for the U.S. lumber coalition to make a credible case for injury or subsidy. If you have market transparency and a declining market share, they're hard to argue against.
In conclusion, since I last testified in June, circumstances have made the serious faults contained in a managed trade agreement even clearer to NAHB--and, I hope, to Canadian industry and provincial governments as well.
I thank you for this opportunity to appear today and share the views of the National Association of Home Builders with you.