Summer destroying Commentary of death number 1

http://www.forbes.com/markets/feeds/afx/2007/08/08/afx3999541.html

The problem in this article is that the lumber companies in Canada are being taxed and therefore being forced to be less competitive relative to the US companies. In a truly free market, the US companies would have long ago been out competed by the cheaper Canadian lumber. This is obviously indicated in the article by it saying that the US suffers twice as many layoffs which shows that the US lumber companies are having to cut costs in order to remain competitive. However, the American government understandably wishes to protect its lumber market which is where the trade tariffs come in, but the tariffs would violate the NAFTA, so the US government created the SLA where Canada would control the tariffs but would control them under guidelines that were agreed upon by both the US and Canada. In this article the US claims that Canada is allowing too much lumber to be exported to the US for too low of a price and is therefore out competing the US lumber harvesters. This claim would violate the Softwood Lumber Agreement which says that the Canadian provinces that export lumber to the US must increase tariffs on lumber exports when lumber prices are low so that the US lumber firms can stay competitive with the Canadian firms. The US also claims that the taxes that Canada enforces are too small and that Canada is also circumventing the SLA by subsidizing the Canadian lumber firms when taxes are increased due to low prices therefore canceling out the effect of the tax.

In order for this problem to be resolved, the US lumber companies need to become more competitive which means that more lumber needs to be available because if there are more trees available to be harvested, then the cost of lumber will decrease. Therefore, instead of being whiney and accusing the Canadian government of not following a trade agreement that is detrimental to their economy anyways, the US government should instead focus more on replenishing their forests because not only would this aid the US lumber companies, but also would provide positive externalities to the public. By allowing Canada to specialize on lumber production and specializing upon a different industry as well would also be in not only the US’ best interests but would also increase the allocative efficiency of the US because Canada is obviously better at producing lumber. Therefore the US could concentrate on a different export and increase its GDP.