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Western Canada Alliance of Wall and Ceiling Contractors' Open Letter to Ministers Morneau and Freeland

Drywall Contractors Are in Solidarity with the Softwood Lumber Industry: Get the Unresolved Canada-U.S. Gypsum Issue Off the Softwood Lumber and NAFTA Negotiating Tables

CALGARY, ALBERTA and VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 07/17/17 -- The Western Canada Alliance of Wall and Ceiling Contractors ("Alliance") today released an open letter sent to Ministers Bill Morneau and Chrystia Freeland imploring them to resolve the issue of the crippling anti-dumping tariffs on U.S. imports of gypsum (aka drywall) in Western Canada.

The Alliance letter explains why it feels abandoned by the Trudeau government and frustrated with being forced to absorb a massive 43 per cent anti-dumping tariff on U.S. drywall. It requests the government resolve the gypsum issue not only because it benefits Western Canadian consumers and the livelihoods of its members but because it is essential to negotiating a favourable agreement for the Canadian softwood lumber industry and advancing Canada's position in the NAFTA negotiations. The letter comes as the U.S. government today released their list of negotiating objectives for NAFTA modernization.

The letter further outlines:


--  How the government's misguided "bargaining chip" trade negotiation
    strategy to ignore the implementation of a duty holiday on its own
    people, leaves the issue unresolved, and creates a roadblock in softwood
    lumber negotiations with the U.S. 
--  This issue now has the attention of the U.S. government. The Alliance
    testified before the U.S. Trade Representative (USTR) at its June 2017
    NAFTA consultation hearings in Washington. The panel was alarmed and
    surprised by the hypocrisy of the Canadian government when the Alliance
    explained it had been harmed by duties imposed on U.S. imported gypsum
    board. Our government was offering the same argument made against
    Canadian imports into the U.S. of softwood lumber and the harm on U.S.
    homebuilders. 
--  From the perspective of the Trump Administration, Canada has now imposed
    extreme duties on U.S. gypsum manufacturers, created a monopoly for a
    French-owned company, and now other foreign countries are entering the
    Canadian market to fill the void left by the U.S. 
--  The contractors' financial situation is worse today than it was in Fall
    2016. Anti-dumping duties have devastated the economics of the
    industry's standard, fixed-price contracts. Over the last six months,
    the Alliance estimates Western Canada's 100 largest commercial
    drywallers (combined) have been forced to absorb over $20 million in
    unanticipated duty costs. Further imperiling their financial situation
    is a 6 per cent increase in U.S. drywall pricing announced on July 6.  
--  The Alliance's appeal to the Ministers to implement the duty holiday
    recommended by the Canadian International Trade Tribunal (CITT) on U.S.-
    imported gypsum into Western Canada. This will allow for the following: 
    --  the contractors can clear out their fixed-price contracts during the
        height of this summer's building season; 
    --  allows the government to take this issue off the softwood lumber and
        NAFTA negotiation tables; and 
    --  is a win-win for both the Western Canadian drywall contractors and
        the Canadian softwood lumber industry. 

                                                                            
Open Letter:                                                                
                                                                            
The Honourable Bill Morneau, P.C., M.P.                                     
Minister of Finance                                                         
Department of Finance Canada                                                
90 Elgin Street                                                             
Ottawa, ON                                                                  
K1A 0G5                                                                     
                                                                            
The Honourable Chrystia Freeland, P.C., M.P.                                
Minister of Foreign Affairs                                                 
House of Commons                                                            
Ottawa, ON                                                                  
K1A 0A6                                                                     

July 17, 2017

Dear Minister Morneau and Minister Freeland:

As Canada closes its NAFTA modernization consultation period, the United States releases its list of negotiating objectives for NAFTA, and our two countries seek to resolve the perennial softwood lumber dispute, we ask you to reconsider the predicament of the construction industry in Western Canada. This may derail all of Canada's interests in its trade discussions with the U.S.

The Canadian International Trade Tribunal (CITT) ruled in February that Canadian duties of 200 per cent on imports of U.S. made gypsum (drywall) imposed by the Canadian Border Services Agency (CBSA) in September 2016 were against the public interest. The CITT reviewed the duties, reduced them to 43 per cent and ordered a duty holiday that would expire at the end of July (i.e. this building season). This duty holiday would allow Canada's construction community to work through fixed priced and long-term contracts with U.S. suppliers. This would alleviate the damage caused to Western Canadian consumers.

We, The Western Canada Alliance of Wall and Ceiling Contractors (the "Alliance") feel unsupported by our federal government given your refusal to enact the duty holiday. As a result, over the last six months we estimate that Western Canada's 100 largest commercial drywallers have been forced to absorb over $20 million in unanticipated duties. Despite our repeated requests that you enact our duty holiday nothing has changed.

To compound the issue, U.S. manufactured drywall prices have increased in Western Canada by six per cent as of July 6. The entire cross border supply chain is reacting to the heavier duties on gypsum, now competing with the monopoly the Trudeau Government has granted to a French-owned company manufacturing in Canada. These higher costs will ultimately have to be passed on to the Canadian consumer. And we know this issue will be moving to Eastern Canada in the coming months.

Additionally, the issue of duties imposed on U.S. imports of gypsum board is being used in what we believe is a misguided "bargaining chip" strategy in Canada's softwood lumber negotiations and NAFTA modernization. This approach threatens the possibility of reaching favourable results in each of these proceedings. Specifically, in the softwood lumber dispute, the Canadian government argues that duties on softwood lumber imports into the U.S. will hurt U.S. homebuilders. The hypocrisy of this argument is apparent when it is Canadian contractors who have been blind-sided by their own government with heavier duties found by the CITT to be against the Canadian public interest.

This issue now has the attention of the U.S. government. We recently presented our concerns to the U.S. Trade Representative at its NAFTA modernization consultation hearings in Washington. We never wanted to be caught in these larger trade discussions, nor have to appeal to the U.S. government to bring awareness to our distress - it was the repeated failure of the Government of Canada to award the recommended relief that has caused us to pursue our only remaining recourse. The panel was clearly alarmed during the hearing and in follow-up meetings to learn that we have been harmed by trade duties imposed by our own government on our purchases of U.S. exported gypsum. We explained that our predicament is the same as Canada's argument against U.S. softwood lumber duties, which purportedly harm U.S. homebuilders. Of greater concern to U.S. interests, is the issue of alternate drywall supply now coming into Canada from foreign countries such as Mexico. From the perspective of the Trump Administration, Canada imposed extreme duties on U.S. gypsum manufacturers, created a monopoly for a French-owned company manufacturing in Canada, and now other foreign countries are entering the Canadian market to fill the void left by the U.S.

We wish to be clear: we stand in solidarity with the softwood lumber industry. It is important for Canadians to appreciate that the government's current trade negotiation strategy abandoning the duty holiday recommended by the CITT to protect the Canadian public leaves this issue unresolved and Canada's trade position vulnerable. We are simply asking you to impose the recommended relief that, in turn, will assist our fellow Canadians in the softwood lumber and NAFTA negotiations.

With regard to the NAFTA, the failure to implement this public interest relief significantly weakens Canada's negotiating position on dispute resolution issues such as Chapter 19. Chapter 19 is needed to avoid the unfairness of domestic U.S. trade tribunals. The U.S. has noted that Canada's claims are questionable. This is because Canadian contractors cannot get relief from their own government even where Canadian trade tribunals have recognized the imposition of duties is against the Canadian public interest.

Last week when our Prime Minister addressed U.S. governors in Rhode Island, he urged them to stand with Canada ahead of NAFTA renegotiation talks for the sake of both economies. He said protectionism hurts "the very workers these measures are normally intended to protect." He added, "once we travel down that road, it can quickly become a cycle of tit-for-tat, a race to the bottom, where all sides lose."

"Gypsum for Softwood" is that very kind of hypocrisy and vicious cycle of protectionism. Implicit in that statement is that policymakers such as you should make the straightforward decisions when they are as clear as those presented to you in this matter. Resolve our issue as recommended by the Canadian International Trade Tribunal and move on to serving the interests of Canada in softwood lumber and NAFTA negotiations.

This is an open letter that will be circulated to the media.

Respectfully,

Dan Ujczo,

Counsel to The Western Canada Alliance of Wall and Ceiling Contractors.

About The Western Canada Alliance of Wall and Ceiling Contractors

The Alliance membership includes small and medium size businesses in Western Canada who are in the business of acquiring and installing drywall in various commercial, institutional and residential applications. Alliance members employ installers and tradespeople in the construction sector across Western Canada. Find the Alliance online on Facebook - @westerncanadaallianceofwallandceilingcontractors or on Twitter - @wcawcc.

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