North Korea, Trump's Wall, and Lumber Tariffs: Today's News for April 25th

Fox News: 

US citizens held in North Korea see diminished hope of freedom amid rising tensions

North Korea has put another American behind bars, bringing to three the number of U.S. citizens imprisoned in the rogue regime's infamous gulags even as tensions on the peninsula threaten to spiral out of control.

Tony Kim, a 58-year-old Korean-American professor, was detained at Pyongyang International Airport after teaching accounting for a month at Pyongyang University of Science and Technology and working on aid and relief programs to North Korea.

In the past, North Korea has generally quickly released any American citizens it detained – waiting at most for a U.S. official or statesman to come and to personally bail out detainees. But that appears to be changing.

Kim’s arrest makes him the third American citizen currently detained in North Korea, and while activists and U.S. government officials have lobbied for the release of these prisoners, little progress has been made as relations between Washington and Pyongyang deteriorate amid the latter’s continued missile tests and refinement of nuclear weapons.  

Believe it or not, this is a good sign.If North Korea is resorting to kidnapping as a diplomatic ploy, that means they have no better leverage.

That said, before you suggest we should feel sorry for these Americans, remember they voluntarily, and stupidly, entered North Korea. If you walk into the lions' den, what do you expect to find?

In other news....

CNN:

Trump administration full of mixed messages ahead of shutdown fight

Less than a week before the federal government is scheduled to shut down absent a funding bill, the White House's battle lines remain fuzzy.

That's because, in part, President Donald Trump's top aides sent mixed signals over the weekend about how far he would go to secure funding for his border wall, a potential poison pill for the spending fight.

...But one White House official signaled on Monday that the President won't insist on funding for the wall in a spending bill to keep the government running past Friday. The official said that even some funding for "border security" could satisfy the President at this point, with the expectation that wall funding would come in future spending bill negotiations.

"Politics is the art of compromise," the official said.

The new flexibility comes after White House officials sounded as if they were insisting on wall funding as part of any proposal to keep the government from shutting down.

Not funding the wall? This would be a political disaster for Trump, along the lines of George H.W. Bush's "read my lips, no new taxes" promise. Trump already has little credibility when it comes to what he says.

Mind you, I do not personally support the wall, but the political loss for Trump in failing to build it is enormous.

Speaking of walls...

CNN Money:

Trump slaps first tariffs on Canadian lumber

The Trump administration is hitting Canada with stiff tariffs of up to 24% on lumber shipped into the United States.

These are the first tariffs imposed by President Trump, who during his election campaign threatened to use them on imports from both China and Mexico. The decision on Monday is bound to lead to a standoff and could stoke fears of a trade war between the US and Canada, two of the world's largest trade powers.

Commerce Secretary Wilbur Ross said the tariffs, or taxes, announced Monday evening were being imposed after trade talks on dairy products fell through.

...The duties were imposed to create a level playing field for American lumber companies. 

U.S. lumber companies allege Canadian firms are provided with unfair subsidies by the Canadian government.

Canadian exports of softwood lumber to the U.S. were valued at $5.6 billion last year, according to the Commerce Department.

...The lumber dispute isn't new, and it's not the first the U.S. has imposed tariffs on Canadian lumber.

In fact, it goes back decades. U.S. lumber companies started alleging in the 1980s that Canadian companies have been unfairly subsidized by their government. In 2002, the U.S. imposed a 30% tariff on Canadian softwood lumber, which Canadian firms claimed cost 30,000 jobs at the time.

Canada has consistently denied it subsidizes its lumber companies. The World Trade Organization sided with Canada in 2004 and the two sides came to a temporary agreement in 2006, which expired last October.

Government subsidies come in many forms beyond simple monetary support. According to the U.S. Lumber Coalition (and consider the biased source when reading this):

...the cost of [U.S.] timber accounts for 60-70% of variable manufacturing costs and will rise as lumber prices rise. In stark contrast, the Canadian government -- which owns virtually all timberland in Canada -- shields Canadian lumber companies from market forces by artificially lowering those companies' wood costs by charging noncompetitive, below market prices for government timber and by distorting private log markets.

...The Canadian regulatory system provides special breaks for failing mills and discourages competition through limits on tenure transferability. This regulatory system, along with other systemic economic distortions, helps keep Canadian mills with high cost structures in business, facilitating uneconomic production and unfair competition.

In addition to providing unfair subsidies, Canadian provinces have instituted other policies designed to maximize jobs and production in the Canadian industry -- including minimum harvest requirements, domestic processing mandates, and log export restrictions -- resulting in artificially high levels of timber harvests and lumber production even when the market is oversupplied.

Putting aside the Canadian government support for failing lumber companies, what about the question of public timberlands in both countries? According to Forisk Consulting (a lumber industry research firm), from 9% to 14% of U.S. "industrial" timberland (timberland actually being worked) is privately owned, whereas only 7% of ALL Canadian forest area is privately owned.

On the other hand, the U.S. lumber industry isn't suffering nearly as much as they claim to be. According to the Realtors' Land Institute (whose bias is towards encouraging real estate and REIT investing):

...[U.S. lumber] exports to China will continue to increase. The U.S. is currently exporting ten times more wood to China than just seven years ago. Most of the timber being exported to China is coming from the Pacific Northwest.

...imported lumber from Canada will decrease because of the devastation of Canada’s timberlands from the mountain pine beetle. The mountain pine beetle infestation has reduced timber volumes by more than half in western Canada.

Overall, this is a complex issue with a lot of moving parts. While there is no real defining factor here, it is clear that Canada's government is gaming the system. The biggest threat to free trade in the world today is any specific government's hidden influences on their exporting industries.