US Lumber Producers Push for New Trade Remedy Probes as Canada Talks Continue

1 December 2016

A coalition of US lumber producers has petitioned Washington officials to examine allegedly unfair subsidies being provided to Canadian softwood lumber producers, along with claims that the timber is being dumped on the US market.

The announcement, confirmed late last week, comes less than one month after a “standstill” on such investigations had lapsed. This US-based coalition says that trade remedies are needed to help address “the injury suffered by US industry and workers by reason of unfairly-traded Canadian softwood lumber imports.”

“In the immediate aftermath of the expiration of the 2006-2015 US-Canada Softwood Lumber Trade Agreement, Canadian imports surged from 29.5 percent of US total consumption in the third quarter of 2015 to 33.1 percent in the fourth quarter of the same year and to 34.1 percent so far in 2016,” the US industry group claims.

According to the US Lumber Coalition, their group of petitioners includes producers responsible for nearly 70 percent of US-made lumber, along with timberland owners and carpenter unions.

US lumber producers have long argued that Canadian stumpage fees are set at artificially low levels, to the point of actually serving as a subsidy for Canadian producers. Stumpage fees are paid to landowners to harvest timber. In Canada’s case, the land is government-owned, known otherwise as “crown land,” with the authorities setting the fee levels.

The vast majority of these lands are owned by individual Canadian provinces, with a small percentage owned either by the federal government or privately. By comparison, over half of US timberland is privately owned, with just over 40 percent owned by national or subnational government, according to a 2016 report by the Congressional Research Service. Prices in the latter are often the result of auctions.

US Commerce Department officials must now confirm within a 20-day window whether they will pursue such investigations in response to the petition. Canadian officials say they intend to hold consultations with those authorities during that timeframe.

Canadian officials, industry respond

Industry groups and government officials in Canada, for their part, have pledged to defend their interests, citing the results of past international trade disputes as examples in their favour – while cautioning that such disputes are far more costly than a negotiated outcome and could also harm livelihoods in rural communities.

“‎‎Our softwood lumber producers and workers have never been found in the wrong; international bodies have always sided with our industry in the past,” said Alex Lawrence, a spokesperson for Canadian Trade Minister Chrystia Freeland, just days before the petition was announced.

“Forestry is a vital economic driver supporting over 140 rural communities. While our preference remains free trade, a managed-trade agreement is preferable to litigation, which is not only costly for lumber producers and the federal and provincial governments, but also creates increased market uncertainty, harming producers on both sides of the border, and increases the costs of lumber to US consumers,” said British Columbia’s Forests, Lands, and Natural Resource Operations Minister Steve Thomson on 25 November.

Within Canada, the province that exports the most softwood lumber to its southern neighbour is British Columbia, which credits the industry as a major source of local jobs.

“With the US economy growing, and housing and construction starts on the rise, the US lumber industry alone cannot meet the demand of its domestic consumers,” said Susan Yurkovich, President of the British Columbia Lumber Trade Council. “Unfortunately this new action by the US lumber lobby will only serve to limit access to Canadian lumber products, driving up prices for US consumers.”

Past dispute, SLA lapse

The 2006 Softwood Lumber Agreement (SLA) between the two North American economies effectively put an end to several decades’ worth of trade disputes, including cases that were brought to the World Trade Organization and under the North American Free Trade Agreement (NAFTA).

The initial seven-year SLA was extended until October 2015, when it expired. However, the accord also included a one-year “standstill” on launching any new anti-dumping or countervailing duty investigations should the SLA lapse. (See Bridges Weekly, 15 October 2015)

Before the SLA was reached, US authorities had collected US$5.3 billion in anti-dumping and countervailing duties on imported Canadian lumber. They later returned over US$4 billion as part of the 2006 accord, with the money that was kept in the United States used partly to help support sustainable forest management practices, along with helping communities whose livelihoods come primarily from the timber industry, among other initiatives.

Talks between US and Canadian trade officials for a new accord have been underway for several months, with officials reporting in June that “significant differences” remained, while confirming a series of shared goals for a future deal. (See Bridges Weekly, 23 June 2016)

In October, officials confirmed that they had not yet reached an agreed outcome, despite the expiry of the standstill, while pledging to continue talks.

“In those negotiations, we will work to meet the mandate agreed to by President [Barack] Obama and Prime Minister [Justin] Trudeau when they met in Ottawa in June – a new agreement that is designed to maintain Canadian exports at or below an agreed upon US market share to be negotiated, with the stability, consistency, and flexibility necessary to achieve the confidence of both industries,” said Canadian Trade Minister Chrystia Freeland and US Trade Representative Michael Froman at the time.

ICTSD reporting; “U.S. Lumber Coalition files petition, restarting Canada-U.S. softwood lumber hostilities,” CBC NEWS, 25 November 2016.

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