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Deal in the Works? Dispute Between U.S. & Canada Lumbers On…

After the U.S. instituted a temporary 20 percent tariff on imported lumber from Canada, the two sides are working toward a more permanent deal…

Kelly Knight Craft Canada

A long simmering dispute over lumber imports from Canada to the United States is beginning to boil over.

At the heart of the dispute are two issues: stumpage rates (the amount payable on Canadian government-owned lands for harvested lumber) and log export restrictions (a benefit given to Canadian lumber producers by the Canadian government limiting the export of logs).

Log export restrictions are particularly a problem in British Columbia:

The U.S. has also complained about rules that limit the export of raw logs in the west-coast province of British Columbia, where most Canadian softwood lumber is located. The regulations artificially suppress the price of Canadian lumber, U.S. producers say.

That negative impact on the U.S. lumber industry, triggered by Canadian restrictions, is why the U.S. Commerce Department slapped a 20 percent tariff on imported Canadian wood. To offset that advantage in the market, the U.S. has instituted a temporary tariff:

Subject to certain rules and limitations, where producers in a country are being injured by low-priced goods from another country that are made possible by the provision of subsidies in the country of export, those producers may initiate proceedings to have countervailing duties put in place. These duties are intended to offset (or countervail) the amount of the subsidies that are causing harm.

Countervailing duties, as mentioned above, are commonplace. In fact, Canada maintains such duties for a variety of products against countries like China, India, and the European Union.

But the tariff, or duty, is only temporary. Officials from the U.S., including Commerce Secretary Wilbur Ross and Canadian Foreign Minister Chrystia Freeland, are in discussions about how to handle the issue going forward.

Members on both sides of the dispute worry that allowing the issue to drag on longer could result in it becoming part of renewed NAFTA discussions.

“It would certainly be an advantage to both countries to settle the softwood issue outside of the Nafta negotiations. Having them injected into the Nafta negotiations would be a mistake because it would add an enormously complex issue to those talks,” Lawrence Herman, a Toronto-based trade lawyer and former Canadian diplomat, told the Wall Street Journal.

For his part, Ross is reportedly involved in “trying to solve some of the little disputes with Canada,” as he described it.

“Disputes are resolvable if people are of reasonable will and are willing to make reasonable compromises,” Ross said.

Sources claim Ross and Freeland have a “hand shake deal” for a 10-year agreement, but Ross has thus far been unable to corral an unhappy U.S. Lumber Coalition. Adding further to Ross’s headaches is an interagency dispute between Ross and the U.S. Trade Representative’s office over who should be taking lead on the negotiations.