Canada-us Softwood Lumber Dispute

[RedScorpion]

Here's the background of the situation.

'INDEPTH: SOFTWOOD LUMBER DISPUTE
Softwood lumber dispute

CBC News Online | Updated August 10, 2005

Canada's protracted dispute with the United States over softwood lumber is estimated to have cost lumber producers billions of dollars and thousands of jobs.

The dispute has been simmering for years, but boiled over in May 2002 when the United States imposed duties of 27 per cent on Canadian softwood lumber, arguing that Canada unfairly subsidized producers of spruce, pine and fir lumber.

An agreement-in-principle to end the dispute was reached in December 2003. But it died two days later and the issue has been before North American Free Trade Agreement panels and the World Trade Organization several times. Rulings have usually gone Canada’s way.

At issue

The dispute is centred on stumpage fees - set amounts charged to companies that harvest timber on public land. Many in the U.S. see Canadian stumpage fees as being too low, making them de facto subsidies. A U.S. coalition of lumber producers wants the provincial governments to follow the American system and auction off timber rights at market prices.

The U.S. responded by levying tariffs on incoming Canadian lumber in May 2002.

Overview of the dispute

The bickering between Canada and the United States over softwood lumber is like a case of sibling rivalry. It dates back hundreds of years. Even within Canada there are divisions. The B.C. Lumber Trade Council has argued a trade war with the Americans over softwood lumber would be costly and should be avoided by accommodating U.S. demands. The Free Trade Lumber Council, which includes lumber producers in Quebec and Ontario, wants to fight it out. What most Canadian foresters and governments do agree on is their goal: free trade in softwood lumber.

In August 2001, the Bush administration backed a U.S. forest industry bid to hit Canadian lumber with billions of dollars in duties. Two months later, the duty was increased further when the government imposed an anti-dumping duty on top of the original duty. Dumping is a term used to describe the sale of goods to another country at less than what they cost to produce.

The duties were applied separately following the expiration of the softwood lumber agreement between Canada and the U.S., which governed exports from April 1, 1996 to March 31, 2001. Under that agreement, the U.S. guaranteed market access to Canadian exporters for five years and permitted the import of 14.7 billion board feet per year of lumber without fees. The agreement applied to $10 billion worth of lumber produced in British Columbia, Alberta, Ontario and Quebec.

The agreement didn't apply across Canada. Since lumber harvested in the Maritimes comes mostly from private land, Maritime provinces weren't subject to the U.S rules. With no extra duties to deal with, Maritime producers saw business rise.

When the agreement was signed, Maritime provinces accounted for about five per cent of Canada's lumber production. In the five years following, production in Nova Scotia and New Brunswick soared 62 per cent to more than 1.2 billion board feet. That compares with 1.5 billion board feet produced in Ontario. In New Brunswick, 90 per cent of softwood lumber exports go to the United States.

The trade war has taken a toll on Canadian jobs. Thousands in the industry lost their jobs, including about 15,000 forestry workers who were laid off in British Columbia.

In 2001, then-U.S. trade ambassador Robert Zoellick vowed the trade war would continue until Canada imposed its own taxes on lumber exports. Canada has refused to do so.

On July 29, 2003, it seemed as if there might be a breakthrough in the dispute when officials on both sides announced a draft deal. As part of the draft, Canada had agreed to cap lumber exports to account for 30 per cent of the U.S. market, down from 34 per cent. If the quota was exceeded, Canada would have to pay a penalty. The plan was nixed two days later when U.S. producers said Canada needed to make more compromises.

A NAFTA decision on August 13, 2003 was considered a partial victory for the Canadian side. A panel ruled that, while the Canadian lumber industry is subsidized, the 18 per cent tariff imposed on softwood lumber by the United States is too high. While the ruling didn’t throw out the duty imposed more than a year earlier, it ordered the U.S. Commerce Department to review its position.

The NAFTA report said the U.S. made a mistake in calculating its duties based on U.S. prices, and by not taking Canadian market conditions into consideration. It ordered Washington to recalculate them. NAFTA decisions are legally binding and must be put into effect within 60 days.

Two weeks later, a WTO panel concluded that the U.S. wrongly applied harsh duties on Canadian softwood exports. The panel also found that provincial stumpage programs provide a "financial benefit" to Canadian producers. But, the panel made it clear that the benefit is not enough to be a subsidy, and does not justify current U.S. duties.

On Aug. 10, 2005, an “extraordinary challenge panel” under NAFTA dismissed American claims that the earlier NAFTA decision in favour of Canada violated trade rules.

"We are extremely pleased that the ECC dismissed the claims of the United States," said International Trade Minister Jim Peterson.

"This is a binding decision that clearly eliminates the basis for U.S.-imposed duties on Canadian softwood lumber. We fully expect the United States to abide by this ruling, stop collecting duties and refund the duties collected over the past three years," he said.

Washington’s initial response was that the ruling doesn’t settle anything – and that it will take more negotiations before this dispute is wrapped up.'

I Believe that this whole process is complete nonsense - NAFTA was created so 'free trade' could be established between our two nations, without this arbitrary conflict at hand. It should be a company to company issue, not an international dispute. Of course, this is a much deeper issue, but my main point still stands - free trade means free trade - without the meddling of our countries individual interests. Overall, I wish that the NAFTA rulings be upheld, as an unbiased counsel.
(source)

I'd be happy if you guys would voice your opinion on this :)

[RedScorpion]

Yea, I guess Paul Martin has actually just done that... lol.
Martin is wanting Bush to hold to the NAFTA board of appeals, but Bush is still wanting to negotiate - so Martin basically took an 'undiplimatic tone' and used our energy resources as a threat - ones that the US desperately needs right now (we export about a billion barrels of oil per day to them). The threat was to look for exports deals with India or China - so I think that should put some pressure on Bush (cept Bush is a stubborn s.o.b.)

Here's the link for the story on his speech - (Phone call) (Summary of speech)

[JoS]

I happen to be doing a research project on this topic for my 3rd Political Economy class.

Basically NAFTA and WTO ruled that the duties and such being collected by the US were illegal (either too much or in violation of trade laws). NAFTA has ruled in all its pannels that these duties must be removed. Even Mexico has sided with Canada.

The WTO rulings gives Canada the green light to enter in a trade war with the US. The federal gov't has already heard what the US is willing to offer and it is unacceptable. Not to mention the fact these illegal duties colelcted (well over a billion dolalrs) have been distributed to US logging companies. The only acceptable solution is the removal of these tariffs and the return of these fees the USDOC has collected. The US refuses to do so.

A trade war, even one involving energy is in no way undemocratic, or in bad faith. If the US feels it does not have to listen to pannels it creates and wants other countries to follow, it must do so itself. Withholding oil and natural gas this winter will put tremendous pressure on the US as their oil and gas production has been hurt due to Katrina and will be even mroe reliant on Canada.

I cant see how someone can feel this is undemocratic. Undemocratic is what the US is doing, not obiding by legally binding decisions. And canada has a green light to legally do this.

[JoS]

I meant undiplomatic, nto undemocratic. Sorry.

[Memorize]

Hey, something I agree with Canada on. But why is it that whenever something horrible happens, the US always has to pay whatever it is back?

[JoS]

You mean return money it collected illegally?

If you get robbed should the theif be allowed to keep your money once he gets convicted and sent to prison?

[RedScorpion]

Yes, exactly! The US has taken over 5 billion dollars CDN in tariffs over this dispute - and the thing is, its not returning the profit to the employees or the consumers - the companies themselves (5 I believe) seem intend on keeping the change. Therefore, it is not only unjustified, but makes the whole dispute illegal on the grounds on what they are resting their case on ('subsidized' market in Canada).

Also, the companies in the US are challanging the NAFTA board as 'biased' and 'absurd' - and Bush still wants to 'negotiate', as if its the first time its come to the table... :|
Absurd and biased... Phhff

[RedScorpion]

I'm starting to think that a full-scale trade war may happen... :|

[Memorize]

At 10/19/05 09:15 PM, JusticeofSarcasm wrote:

If you get robbed should the theif be allowed to keep your money once he gets convicted and sent to prison?

Perhaps I shouldve been more clear. I was speaking in a general sense (yes, we should pay back on this subject), but im talking about things like war.

[JoS]

At 10/19/05 09:53 PM, TimeFrame wrote:

At 10/19/05 09:15 PM, JusticeofSarcasm wrote:

If you get robbed should the theif be allowed to keep your money once he gets convicted and sent to prison?

Perhaps I shouldve been more clear. I was speaking in a general sense (yes, we should pay back on this subject), but im talking about things like war.

When have you had to pay back for war? Did you pay back Germany or japan for leveling their cities? Did you pay back Iraq for airstrikes in no fly zones? Or are you refering to the fact of paying to rebuild Iraq and Afganistan. No one is forcing you to, but if you didnt the world would a.)think your even bigger douchebags and b.) the people in those countries would hate you. Its a political move, not one out of the goodnes sof your hearts, or that you are required to.

Germany was required to pay to rebuild Europe after WW1, Iraq was made to pay to rebuild Kuwait in the early 1990's.

[Demosthenez]

I dont think the USA has any right to do this but I also dont think we should just hand you $5 billion.

Just put a tariff on some American goods until you recoup your lost costs. Id be ok with that.

[Memorize]

At 10/19/05 10:01 PM, JusticeofSarcasm wrote: No one is forcing you to, but if you didnt the world would a.)think your even bigger douchebags and b.) the people in those countries would hate you. Its a political move, not one out of the goodnes sof your hearts, or that you are required to.

We are paying for WWI.

[BigBlueBalls]

The only one who benefits from this is the U.S. lumber industry. The ones who lose out are American homeowners who have to pay for higher lumber prices.

[JoS]

At 10/19/05 10:37 PM, TimeFrame wrote: We are paying for WWI.

Please elaborate on this. I am slightly confused as to how the US is paying for WW1, which was fought nearly 90 years ago. As a matter of fact i am confused as to how they paid for it at all.

To the point of repaying. If we charge duties on American goods to re-coup the cost guess who pays those costs? The American company, not the government. So then we would be taking money from industries that had nothing to do with this. Is that still ok with you, or should uncle sam fork over the money and e give it back to the comapnies that paid them?

And yes, the only one who do benifit are US lumber industries. The US homebuilders Association is very much against this. Ironically enough this was the work of the Bryd Act or something like that named after the US Senator who got th eball rolling and returning the duties collected to US lumber companies. His state? The logging industry heartland, Montana.