U.S.-Canadian Softwood Dispute Still Defies Resolution

The endless legal wrangling between Canadian and U.S. authorities over imports of softwood lumber to this country continues this year, with no end in sight. The dispute started in 2002 when the U.S. imposed countervailing duties and antidumping fines of 27% on Canadian lumber imports, which services one third of the U.S. market. The fines have since been reduced to 10.8%. Canadian authorities appealed the case, and a North American Free Trade Agreement (NAFTA) dispute panel struck down Washington’s rationale for tariffs in an August ruling. Last month, the World Trade Organization (WTO) appeared to disagree with U.S. trade authorities as well, authorizing Canadian officials to impose retaliatory sanctions on U.S. imports.

The dispute has recently grown in importance as it became increasingly politicized; Canadian Prime Minister Paul Martin reportedly upbraided U.S. President George W. Bush at the November’s Asia-Pacific economic summit in Busan, South Korea for failing to resolve the disagreement. “I told him, ‘The problem you Americans have is if you can’t agree with your best ally – Canada – and you have the same problem with Mexico, how are you going to convince the rest of Latin America that it’s a good idea?’” The Prime Minister was referring to the Bush administration’s proposal to create a Free Trade Area of the Americas (FTAA) that would be similar to NAFTA but would include the entire Western Hemisphere, excluding Cuba. Many Canadian officials are crying foul as the U.S. refuses to honor its obligations under NAFTA by dropping duties on the importation of Canadian products.

In an interview with COHA, Barry Cullen of the U.S. lobby group, Coalition for Fair Lumber Imports, outlined the position of this country’s lumber companies on the issue. As the executive director of the Coalition, Cullen was intimately involved with the group’s filing of the antidumping case with the U.S. Department of Commerce in 2001. He claimed that Ottawa indirectly subsidizes lumber exports by selling publicly owned timber to local lumber companies at below-fair prices. This allows Canadian lumber corporations the leeway to dump their products on the world market, thereby making it harder for U.S. companies to compete. “Canadians manipulate the price of trees and ground,” he insisted, “They don’t have a competitive bidding system like we do down here.” Cullen claimed that the loss of revenue for U.S. sawmills has forced many of them to close, and has also hurt private U.S. landowners, many of whom will not sell their timber if the market price remains too low.

According to Cullen, the only way to resolve the longstanding dust-up is to come to a negotiated settlement. He stated that the Coalition “doesn’t support the NAFTA process,” especially the dispute resolution mechanism. In fact, the Coalition for Fair Lumber Imports is planning to file a constitutional challenge to that particular part of the 12-year-old treaty.

On the opposite side of the dispute is the British Columbia Lumber Trade Council, which represents sawmills throughout the Canadian province. In an interview with COHA, a spokesperson for the group stated that B.C. companies have suffered countless layoffs and mill closures as the result of U.S. tariffs. “The biggest challenge for our members is that they’ve had to lay out so much money in duties,” she said. Currently, the total amount collected from Canadian companies in countervailing and antidumping fines is over $4 billion, 50% coming from B.C. “NAFTA was an agreement that both sides signed on to and should live up to,” claimed the spokesperson. She agreed that the only way to put an end to the legal dispute is to negotiate a long-term solution.

The softwood issue is no longer a clear-cut case of Canada vs. the U.S., however. Michael Strauss, the communications director at the National Association of Home Builders in Washington, D.C., has joined the Canadians in “urging that the tariffs be eliminated.” In an interview with COHA, he explained that the U.S. construction industry depends on Canada for one-third of its lumber, and that this supply is in jeopardy because of the persisting levies. Strauss said that the U.S. is “bound” to abide by NAFTA requirements, and so should rescind the tariffs immediately.

Strauss is not alone. His organization is part of a coalition of U.S. lumber consumers calling itself American Consumers for Affordable Homes. Its ranks include the American Homeowners Grassroots Alliance, the National Retail Federation and the Manufactured Housing Institute.

Emotions run high and allegiances are complex in the battle to control the North American softwood lumber trade. Last summer, a round of negotiations between U.S. and Canadian trade representatives failed miserably, but such talks seem to be the only way to put an end to the increasingly acrimonious disagreement. As much as officials on both sides bluster and point their fingers across the 49th parallel, each country knows it is economically dependent on the other; Canada still must sell its lumber and the U.S. still wants to buy it. In light of this fact, the dispute should have been resolved years ago. However, softwood has become emblematic of international prestige, and when pride enters the equation, nothing is that simple.