When it comes to Canadians selling softwood lumber in the United States, the border between the two countries may as well be a line in the sand. Just hours before the expiration of the U.S.-Canada Softwood Lumber Agreement, officials in neither country appear to have developed a consensus as to how lumber should flow across the border.

Some American lawmakers claim Canadian lumber companies have an unfair advantage over their American counterparts because the Canadian firms are allowed to harvest timber on government-owned land for little or no stumpage fees. Canadian firms, by contrast, contend that the North American Free Trade Agreement, or NAFTA, calls for unfettered trade and doesn’t allow for tariffs or surcharges.

With the end of the lumber agreement set for 12:01 a.m. Sunday, people on both sides of the border hope that the two nations can find some way of smoothing out this trade dispute before it ripples throughout an otherwise healthy trading partnership of countless goods and services.

The current agreement, negotiated in 1996, allows for Canadian exports to ship 14.7 billion board feet of lumber into the U.S. each year. Beyond that mark any additional shipments are subjected to a 15 percent tax.

“Ultimately, we consider Canada an important neighbor, as well as an important trade partner,” said Dave Lackey, spokesman for U.S. Sen. Olympia Snowe. “It’s important to have good trade relations with Canada.”

But Lackey said that doesn’t mean the United States and it’s lumber industry won’t aggressively pursue a new trade agreement that will prevent Canadian firms from importing what Lackey deemed “below market lumber.”

“In order to negotiate a fair trade agreement,” Lackey said, “the industry is prepared to use the full range of legal alternatives under our trade laws. It’s important to remember that the last time an agreement was negotiated it was done under the specter of a litigated case going forward.”

Because Canadian firms cut trees on government land for little or no stumpage fees, Lackey said, those companies enjoy what amounts to a subsidy that doesn’t provide for fair trade under NAFTA rules. “Unfair subsidies of this nature conflict with NAFTA,” Lackey said. “NAFTA is supposed to be providing free trade; it was not supposed to be a sieve.”

Andre Lemay, spokesman for the Canadian Department of Foreign Affairs and International Trade, said Friday that free trade is not the imposition of tariffs on a country’s goods. He also rejected the claim that Canada subsidizes its lumber companies.

“We don’t subsidize our lumber industry,” Lemay said. “The thing is: we have some environmental practices here that we have to abide by. For every tree that is cut down, two trees are replanted.” Lemay added that Canadian firms, while paying lower stumpage fees, also have to pay more for environmental regulations in Canada that better protect the forests than laws in the United States. Therefore, the harvesting of lumber in Canada, Lemay said, is no cheaper. He also said that Canada has seen the closure of many lumber mills because of the soft lumber market.

“Once you get a stumpage fee, that is in addition to what you have to pay to go into the forest,” Lemay said. “It’s like when you buy a product … there’s a sales tax. This is in addition to what you’re paying for the forest.”

Lemay said trade agencies have, for many years, investigated the Canadian lumber market for unfair subsidies. In all cases, Lemay said, those agencies have found Canada doesn’t unfairly subsidize its lumber companies. “The perception is there,” Lemay said of American claims of unfair subsidies, “but where is the reality?”

Lemay said Canada signed the last agreement in 1996 after the U.S. threatened lawsuits over Canadian imports. The current threat of new litigation, Lemay said, is one example of what he called American harassment of Canadian exporters. One example of that harassment, he said, was when U.S. Customs officials classified drilled, notched and value-added lumber as part of the Softwood Lumber Agreement. A ruling this week by the World Customs Organizations, called in to review the situation following Canadian complaints, found that the United States had indeed breached the agreement by reclassifying those products.

Lemay said Canada won’t be sending lots of timber into the U.S. market following the expiration of the trade agreement because most Canadian exporters fear they will be slapped with a trade lawsuit as part of aggressive U.S. trade actions. Still, Lemay said, he hopes the two nations may resolve the dispute without altering what is an otherwise peaceful trading relationship between the two nations.

“The truth of the matter is that we have an excellent trade relationship with the U.S.,” Lemay said. “This is just a sour note in our relationship. In the best of marriages you have a few problems pop up.”

Meanwhile, as the dispute over how the two nations will trade lumber continues, one U.S. lobbying agency representing 203,000 businesses in the housing market has come out against renewing the Softwood Lumber Agreement.

Jay Shackford, spokesman for the National Association of Home Builders (NAHB), said Friday that the Softwood Lumber Agreement adds anywhere from $800 to $1,300 to the cost of building a new home. As a result, he said, as many as 300,000 homes cannot be built or sold because they are too expensive for families.

“Every time you add to the cost of building, you’re effectively pricing people out of the market,” Shackford said.

Shackford said NAHB members realize lower lumber prices mean that mills may be closed and employees will lose their jobs, but he added that the same thing happens to the housing market when lumber prices are on the rise. NAHB members, he said, employ roughly 6 million U.S. workers – more than 25 times as many employees as the lumber industry.

“It’s a huge and very fragmented industry,” Shackford said. “Five cents of every dollar spent in the U.S. economy is in the housing market. It’s a huge part of the U.S. economy.”

But Lackey said such a viewpoint takes account of the situation opposite of reality. “Sen. Snowe’s concern is that in order to have a healthy home building economy you have to have good paying jobs,” Lackey said. “We can’t have the lure of below market prices undermining the economy.”