U.S., Canada struggle with softwood trade

One week after the expiration of the softwood lumber agreement, there seems to be little attempt by officials from either the United States or Canada to come to consensus as to how the two countries will exchange wood products.

U.S. firms claim Canadian lumber producers enjoy an unfair advantage over American firms because the Canadian government charges its timber harvesters little or no stumpage fees to cut trees on land owned by the Canadian government. They seek an agreement that would place a tariff on softwood lumber imported into the United States from Canada.

Canadian companies, however, counter that they don’t enjoy any advantages over their U.S. counterparts and the imposition of any tariff or surcharge on Canadian goods would run counter to the rules of the North American Free Trade Agreement. Canadian lumber is sold more cheaply than U.S. lumber, Canadian officials say, because Canadian mills operate more efficiently and there are fewer frivolous and costly regulations for mill owners to contend with in Canada.

Both sides say the current market for softwood lumber is poor enough to force the closing of scores of mills in the two countries. The fight over whether to put in place another trade agreement regarding softwood lumber, both sides say, is key to the future employment of millworkers on both sides of the border.

The recently expired agreement, negotiated in 1996, allows for Canadian companies to ship 14.7 billion board feet of lumber into the United States each year. Beyond that mark, any additional shipments were subjected to a 15 percent tax.

Congressional delegations from U.S. states with forestry industries claimed the expiration of the agreement could lead to a flooding of the U.S. market with cheap Canadian lumber, forcing the further closing of U.S. mills. The U.S. Commerce Department, in cooperation with the U.S. Customs Service, has begun a monitoring effort to determine just how much Canadian lumber has entered the market since the agreement expired. The Canadian government also has started a similar program to ensure it has figures on the outflow of Canadian lumber.

As of late last week, neither side reported an apparent increase in the volume of lumber flowing into the United States from Canada.

“I’m told that we’ve not seen a huge influx thus far, which is a step in the right direction,” said Dave Lackey, spokesman for Sen. Olympia Snowe. “It means Canada takes our concerns very seriously.”

But Andre Lemay, spokesman for the Canadian Department of Foreign Affairs and International Trade, said late last week that Canada’s measured response to U.S. calls for a new treaty has more to do with fear of unwarranted litigation than deference to U.S. trade concerns. Citing U.S. lumber industry filings with the Commerce Department, Lemay said most Canadian producers simply don’t want to be unfairly labeled as flooding the U.S. market.

Lemay said the industry filings, designed to place penalties on Canadian lumber if in fact Canadian companies are found to have flooded the U.S. market, have been litigated in years past and were always ultimately dismissed by international trade tribunals. The filings, Lemay said, have the short-term goal of merely trying to intimidate Canadian businesses.

In the meantime, Lemay said the Canadian government will not willingly enter into a new softwood lumber agreement. “The softwood lumber agreement expired and, no, the world didn’t end,” Lemay said. “We’re not getting any screams or cries or anything like that.”

But Lackey said there have been screams and cries on the U.S. side of the border.

“The [lumber] industry has begun its litigation for countervailing duties and anti-dumping complaints,” Lackey said. “And [Commerce] Secretary Donald Evans is prepared to institute sanctions retroactively, if necessary.”

Lemay, however, described the current dialogue between the two nations as largely reactionary, saying there needs to be an effort to resolve the current dispute without affecting what is an otherwise large and peaceful trading partnership. “I suspect that temperatures are very high and words are very loud,” Lemay said. “Perhaps people will start talking in more rational terms.”

A quick survey of the editorial pages of newspapers on both sides of the border tends to support Lemay’s claim that less than healthy rhetoric has become part of the dialogue on softwood lumber. U.S. papers decry Canada’s alleged subsidizing of the timber companies and overly aggressive marketing strategies. Canadian papers, conversely, claim the United States is only interested in free trade when it works to its advantage and will employ any means necessary to force its will on would-be trading partners.

And both sides of the disagreement seem to pounce on any statement by officials from either country that appears to show support for one position or another. For example, Federal Reserve Chairman Alan Greenspan testified before Congress last week that he viewed anti-dumping suits and countervailing duties as “just simple guises for inhibiting competition.”

The comment was welcomed in Canada and met with skepticism in the United States.

“We have people here trying to take credit for that statement,” Lemay said from his office in Ottawa.

Meanwhile, Lackey said he respectfully disagreed with Greenspan’s views. “Clearly, there are those who believe that free trade is the best trade,” Lackey said. “Sen. Snowe believes that free trade must also mean fair trade.”

The monitoring of Canadian lumber exports will continue on both sides of the border until some agreement is reached to end the impasse.