Reviewing lumber

If free trade is anything more than one nation angling to give its products an advantage over the products of another, the lumber-subsidy dispute between the United States and Canada ought to be settled through something more sophisticated than the “does not-does too” argument that has been shuttling across the border for the last 20 years. The Department of Commerce, the U.S. International Trade Commission and the World Trade Organization cooperate in such a process, leaving the obligation to the two countries merely not to make matters worse until that process can be carried out.

Among the primary issues is whether the Canadian government sets artificially low stumpage prices on public land (95 percent of the land in question is public). Americans say yes, Canadians say they are merely more efficient at producing lumber. For five years until March 31, the two agreed to a treaty that held Canadian provinces to exporting 14.7 billion board feet of duty-free lumber to the United States, about 91 percent of the 1995 level. Export taxes would be applied after that. Canada didn’t like it, and found an ally in the U.S. construction market, which preferred the less expensive materials. The treaty lapsed with little chance of it being revived.

The amount of noise made in lumber-producing states has kept and will keep Canada from immediately increasing exports. Meanwhile, Commerce has begun looking for actual damage to the U.S. lumber industry, evidence it can take to the trade commission to ask for relief. With the help of the WTO, some resolution certainly is possible.

Sen. Olympia Snowe, a leading advocate for reviewing Canadian subsidies, suggests that Commerce start with the steep drop in Canadian lumber prices beginning in April 2000. In addition, there are a few examples of arbitration panels ruling that Canada had missed the fairness point behind free trade – in 1998, when British Columbia set stumpage too low, and in ’99, when Canada tried to shift a substantial portion of its lumber to the tariff-free “builder’s joinery” designation by drilling one-inch holes toward each end of their two-by-four studs and claiming they were specialty products.

If there were an agreement to be had between the two nations, it would need to be only a temporary one. Canada could agree not to increase current exports until a decision by the trade commission is produced, and the United States could agree to abide by the decision and not return to a demand for countervailing duties should the decision favor Canada.