Canada and U.S. sign Softwood Lumber Agreement
On September 12, Canada’s International Trade Minister David Emerson and U.S. Trade Representative Susan Schwab signed an agreement ending the long-running dispute over Canadian softwood lumber exports to the United States. While the deal must be approved by Parliament before coming into effect, the government appears to have secured support for its passage, and intends to bring it into force October 1.
Under the terms of the deal:
– The U.S. will stop collecting duties on Canadian lumber and not launch new trade actions.
– Canada will terminate all related lawsuits against the U.S. and not launch new cases.
– Of the more than US$5 billion in duties the U.S. has charged Canadian companies, most will be returned, although $1 billion US will remain in American hands.
– During times of lower market prices, such as those prevailing today, Canadian lumber producers shipping to the U.S. will pay either an export tax ranging from 5% to 15% as lumber prices fall, or a lower range of export taxes combined with volume limits.
Before the signing, Ottawa had sought provincial government and industry support for the agreement. Across Canada, forest companies weighed the risks of accepting the deal, with its shortcomings, against those of opposing it and pursuing litigation to an uncertain end. By the deadline of August 21, most companies had decided the deal was the best they could expect the federal government to deliver and, rather than stand in its way, offered their acceptance.
Industry members had expressed a number of concerns about the agreement, including: the loss of US$1 billion in duties to the U.S.; the potentially short term of the deal, which may be terminated in as few as three years; and details of the agreement that will leave companies operating in an uncertain business environment, not knowing until after the fact whether they will be penalized for certain shipments.
However, there is no doubt Canadian forest companies will welcome the return of more than US$4 billion in duty deposits, the end of costly litigation, and the onset of a period, however brief, of relative trade peace. And, at higher market pricing levels, such as those seen when the framework agreement was announced last April, no export taxes would be charged, a definite improvement over the pre-deal status quo.