“The last softwood lumber trade arrangement between Canada and the United States was incredibly destructive, particularly for Central Canada. The previous Government of Canada not only agreed to limiting access, through quotas and taxes, it also paid over $1 billion “in ransom” to the U.S. softwood lumber producers, financed by Canadian workers. The purpose of a deal must not be simply an alternative to litigation. It must be to assure fair and equitable trade,” said Richard Garneau, CEO of Resolute Forest Products.
Resolute is Canada’s largest forest products company and the largest producer of softwood lumber east of the Rockies.
The vocal figure has spoken out against resuming or extending the softwood lumber agreement between U.S. and Canada, instead has voiced out for unrestricted softwood lumber exports from Central Canada (Quebec and Ontario) to the U.S.
Beginning this month, firms in the U.S. will be able to sue for relief and seek countervailing duties applied to Canadian exports. The gist of the dispute is the claim by U.S. firms that Canadian lumber products are unfairly subsidized by local and national governments. As most of the timber are owned by the governments, prices to harvest them are set administratively rather than in the marketplace as in the U.S. The U.S. firms have countered this by saying this constitutes an unfair subsidy, as it results softwood lumber from Canada subject to U.S. trade remedy laws. A settlement established in 2006 had remedied the situation, but has since expired with the grace period ending this month.
Canada had argued that under the U.S. trade remedy law, a countervail-able subsidy must be specific to a particular industry. As wood is used in so many arena, a countervailing duty doesn’t apply.
“Managed trade increases volatility, creating an unpredictable and unstable trade environment between two of the world’s largest trading partners,” Garneau said.
Canada is divided on the subject, largely along geographic and market lines. Western Canadian softwood lumber producers benefiting from the voracious market in China were less affected by the trade agreement with the U.S., intended to protect panel producers south of the border from Canadian competition.
The extraordinary economic development, logistical limitations also meant that Asian markets remain out of reach for Central Canadian producers. In addition, 39 sawmills were purchased by Western Canadian softwood lumber producer in the U.S., with a production capacity of some five billion board feet. This has afforded them an important measure of insulation from future restrictive measures.
“To put this capacity into context, it is over 150 percent of the total existing capacity of Ontario’s sawmills. Canadian demand is simply not enough to absorb all the production of Central Canadian sawmills,” Garneau said. “We need to be able to sell freely to the U.S. Indeed, that was the whole point of the Canada – U.S. Free Trade Agreement and NAFTA. Just about every industry enjoys free trade, except for softwood lumber.”
Source: Woodworking Network