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Ottawa Reviewing Decision on Softwood Lumber Agreement Breach

By 250 News

Wednesday, September 30, 2009 03:56 AM

Prince George, B.C.- Canada has lost a dispute under the Softwood Lumber Agreement.
 
The breach of the agreement is about timing. The breach is related to the use of the adjustment factor in the calculation of the volume of exports to the United States. Canada applied the adjustment factor to some provinces beginning July 2007, but the London Court of International Arbitration Tribunal ruled it should have been applied as of January 2007.
 
Canada offered to pay $46.7 million for the breach, but the Tribunal said that wasn’t enough and the amount to be paid is $68.26 million.
 
 The Honourable, Minister of International Trade and Minister for the Asia-Pacific Gateway, Stockwell Day says while Canada still believes the initial offer (46.7million) was fair,  there is no way to appeal the decision.
 
 “The Government will comply with the Tribunal’s decision, as we remain committed to the success of the Softwood Lumber Agreement. This agreement has brought stability and has returned nearly $5 billion to the industry. This is a complex matter. We are reviewing the decision and consulting with the provinces to determine how best to move forward.”
 
The 2006 Softwood Lumber Agreement ended a long-standing dispute that had resulted in years of punishing duties against Canadian exports. Through the Agreement, $4.5 billion US in duties collected by the U.S. was returned to Canadian companies.

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Stockwell (Doris) Day has a nice way of twisting the facts. Yes the softwood agreement returned $5 billion to industry, unfortunately he neglects to mention that $2 billion was given to the US forest industry that funded the US case throughout. Harper was taken to the woodshed by George Bush on this deal, and we are still being told by Conservatives that it was a good one.
At current pricing the SLA reduced costs to Canadian producers. The pre SLA CVD was nearly 30%. The current export tax is 15%. These are facts.

But hey dont let the facts get in the way of political 'spouting off' and useless finger pointing.
Even if you were right (you are not), the facts remain that of the close to $5 billion "returned to industry" that Stockwell Day crows about, roughly 40% went to the Americans. If you were mugged by a thief who took $100 from you,would you boast about what a great deal it was if you were able to get back $60? You Conservative supporters just seem to love getting kicked in the arse so much, that you can't resist saying thank you.
The pre 2006 SLA was in fact 0%. The 1996 SLA allowed Canada to export 14.7 billion board feet annually to the United States free of any export charges or duties. Exports above this threshold would then be open to escalating charges. The US in 2001 unilaterally started applying a 27.2% duty on some Canadian softwood. After winning several decisions in international courts, Canada was on the verge of winning its case before the WTO, when Steven Harper snatched defeat from the jaws of victory, and gave us the present deal.
If you want a little history here is an excerpt from Wikipedia. Notice how Harper was only able to get this deal done with the help of the Bloc Quebecois.

" * On October 18, 2005, Bill Clinton stated his general agreement with Paul Martin's position, stating that if he were the prime minister, he would do little differently. However, he did state that the Canadian government ought to return to negotiations.

* On October 24, 2005, United States Secretary of State Condoleezza Rice visited Ottawa on her first visit to Canada. Canadian Prime Minister Paul Martin talked with her about duties, but no response has been registered.

* On November 24, 2005, The U.S.Commerce Department announced it would comply with a separate NAFTA panel's order to cut a 16 percent duty on Canadian softwood lumber imports for now. Even though the Bush Administration still strongly disagrees with the repeated NAFTA rulings in Canada's favour, it says it will comply.

* In December 2005, the U.S. Commerce Department announced recalculated countervailing and anti-dumping duties on softwood. The new duties would be set at a total of 10.8 per cent.

* In March 2006, a NAFTA panel ruled in Canada's favour, finding that the subsidy to the Canadian lumber industry was de minimis, i.e., a subsidy of less than one percent. Under U.S. trade remedy law, countervailing duty tariffs are not imposed for de minimis subsidies.

* A tentative deal was reached in July, in which Canada got $4 billion of the $5.3 billion it lost because of the penalties with no additional tariffs to be imposed. Initially, there was a large opposition by several lumber companies from several provinces. However, during the following weeks the support, due to the possibility of no better scenarios, had increased and the Harper government was confident that there would be enough support for the deal so it would not be jeopardized. The government did not specify how many companies endorsed the deal nor did they implement a minimum for the deal to be salvaged.

* In August, Canadian Prime Minister Stephen Harper brought the new deal to Parliament for discussion and a possible confidence vote in which if the House of Commons would vote in majority against, it would have automatically forced a general election and annulled the deal. The Conservatives were in favour of the deal, while the New Democratic Party and the Liberal Party were against leaving the Bloc Québécois as the deciding party to support and for the survival of the deal."
If we can slowly increase markets elsewhere then we won't need to rely on the US market.
Perhaps at some point they will need our wood and will have to beg us to sell to them at a premium price. Maybe this is a fantasy, but I hope Canada can be smarter in this.
The biggist thing is that we must never, never, never export raw logs to them
"Cheeta" The export log issue is only ONE of the key goals to this US assault and to open access to Canadian Logs without duty.
The SLA obliges by restricting our ability to prevent wide open log sales to the US.
The only thing which is saving us from this expanding right now is that the US markets are incredibly bad.

I agree with Stockwell that this is a complicated "deal" and here IMO are just a couple of the complicated components and results of the "deal":

1-Immediately after the deal was signed, two of our major forest companies (which went on stage hand in hand with the feds to support the SLA) purchased substantial US forest companies (which were member companies of the US coalition against fair lumber imports) with their softwood refunds (nearly 1 billion dollars)..and...if you think about that..what that means to "Canadian" benefits of the deal..this is certainly not one of them. Good for the shareholders of these so called Canadian companies to increase market share with non tariffed US lumber production..which competes against Canadian production (that they have been shutting down)which does have a duty thanks to the SLA "deal".

2-The softwood "LUMBER" dispute, historically WAS (up untill fairly recently almost always) about dimension lumber and studs and the major corporations which held huge timber tenures (dominating log markets and prices)and therefore were accused as being (the subsidised companies)by the US coalition.
The dispute centered upon these few companies and the products THEY made.
Note that previous trade restrictions and tariffs largely exempted most Canadian made specialty or value added wood products which are mostly produced by smaller independent Canadian companies. Ironic that these value added companies which were not paying tariffs or duties were the ones who competed against the majors for Canadian logs. These companies were ironically the competing companies for Canadian logs and that this dynamic was in fact one key to appeasing the US.

The employment ratio per cubic meter of Canadian logs and other Canadian benefits which flow within Canada, not to mention that these are actually the companies committed to operate within Canada, and that these beneficial yet smaller independents..somehow... became the sacraficial lambs in the SLA which now encompasses virtually every specialty product made from softwood.
Again, good for no one other than the shareholders of a few large corporations which were/now getting reduced Canadian competition for logs via the SLA.

This couldn't possibly have been seen as a good deal for Canadian benefit by our well intentioned Canadian negotiators ..could it? Why and how would this arrive when it was never the target issue of the US coalition?

Why would any Canadian government preempt the favourable results from the dispute resolution processes which were nearly completed..and push for and sign a "deal" like this?

This couldn't have been the intent of the negotiators..but could it have been a political directive from a very focussed source..so in tune how to thread this deal through a naieve government? That just cannot happen in this country..can it?

Here is the real irony in this current chapter and while the US market and our US focussed industry is on its knees, and we are to develop markets for our products elsewhere in the world..and we are supposed to do this with an industry which is tooled for the US housing market..which these facilities can hardly adapt to the products which other countries actually use or want?