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What's Everyone Saying About the Softwood Deal?

By 250 News

Friday, April 28, 2006 04:01 AM

The long standing battle between Ottawa and Washington over softwood lumber, is over.

The Prime Minister likes the deal, Premier Gordon Campbell likes the deal. 

Here are some of the details:
-Canada maintains a 34% share of the U.S. market
-The U.S. will pay back 80% of the duties collected at the border
-Canada will pay a tax when the U.S. lumber prices slip below a certain level 
 -B.C.’s share of the market is protected 
 -Both sides drop all their legal battles

According to reports and media releases, here’s how reaction is shaping up on both sides of the border: 

In an official news release the The BC Lumber Trade Council says it has given “conditional support to the framework agreement”
"Each company had to assess the framework agreement through its own lens and individual analysis," said John Allan, President of the BC Lumber Trade Council. "Agreements of this nature are rarely perfect and the complexities of the issues will always make unqualified support elusive," Allan said. 

Roy Nagel of the Central Interior Logging Association is quoted as saying it would appear the agreement is more about making peace with Washington than helping the Canadian industry. 

Canadian Business On Line says news of the deal has had an impact on stocks “The stock of Canada's biggest softwood lumber producer, Vancouver-based Canfor Corp. (TSX:CFP), fell 38 cents to $14.36 on Thursday. Montreal-based Tembec (TSX:TBC) saw its shares dive more than nine per cent, or 20 cents, to $1.90, while shares of Abitibi-Consolidated Inc. (TSX:A), a major newsprint and lumber producer, lost seven cents to close at $4.78. Western Forest Products Inc. (TSX:WEF) added seven cents to close at $2.34, after gaining ground it lost in the morning.” 

On the other side of the border, the Coalition for Fair Lumber Imports issued a news release saying it expressed its support for the settlement of the dispute: “The Coalition has long sought to end Canadian provinces’ sale of timber (standing trees) to Canadian lumber companies for a small fraction of the timber’s market value. This subsidy has cost multitudes of U.S. jobs and scores of competitive U.S. sawmills. The Coalition initiated unfair trade proceedings before U.S. agencies in 2001, and the U.S. government has maintained countervailing (anti-subsidy) and antidumping duties on Canadian lumber since that time.  “All we have ever asked is that Canadian timber and logs be sold in open and competitive markets,” said Swanson. He concluded, “We hope that the Canadian governments take this opportunity to move to market sales.”

When it was clear there were negotiations underway, the National Association of Home Builders in the U.S. issued a release expressing concerns:
“Should the U.S. and Canada agree to a settlement resulting in new trade barriers that were to limit Canadian lumber shipments into the U.S., NAHB will help builders seek lumber sources from other countries and to assist builders who want to engage in the use of alternative building materials wherever practical."  The release went on to say “From a policy perspective, NAHB will work with the U.S. government to increase the supply of German and Swedish lumber, and we will consider options to import Russian softwood from Siberian forests,” he said. “In addition, we will encourage interested builders to explore using steel and other building materials and construction techniques”



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Comments

Both NAFTA and the WTO are the proper channels through which disputes of this sort ought to be settled.

Canada won all the WTO and NAFTA decisions.

The big bully walked away with a thousand million illegally collected dollars and an agreement that may just contravene NAFTA and WTO and could be challenged by other members in the future.

Might won over right again.

There isn't much to celebrate except that we now know for CERTAIN who ended up on top again - the very neighbourly USA.
Not surprising that the American Homebuilders are opposed. It was always the fact that any deal would at its heart be a conspiracy to cheat American consumers. This deal is precisely that and the homebuilders know it.
Harper apparently hung himself out to dry when in the euphoria of winning the election he insisted that NOW is the time to settle the dispute, one way or the other.

The Yanks saw the *** in the armour and shrewdly did the spin in their own favour, knowing that the 'pig' was ready for the slaughter.

Game over.

This caving-in will also affect future negotiations, since it proved again that one does not have to pay any attention to rulings from the NAFTA or the WTO if they are thought to be unfavourable.

If Canada had lost all the rulings this agreement would have been a win, but since we won all the rulings it is a loss.

Plain and simple.
Seems that most of the stakeholders are satisfied with the outcome of this negotiation effort. Let's start looking ahead get on with business and forget about continuing to look in the rear view mirror.

It't time to move on. Percy
I think the USA feels that anything is negotiable. NAFTA was a negotiated agreement. Something happend when the previous softwood lumber agreement ended and the NAFTA took over. The USA forestry industry did not like it. So, the USA knows full well that there is no finality to contracts, thus they took actions to cause it to be re-opened. While Canada was using the system set up for dispute resolutins, the USA kept insisting they wanted to negotiate.

They prevailed. As diplomat states, they prevailed due to politcal changes in the Canadian government. Harper is strutting around stating that he knows how to close a deal while Martin could not do it. Well, it is easy to close a deal when the standard you set is lower than those who came before you.

So we lost this one. Do we get a gain somwhere else. Will the USA buy some more Bombardier products from us, for instance? If not, it was a lousy deal.

Simply put, the USA has us by the short and curlies. Wood from other countries is becoming cheaper and more plentiful. It does not sound good for supplier countries in the next decade or more from what I read.
Here is a handy chronology of events in the long-running softwood-lumber dispute between Canada and the United States:

1982: The U.S. lumber industry lobby first petitioned against Canadian softwood lumber imports under U.S. countervailing duty law, alleging Canadian forest management practices unfairly subsidize Canadian producers.

1983: After a full investigation, the U.S. Commerce Department concludes that Canadian stumpage policy does not confer countervailable subsidy.

1986: The Coalition for Fair Lumber Imports again seeks countervailing duties.

Oct. 16, 1986: Commerce Department determines that Canadian stumpage systems confer a subsidy averaging 15 per cent to lumber producers.

Dec. 30, 1986: Canada and U.S. strike a five-year deal to resolve the dispute, with Canada agreeing to collect a 15 per cent charge on exports of lumber from Canada, while provincial governments implemented so-called "replacement measures" that would replace the export charge over time.

Jan. 1, 1989: The Canada-U.S. Free Trade Agreement comes into force, including new binding dispute settlement mechanisms which provide bi-national panel review of countervailing duty and anti-dumping determinations by domestic trade authorities.

May 28, 1992: U.S. Commerce Department issues final affirmative determination on subsidization, finding that forest management programs in British Columbia, Alberta, Ontario and Quebec and the log export controls imposed by B.C. conferred countervailable subsidies.

July 15, 1992: Commerce Department imposes final countervailing duties of 6.51 per cent on lumber imports from all provinces except the Atlantic provinces.

August 1992: Canada appeals decisions to binational panels under the free trade deal.

July 6, 1994: After numerous reviews and appeals, the Department of Commerce revokes the countervailing duty order.

May 29, 1996: Canada and the United States finalize agreement on softwood lumber covering the five-year period to March 31, 2001, which limited duty-free shipments of lumber to the United States to 14.7 billion board feet a year. Shipments after that could be shipped but were subject to increasingly prohibitive tariff rates. Exports from Atlantic Canada were unrestricted.

April 2, 2001: The Coalition for Fair Lumber Imports files countervailing and anti-dumping duty petitions with the United States government, alleging a subsidy rate of 39.9 per cent.

May 3, 2002: Canada requests WTO consultations with the United States concerning the U.S. Final Determination of Subsidy.

May 23, 2003: Canada releases counterproposal as the basis for discussions with the United States.

2003-2004: The dispute goes through various administrative reviews, NAFTA challenges and the WTO.

Aug. 10, 2005: An extraordinary challenge panel, convened under the North American Free Trade Agreement, dismisses U.S. claims that Canada's softwood exports are subsidized. Ottawa claims victory, Washington says it will ignore the ruling.

Aug. 11, 2005: British Columbia Premier Gordon Campbell, whose province is Canada's largest lumber producer, tells new U.S. ambassador David Wilkins at a premiers meeting in Banff, Alta., that he expects the United States to accept the ruling.

Aug. 16, 2005: Federal officials say Canadian government is suspending softwood lumber talks with the United States to protest its refusal to heed the panel's ruling, which Canada argues was the final avenue of appeal under NAFTA.

Aug. 23, 2005: At a brief media scrum, Prime Minister Paul Martin castigates the United States for its lumber protectionism and its decision to ignore the panel's ruling.

Aug. 29, 2005: World Trade Organization rules the United States complied with international law. Washington calls WTO ruling a vindication and Ottawa calls it a setback, saying NAFTA ruling takes precedent.

Dec: 12, 2005: The U.S. Commerce Department publishes the final results in the second administrative reviews of the anti-dumping and countervailing duty orders on softwood lumber from Canada for 2003 and 2004, determining a final, countrywide countervailing duty rate of 8.7 per cent and anti-dumping duty rate of 2.11 per cent.

April 26, 2006: Canada and U.S. hammer out a framework deal that would cap Canada's share of the U.S. lumber market, impose a border tax and return 78 per cent of the $5 billion in punitive duties collected by U.S. Customs since May 2002.

So ...... is this the end of it???? .. I would think not ... the ever continuing saga
The American complaints never had any economic validity but Canada did have some disadvantages in the dispute: (1) the Federal government was not prepared for the fight in 2001 (2) the Canadian Province and the Canadian industry were all deeply divided (3) there were commentators in Canada who said Canada was guilty and the Americans seized on every such comment (4) the Americans benefitted simply from dragging the thing out while dragging it out was costing Canada (5) if Canada had won the litigation, the US would have started over (6) the Americans declared that they were not prepared to deal in good faith with Canada on this issue.

This deal is probably better economically for Canada than winning in the courts three years from now would have been. The key thing now is to work on the issues which should have been worked on a decade ago - foreign imports into the US as evidence of world prices for timber and stumpage reform which is demonstrably market driven.