The federal government says American duties on Canadian softwood lumber exports continue to be “unfair” and “unjustified,” even if they have been reduced. An administrative review by the U.S. Department of Commerce imposes countervailing duties of nearly 9% on certain Canadian exporters, down from just over 20%. It’s the latest salvo in one of the most persistent trade irritants between Canada and the United States, a dispute that has been raging for nearly 40 years.

The lower rate appears to be the result of a World Trade Organization decision in August that found Commerce and the U.S. International Trade Commission were wrong to impose the original duties in 2017. International Trade Minister Mary Ng acknowledged the lower tariffs as a step in the right direction, but insisted they remain baseless and unfair.

Ng says the government will continue to seek a negotiated settlement and defend the interests of Canadian forestry companies and workers. “While reduction in tariffs for some Canadian producers is a step in the right direction, Canada is disappointed that the United States continues to impose unwarranted and unfair duties on Canadian softwood lumber,” she said in a statement on November 24. “These duties have caused unjustified harm to Canadian businesses and workers, as well as U.S. consumers.”

The issue of Canadian lumber shipments into the United States is not a direct part of the North American free-trade agreement nor the U.S.-Mexico-Canada Agreement (USMCA). But under NAFTA’s Chapter 19, Canada and the United States agreed to set up trade panels to settle disputes. The USMCA, which took effect on July 1, retains that appeal process.

The announcement on November 24 “will have no effect on the over $4.3-billion of Canadian lumber duties being held on deposit by the U.S. government,” CIBC World Markets Inc. analyst Hamir Patel said in a research note. “While we continue to believe the majority of these deposits will eventually be returned back to Canadian producers as part of an eventual softwood lumber agreement, we do not believe any deal is likely to materialize until late 2022 at the earliest.”

U.S. producers have long taken issue with Canada’s system of provincially regulated stumpage fees, which are paid to the Crown in exchange for the right to harvest timber. They say the system unfairly subsidizes an industry which in the U.S. is privately owned and operated, with pricing set by the competitive marketplace. Canadian lumber exports play a critical role in the U.S., where demand for wood products used in construction significantly outstrips the domestic supply.

The U.S. Lumber Coalition, a champion of countervailing duties against Canada, noted in a statement that the August decision by the WTO is being appealed — although the U.S. has effectively hamstrung the world body’s dispute resolution panel by refusing to appoint new members. “It is absolutely imperative that these flawed WTO recommendations are not allowed to undermine in any way the continued enforcement of the trade laws,” executive director Zoltan van Heyningen said in a statement. “The WTO case is far from over, and as such, it must not be allowed to influence the ongoing process and the results of the second administrative review.”

Source: Toronto Star
Source: Globe and Mail