The Whole Canada - United States Lumber Trade Mess...
History of U.S. - Canadian Lumber Trade Friction:
Because of an abundant forest resource coupled with unique political and market conditions, Canadian sawmills can manufacture lumber cheaper than U.S. mills. This cheaper lumber is considered by many U.S. softwood lumber producers the result of "subsidy" and is an unfair trading practice. The so-called subsidizing of timber has resulted in Canadian–US trade friction since the early 1980s.
In December 1986 a "countervailing duty
investigation" of softwood lumber exported from Canada resulted in an export tax on Canadian
lumber. Canada and the United States signed a Softwood Lumber
Memorandum of Understanding (MOU) under which Canada imposed an export
tax of 15 per cent on softwood lumber entering the U.S. market from
Canada.
In October 1991, Canada terminated the MOU. The United States again
investigated and found that Canada was
subsidizing her lumber producers. This investigation resulted in the imposition of more
"countervail" duties against Canadian lumber.
The Canadian government, the provinces and Canada's lumber industry filed challenges
against that investigation before two Canada–U.S. Free Trade Agreement (FTA)
Chapter 19 review panels. It was ultimately decided that the U.S. Department
of Commerce should not have found Canadian subsidies to be economically
harmful. The countervailing duty action was terminated and duties
refunded.
Given the importance of this trade issue, both countries agreed to establish discussions to
reduce tensions and avoid
further litigation. This avoiding of "further litigation" resulted in the 1996 Canada
- United States Softwood Lumber Agreement (SLA)...
The 1996 Canada - United States Softwood Lumber Agreement:
The Canada–United States Softwood Lumber Agreement which was announced on April 2,
1996, provided Canadian exporters with a guarantee against U.S. trade actions
for five years. The Agreement ends April 2, 2001.
From a report by the Society of American Foresters describing the Agreement:
"Canada agreed that softwood lumber exports to the United
States originating from British Columbia, Quebec, Ontario and Alberta that
exceed 14.7 billion board feet a year will be subject to a US$50 per thousand
board feet border fee for the first 650 million board feet, and a US$100 per
thousand board feet fee for greater quantities."
"No fee will apply to shipments below 14.7 billion board feet, a level
which is even higher than the 1992–94 average annual exports of softwood
lumber from those four provinces to the United States. If the fee were applied
to the record shipment level of 16.2 billion board feet in 1995, 91 per cent of
exports from those four provinces would enter without payment of the fee."
"No fees are required for lumber originating from Manitoba, Saskatchewan,
the Atlantic Provinces or the Territories. These are exempted from the
agreement."
"The Agreement provides for an increase in exports without fee for each
calendar quarter when the average price exceeds US$405 per thousand board feet
in the first two years and US$410 in the last three years. Canada has qualified
for at least a further 92 million board feet of exports without fees from April
to June 1996, and may qualify for an additional 92 million board feet in the
current quarter if the average price remains above this "trigger"
price."
Those For and Against the Agreement:
U.S. lumber lobbyists, environmentalists, forest owner associations and Canadian natives have joined forces against Canada's forestry industry and homebuilder associations in order to influence the Softwood Lumber Agreement.
Neither country wants to renew the original agreement, which addresses $20 billion in cross-border lumber business. Canada wants to return to unrestricted trade with the U.S. under the Canada-U.S. free-trade agreement. U.S. officials say the current agreement isn't working and needs to be changed.
Those for the Agreement suggest:
- Subsidized Canadian lumber producers have a direct advantage when mills from both countries compete. This is resulting in U.S. forest product manufacturing plant closings and lost jobs.
- There is "an enormous threat" to U.S. timberland values and stumpage prices.
- Canada "is virtually giving away its forests to loggers in the form of trade subsidy, thereby encouraging deforestation" and potential environmental problems.
Those against the Agreement suggest:
- The U.S. timber producer is already being subsidized with a special capital gains treatment on timber, expensing timber-growing costs, a special investment tax credit and an amortization schedule for reforestation expenses.
- Costs of building a new home under the Agreement are increased by some "$800 to $1,300" dollars which prices some 300,000 people out of the housing market.
- The SLA creates "volatility in the supplier market" which disrupts and distorts markets. This is of major concern to U.S. timber growers who sell to Canadian mills whose stumpage prices are lowered as the quota is approached.
- The Agreement could negatively impact the relationship between Canadian/U.S. free trade.
Check The Poll! Would you like to discontinue the Softwood Lumber Agreement between the United States and Canada?
MORE:
US-Canada
Lumber Agreement to Expire:
Conflict Looms Over Five-Year-Old Pact - SAF
NAHB's
Comments Supporting Elimination of the U.S. Canada Softwood Lumber Agreement
- NAHB
Showdown Over The Softwood
Lumber Agreement (SLA) - e-Wood.com
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