Bridges Trade BioRes • Volume 6 • Number 13 • 14th July 2006

US and Canada Finalise Softwood Lumber Deal

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The US and Canada on 1 July signed an agreement regulating trade in softwood lumber, marking a new truce in their two decade-long dispute (Bridges Trade BioRes, 2 September 2005). Based on a tentative deal struck in April, the formal accord halts all legal battles and retaliatory duties on softwood lumber. Of the USD 5 billion the US has collected since 2002 from antidumping and countervailing duties on Canadian lumber, it will return USD 4 billion to Canada. The remaining USD 1 billion will be split between the US government and forestry industry. The agreement effectively manages trade in softwood lumber by requiring Canadian regions to levy export taxes that will rise from 0 to 15 percent based on export price triggers and US market share. It also contains safeguard measures in the event that a region exceeds its allocated share. The accord is meant to last for seven years, although each country will be able to terminate it after three.

The crux of the disagreement was over Washington’s allegation that the ’stumpage fees’ Canada charges for harvesting timber on state-owned land were so low that they constituted a subsidy. Washington has maintained retaliatory duties on Canadian lumber imports since 2002, throughout extensive legal battles in the both the WTO and NAFTA (North American Free Trade Agreement) dispute settlement systems.

Some critics of the deal have argued that it allows the US government to retain too much of the money collected in extra duties. Other commentators have countered that a better deal was unlikely, since the US had not shown any indication that it would comply with various NAFTA rulings in favour of Canada. Canadian government officials insist that the deal will make softwood lumber trade stable and predictable. The agreement requires approval by Canadian industry and provinces, as well as the parliament. It does not require legislation in the US.

Text of the agreement.

ICTSD reporting; “US, Canada Ink Deal To End Timber Row,” AGENCE FRANCE PRESSE, 1 July 2006; “Canada, U.S. Reach Deal in Softwood Lumber Dispute,” BLOOMBERG, 1 July 2006; “Emerson unwilling to revisit softwood lumber deal,” CTV.CA, 10 July 2006; “Better than nothing: That’s the real dirt on the softwood deal,” GLOBE AND MAIL, 6 July 2006.