US-CANADA LUMBER DISPUTE HEATS UP AS EXPIRY DATE APPROACHES
According to the Canadian press, Canadian and US trade negotiators have been engaged in unofficial negotiations to pre-empt a pending dispute over Canada's softwood lumber imports. With the current Canada-US Softwood Lumber Agreement scheduled to expire at the end of March, some
form of resolution is urgently needed to avert unpalateable trade relations between the trading partners(see BRIDGES Weekly, 6 February 2001; http://www.ictsd.org/html/weekly/story2.06-02-01.htm).
Last week, the US said it was considering the creation of a panel of "eminent persons" -- experts in the field -- in an effort to resolve the pending lumber dispute between the US and Canada. Yet, some speculate that this show of flexibility from the US is influenced by the forthcoming Summit of the Americas in Quebec City next month, when
it is expected President Bush will indicate his favour of the Free Trade Area of the Americas (FTAA). The Canadian government has confirmed that negotiations regarding "special envoys" are currently underway, but has stated that no decision had been made.
The US Coalition for Fair Lumber Imports (CFLL) has said it does not oppose the idea of special envoys attempting to mitigate the dispute,yet maintains that it will file a complaint with the USTR on 2 April after the agreement expires on 31 March. CFLL claims that the Canadian
government provides US$ 4 billion in illegal provincial timber subsidies by virtue of its "stumpage" regime. This, they argue, depresses timber prices by 25 percent and allows Canadian timber producers to maintain one third of the US lumber market share, a trade flow valued at US$ 7 billion per year. CFLL asserts that Canadian "stumpage rates" -- fees levied by the government per harvested tree -- are too low and do not adequately reflect market
value.
Canada has rejected US accusations, arguing that it possesses a natural comparative advantage that make trees cheaper due to its extensive forest cover and high fibre volume. Under the 1996 Softwood Lumber Agreement, Canada limits its US bound softwood lumber exports to 14.7 billion board feet annually, while exports in excess of this quota are taxed by the Canadian government.
In exchange for the export restraint -- designed to protect US timber producers -- the US agreed to curb trade actions against the Canadian softwood lumber imports. Yet, Canada enjoys the support of US home builders who do not want lumber prices to increase after the agreement
runs its course.
"Secret talks on softwood," NATIONAL POST, 24 March 2001; "Jimmy Carter blasts Canadian timer practices," THE GLOBE AND MAIL, 26 March 2001; "Early strategy gives Canada a natural softwood lumber advantage," THE GLOBE AND MAIL, 24 March 2001; "Wood split widens over summit call," NATIONAL POST, 22 March 2001; "At loggerheads,"ECONOMIST, 24 March 2001.
