Softwood Still Problem for Trudeau

March 9, 2016

By: Bay Street

As Prime Minister Justin Trudeau’s enjoyed a state dinner at the White House this week, these two great neighbours continue to have one of the largest and longest-running trade disputes in the world, a battle over softwood lumber that has seen Canadians and Americans at odds for 30 years.

Trudeau and his trade minister, Chrystia Freeland, are working hard to show, in the trade minister’s hopeful words, “significant progress” on the issue. But loggerheads loom.

The uneasy peace controversially brokered by Stephen Harper’s 2006 softwood lumber agreement didn’t last. It was renewed several times on Conservative watch, but this option now eludes the Liberals.

Softwood lumber was, as Freeland told reporters, one of the first priorities Trudeau raised with U.S. President Barack Obama at APEC last November.

But two things seem clear as Trudeau and his delegation get ready to head to Washington: renewing the now-expired deal is not possible, and not everyone sees negotiating a new one as urgent.

Since the 2006 deal expired last October, free trade has been back: no tariffs, no thresholds and no restrictions on trade of the widely-used forest products between the two countries.

For one year — now half over — the U.S. can’t launch any actions against Canada.

That doesn’t mean it doesn’t want to.

The U.S. Lumber Coalition rants online about the dangers of Canadian practices “left unchecked” causing unemployment or even the takeover of U.S. assets.

Things have evolved, the softwood lumber lobby group argues. Renewing the old deal isn’t good enough.

The coalition sent a statement to media outlets more measured than its online lobbying: it supports negotiations and hopes Canada will be a “willing partner,” leading to “an effective, mutually beneficial and sustainable” deal before October.

What’s changed in the decade since the deal was first signed?

Promising U.S. housing starts are boosting demand for the two-by-fours this fight centres on.

Canada’s lower dollar makes imports into the U.S. more competitive.

The Canadian supply of lumber took a hit from the pine beetle in B.C. and the spruce bud worm farther east. Between the 2006 deal’s import restrictions and Mother Nature, Canada’s share of the U.S. market now sits at about 27%, not the 40% it once had.

B.C. and Quebec implemented an auction system to set timber prices on Crown lands — a shift to market pricing that makes the “subsidized” label harder to stick.

Four major B.C. companies expanded into the U.S., buying mills to insulate them from future trade actions.

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