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Washington plays hardball with a softwood bat

June 30, 2016

By: The Globe and Mail

Carl Grenier led the Free Trade Lumber Council from 1999 to 2006. He now teaches at the University of Laval, and l’École nationale d’administration publique.

Surprises are always possible, but as things stand now, Canada and the United States are not entering a new softwood lumber agreement any time soon.

Last March, the President and the Prime Minister agreed to try, but the United States will negotiate only what its industry wants, and its industry wants nothing but a hard-cap quota controlling the supply of Canadian lumber available in the U.S. market. Canada, for its part, will negotiate only what British Columbia wants, and British Columbia does not want a strict quota.

Canada characterizes everything that does not encompass “optionality” – the flexibility to restrain trade by export tax or quota – as “other important issues,” such as recognition of stumpage reform consistent with historic U.S. demands. The United States characterizes everything that is not a quota as “off the table.”

The United States threatens, as playground bullies always do, to beat up Canada through a petition, investigation, and imposition of duties, if Canada will not succumb to the U.S. idea of a “compromise.” Canada, as the meek and weak always do, promises each time the two sides meet, to give away more than before just to avoid a beating. Canada openly says that almost anything would be better than a beating, and it is prepared to negotiate everything – especially an ever-diminishing market share – provided the primary B.C. demand is met.

The U.S. strategy over the past 34 years has always been the same: Petition, probe, protect, produce, bleed and settle. File a petition; let the Department of Commerce probe and “find” subsidies; let the Department of Commerce protect the domestic industry by imposing temporary tariffs at high rates that bleed Canadian companies of their profits; agree to discuss a “settlement” that will shrink the supply of lumber in the U.S. market by imposing restraints on Canadian trade once Canadians are persuaded they cannot stand the pain of the investigation and tariffs any longer.

The last time around, the Americans enjoyed a special bonus, a $1-billion gift of Canadian industry money promised and delivered to the U.S. government and industry by former prime minister Stephen Harper’s government. That largesse whetted appetites. The U.S. industry surely wants another deal with a payoff, so Canada already has made an offer of cash to promote the use of wood in the United States, presumably replacing American expenditures for R&D and advertising.

Canada never seems to answer the bully’s threats in this dispute. Instead of warning that there will never again be a cash payout, Canada is offering money before being asked. Instead of warning that the government of Canada will help its industry when under assault, at least providing it credit when the United States begins, yet again, to confiscate and hold Canadian industry money unlawfully, Canada says it will take almost any deal as its way of protecting its industry from bleeding on the legal battlefield. And while the U.S. government bears most of the legal expense against Canada, Canada recommends that its industry get its own lawyers to defend themselves with no help from the government to pay them.

Canada could communicate to the United States that it is not worth its while to litigate – that the U.S. has lost every time it has litigated against Canada in the long softwood lumber dispute, and that Canada will not permit its industry to be worn down again, out of money to pay lawyers and out of cash to keep operating.

Instead, Canada exudes weakness. Last week, Canada sent to Washington its assistant deputy minister and lead trade negotiator, then its Trade Minister, begging the bully to kick but not shoot. It’s no way to act on a playground, and no way to conduct international trade. Predictably, they got nothing. The U.S. industry probably is enjoying the spectacle while waiting for yet a better deal.

By: The Globe and Mail

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