U.S.-Canada softwood lumber dispute

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The topic of softwood lumber exports from Canada to the United States has always been contentious; since 1982 there have been four major disputes.

In 1996 the United States and Canada reached a five-year trade agreement, The Softwood Lumber Agreement. Under its terms, Canadian lumber exports to the United States were limited to 14.7 billion board feet (34.7 million cubic metres) per year. However, when the agreement expired on April 2, 2001, the two countries were unable to reach consensus on a replacement agreement. The United States held that the Canadian and provincial governments unfairly subsidized their lumber industries, because the majority of Canadian lumber is harvested from crown lands. In addition, forestry agreements are set up in order to assure continuing employment in local communities, many of whom are completely dependent on forestry.

On April 25, 2002, the United States Department of Commerce announced it had determined subsidy and anti-dumping rates, with a final subsidy rate of 18.79% and an average dumping rate of 8.43%, to give a combined CVD/AD rate of 27.22%. Specific companies were charged higher or lower dumping rates, including Abitibi-Consolidated (12.44%), Weyerhaeuser (12.39%), Tembec (10.21%), Slocan (7.71%), Canfor (5.96%) and West Fraser (2.18%).

On August 13, 2003, a NAFTA panel released a ruling that said, although the Canadian lumber industry did get a financial contribution from the government, the tariffs imposed by the U.S. were too high. [1]

On April 15, 2005, the Canadian Minister of Trade announces the federal government will give Canadian softwood lumber associations $20 million in compensation for their legal expenses stemming from the dispute with the United States.

On August 15, 2005, the U.S. said it would not abide by the NAFTA decision and continue their activities, prompting Finance Minister Ralph Goodale to say that Peterson is considering Canada's options, which could include litigation or trade sanctions.

On August 30, 2005, the World Trade Organization which had previously ruled against the United States International Trade Commission finding of "threat of injury", has upheld the U.S. International Trade Commission's new "threat of injury" ruling made in December 2004. A NAFTA panel has not reviewed this decision. The legality of the use of the revised December 2004 International Trade Commission decision to continue to impose duties on Softwood Lumber Imports from Canada is before the U.S. Court of International Trade.

The dispute has had its biggest effect on British Columbia, the major Canadian exporter of softwood lumber to the United States.

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Recent Developments

August 26, 2005
Canadian federal cabinet ministers are defiant and unwavering in response to remarks by U.S. Ambassador David Wilkins that they stop their "emotional tirades" in the softwood lumber dispute.

Canadian Trade Minister Jim Peterson said Washington should not confuse emotion with commitment and determination by Canadians to ensure the NAFTA is respected. Prime Minister Paul Martin used strong rhetoric that the dispute was undermining NAFTA and hinted that Canada can explore trade alternatives such as China. "Friends live up to their agreements," Martin said in calling on the United States to respect a ruling under the North American Free Trade Agreement on Canadian exports of softwood lumber.

October 18, 2005
In a speech given while on tour in Canada, BIll Clinton stated his general agreement with Paul Martin's position, stating that if he were the prime minister, he would do little differently. However, he did state that the Canadian government ought to return to negotiations.

October 24, 2005
U.S. Secretary of State Condoleezza Rice visited Ottawa on her first visit to Canada. Canadian Prime Minister Paul Martin talked with her about duties, but no response has been registered.

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