The solidarity of the Canadian lumber industry, fragile at the best of times, cracked on April 25 as talks in Washington to resolve the softwood dispute with the United States pushed towards an April 27 deadline, a Canadian Press story said.
The Montreal-based Free Trade Lumber Council attacked talks aimed at producing a framework for a settlement, saying the terms undercut gains Canada has made in years of trade litigation and jeopardizes the future of the Canadian lumber industry. The CP story, quoting Council executive vice-president Carl Grenier, said Washington appears to be exploiting the new Conservative government’s desire for better Canada-US relations.
“They’re testing the Canadian government’s resolve to improve the relationship,” he said in an interview with CP.
The US government is also pushing for a deal by April 28, the last day it can file a final challenge against a NAFTA ruling that orders an end to countervailing duties against Canadian lumber imports, said Grenier in the CP story.
For Grenier, the proposal carries disturbing echoes of the reviled 1996 Canada-US Softwood Lumber Agreement, negotiated after Canada won the last softwood trade complaint in 1994.
The five-year deal slapped quotas on Canadian exports, with a hefty tax for exceeding them, but didn’t end harassment of Canadian shipments at the border. A lot of companies also felt short-changed by the quota formula.
Details of the proposed framework that began leaking out include an effective cap on Canada’s share of the US lumber market and a border tax on future exports keyed to market share, lumber prices and the exchange rate between the Canadian and US dollar, the CP story said.
The tax, collected by Ottawa and channeled back to producing provinces, would presumably kick in when lumber prices drop and Canadian softwood gains its traditional competitive advantage over American production.
Grenier in the CP story said the exchange-rate mechanism triggering the border tax is a new wrinkle that would also erase any advantage when the Canadian dollar loses value against its US counterpart.
“This would basically ensure that it would be very, very hard to imagine any circumstances where we wouldn’t be paying an export tax on our exports of softwood lumber to the US market,” he said. “I don’t know of any international trade agreements that have a foreign-exchange clause in it.”
Other sectors of the Canadian industry, especially in British Columbia where more than half of Canada’s lumber exports originate, have supported a border tax as a necessary compromise to guarantee access to the US market, the CP story said.
The Americans also reportedly will be allowed to keep more than a fifth of the $5 billion in lumber duties collected since mid-2002.
“What would we be buying for that money?” Grenier asked in the CP story.
Ontario Natural Resources Minister David Ramsey tried to quiet the industry’s jitters on issues such as the exchange-rate element.
“Those comments are based on a particular mechanism that is being considered but it may not be where we land,” he said in the CP story.
“This is a rush, there’s no doubt about it,” Ramsey said of the deadline-driven talks. “Some of the figures that have been bandied around could appear to be quite scary to some of the industry. I very much appreciate that.”
But he stressed the talks only aim to forge the “architecture” of final negotiations, not the lumber agreement itself.
The Free Trade Lumber Council historically has pushed for Canada to press its case before trade panels under North American Free Trade Agreement and World Trade Organization rules.
The council, in the CP story, said that by accepting American demands, Canada is throwing away the victories won in three years of trade litigation.
“The proposals will limit our upside opportunities and marginalize the Canadian industry in a poor market,” the council said in a news release. “This can seriously jeopardize the future viability of the Canadian industry.”
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