Canada, US Sign New Lumber Agreement

by Mike Godfrey, Tax-News.com, Washington

25 January 2012

The Canadian government has signed a new agreement securing access to the US market for softwood lumber until 2015, which it is hoped will bring stability and predictability to the industry.

Ed Fast, Canada's Minister of International Trade and Minister for the Asia-Pacific Gateway, and the US Trade Representative Ron Kirk signed on January 23 a two-year extension to the 2006 Canada-US Softwood Lumber Agreement (SLA). The agreement, which entered into force in October, 2006, had been set to expire in October, 2013. The new deal extends the SLA without modification.

According to Fast's department, the SLA has served the Canadian industry well in difficult economic circumstances. It maintains stable and predictable access to the US market, protects the ability of provinces to manage their forest resources, and provides for independent and impartial rulings on matters relating to softwood lumber trade disputes.

Under its terms, money collected from export charges remains in Canada and is subsequently distributed to provinces. Canadian figures show that the agreement has returned over CAD5bn (USD4.94bn) to Canadian exporters since it came into force, and has generated over CAD1.3bn in export charge revenue for Canada's provinces.

The new text does not explicitly foresee further extensions beyond October, 2015. However, the two parties intend to consult before that time on whether a further extension would be appropriate. The Canadian government will consult with the provinces and industry on the next steps before the expiration of the extended agreement.

Commenting, Fast said: “The extension of the Softwood Lumber Agreement is great news for Canadian lumber workers and their families. This extension agreement will bring much-needed stability and predictability to the lumber industry. By extending the agreement, we are sending a clear message that our government is committed to securing predictable access to the US market and strengthening the financial security of Canadians.”

“With one in five Canadian jobs generated by trade, our government is strongly committed to helping the forestry sector, and other sectors of our economy, expand and succeed in markets around the world. That’s why we’ll continue standing up for our exporters in markets around the world, including the United States—fighting for their interests and opening doors to new opportunities that will create jobs and prosperity in communities across Canada,” Fast concluded.

In January, 2011, Canada faced allegations that it was under-pricing lumber entering the US market. The US alleged that, by selling timber harvested from public lands in the interior region of British Columbia for prices below those stipulated in the SLA, Canada provided a benefit to Canadian softwood lumber producers in circumvention of the export measures provided for in the SLA.

Softwood lumber exports to the US totalled CAD2.6bn in the first 11 months of 2011. Exports from British Columbia accounted for almost 58% of that total, with Quebec contributing 16%, New Brunswick and Alberta 9% each, and Ontario almost 6%. The Canadian wood products industry and its supporting industries employed 164,000 people in 2010; 33% of these were in British Columbia, and 28% in Quebec. Canadian production in the first 10 months of 2011 was an estimated 19bn board feet.

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