US-Canada Lumber Agreement: The Devil Is In The Details

by Mike Godfrey, Tax-News.com, Washington

21 June 2006

A final agreement that would put an end to a long-standing softwood lumber dispute between the United States and Canada could still be many weeks away, as negotiators attempt to wrap up the finer points of the deal.

Reports in the Canadian media suggest that the negotiations to flesh out the the initial agreement struck almost two months ago by the two governments are not going as smoothly as had been hoped. Negotiators have already missed a deadline for the completion of the legal text of the deal, and it is believed that the two camps are currently at odds over the details of a new quota system and a dispute resolution mechanism.

Canada's International Trade Minister David Emerson has been quoted as stating that a final agreement is "a little doubtful right now," although he has suggested that this is more down to the fact that Canada's parliamentary summer recess, which begins this week, will put the brakes on the process. Lawmakers in Ottawa are not due to return until September.

"We're very close - I'm very optimistic," Emerson added. "We will continue to work throughout the summer, if necessary."

According to Mr. Emerson it is now just a matter of finalising "prickly legal matters" before a final deal can be struck.

In April, the US and Canada agreed on the core terms of an accord which would end US tariffs on Canadian lumber imports. Washington had been arguing that Canadian provinces gave sawmills an unfair subsidy by not charging market rates to harvest timber on government land. The US has responded by charging tariffs on Canadian lumber exports worth some US$4.6 billion in 2002, initially at a rate of 27.2%.

Under the agreement, both countries will end all litigation over softwood lumber and provide for unrestricted trade in favorable market conditions. In a weak lumber market, Canadian exporters will pay export taxes that are adjusted as prices fall. Canadian provinces can also choose to pay lower export taxes by limiting exports below recent levels.

The agreement will also include provisions to address potential Canadian import surges, provide for effective dispute settlement, distribute the duties currently held by the United States, and discipline future subsidies and trade cases.

Washington has collected more than $4 billion in duties over the past four years.

Recommended