US/Canadian Timber Spat Lumbers Along

by Mike Godfrey, Tax-News.com, New York

16 October 2001

The Canadian/US lumber dispute inched closer to a settlement as the US Commerce Department delayed its anti-dumping ruling until October 30th, and British Columbia polished up a proposal it will offer to US negotiators in Vancouver tomorrow.

The dispute centres around a provisional countervailing anti-dumping duty of 19.3% imposed in August on Canadian softwood lumber exports to the US, worth $5bn a year. The Americans insist that BC policy maintains production levels even when market conditions are poor, keeping prices low and threatening the viability of American mills.

British Columbia has the lion's share of exports to the US, and admits that its pricing policies are not totally transparent, whereas other provinces say they already abide by fair market principles. BC is not prepared to move immediately to an open auction system for setting stumpage fees for Crown timber, but will, however, make several suggestions aimed at cutting BC lumber production at the bottom of the economic cycle. Thousands of BC workers have been laid off as a result of the US duty.

John Allan, president of the BC Lumber Trades Council, said that the Commerce Department deferral is a welcome move that will remove the threat of a poisoned atmosphere as negotiations get under way. But John Ragosta, representing US producers, said that such delays in rulings are quite common.

"Do they plan on settling this before Oct. 30? That's not going to happen," Mr. Ragosta said. "The anti-dumping decision is still going to come out before this thing is settled."

Problem is, there is no unanimity among Canadian provinces about what should happen. Canadian Alliance critic John Duncan says that Canada's international trade minister is allowing the US to divide the provinces: "Pierre Pettigrew has abdicated his responsibility and created circumstances whereby the U.S. is now negotiating directly with the provinces in a divide-and-conquer arrangement on softwood lumber," he said on Sunday.

Mr Duncan points out that the federal government has already said it's confident Canada can win the dispute by appealing under NAFTA and WTO rules (a process it has laready started). "So the question is, why is the Canadian federal government allowing officials of the US trade representative to deal directly with the provinces?" Duncan asked.

Mr Duncan said the current approach is a one-way street: "We have the provinces making detailed proposals on stumpage, on forest policy and on land tenure and we have the US making proposals on nothing," he said. "They're reserving any proposals until they've heard from all the provinces, which will allow them to leverage one province on to another."

BC representatives don't agree, saying that the WTO and NAFTA approaches may take up to two years, and that bilateral province/US negotiations are just a way of hammering out the components of an eventual national deal. In the end, they say, any agreement has to be a national agreement under the auspices of the federal government.

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