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United States Unhappy With Canadian Implementation Of Softwood Lumber Agreement

by Glen Shapiro,, New York

09 August 2007

United States Trade Representative Susan C. Schwab announced on Tuesday that the United States will initiate arbitration proceedings under the 2006 Softwood Lumber Agreement (SLA) with Canada, which came into force last year.

The USTR also revealed that she is working with the United States Department of Commerce to take additional measures to monitor Canadian compliance with the SLA.

Earlier this year, the USTR requested formal consultations with Canada to discuss whether that country is really abiding by the US-Canada Softwood Lumber Agreement.

The agreement, which entered into force on October 12, 2006, was supposed to settle a longstanding and acrimonious dispute regarding imports of Canadian softwood lumber

However, multiple concerns have been raised in the US with regard to Canada’s compliance with the agreement. Some provinces, for example, have issued new subsidies to their lumber industries that appear to violate provisions of the agreement.

In addition, the US Trade Representative revealed in April, the Canadian federal government does not appear to have properly implemented the Agreement’s “surge” mechanism, which is designed to increase the tax on softwood lumber imports from Canada when the volume of such imports hits a certain trigger point.

The agreement included a binding arbitration mechanism to resolve disputes such as this. Either the United States or Canada can initiate arbitration by submitting a written request for consultations. If the United States and Canada cannot resolve the dispute amicably within forty days, either party may refer the matter to the London Court of International Arbitration for binding arbitration proceedings.

Commenting this week on the concerns felt by the US government and lumber industry regarding Canada's implementation of the terms of the agreement, Ms Schwab observed that:

"When the governments of Canada and the United States signed the Softwood Lumber Agreement last year, we celebrated the end of over 20 years of litigation."

"It is truly regrettable that, just ten months after the Agreement entered into force, the United States has no choice but to initiate arbitration proceedings to compel Canada to live up to its SLA obligations relating to export volume caps, proper application of the import surge mechanism, and anti-circumvention. Our efforts to resolve these matters through consultations have not been successful. Therefore, we are initiating arbitration proceedings as provided under the SLA."

She concluded:

"In addition, we are working with the Department of Commerce to take steps to monitor implementation of the Agreement and collect information on compliance with its terms. This information will allow us to consider any future steps necessary to ensure that the SLA is fully implemented."

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