By Carlton Joseph
The U.S. government has launched investigations to determine whether softwood lumber imports from Canada were dumped into the country and harmed the American forestry sector. The U.S. Commerce Department (DoC) says it will work with the U.S. International Trade Commission to examine allegations that wood was dumped at less than its fair value and that Canadian forestry firms received unfair financial assistance from governments. Mr. Trudeau responded “Let’s not pretend we’re in a global free market when it comes to agriculture. Every country protects, for good reason, its agricultural industries.”
This conflict is not new and began in 1982 when the US Lumber Industry Group petitioned the DoC. which found that Canada’s stumpage system was not specific to any single industry and thus not subject to anti-subsidy duties.
The softwood lumber industry is vital to the Canadian economy. It has provides employment for thousands of people. The overall forest industry has contributed to direct jobs for approximately 232,700 individuals. Indirectly, 289,000 people have been hired to work in other sectors that depend on Canada’s forests.
Unlike the US, the provincial governments own most timber in Canada; therefore, the prices charged to harvest the stumpage fee are set administratively. In the US private industry owns the timber and prices are set through the competitive marketplace. The US Lumber Industry Group believes that provincial ownership of the timber is socialism and that the timber should be placed under private industry control.
The U.S. is heavily dependent on Canada’s lumber, and the needs of the US outweigh the domestic supply. Although the DoC ruled against the Lumber Industry Group in 1982, Canada agreed with preliminary terms that the US would lift countervailing and anti-dumping duties provided lumber prices continue to stay above a certain range. Below the specified range, a mixed export tax and quota regime would be implemented on imports of Canadian lumber.
In spite of these preliminary agreements the US lumber Industry Group has taken the Canadian Lumber many times to the various legal bodies that the US and other countries have organized to settle trade disputes. In 1986, the US trade industry group again petitioned the US International Trade Commission. This time the Commission ruled that Canada’s exports unfairly, impacted American producers. and set a preliminary duty of 15 per cent. However, before the subsidy was imposed, the United States and Canada agreed on a Memorandum of Understanding (MOU) that created a phased tariff. Canada later withdrew from this MOU.
In 1996, the United States and Canada reached a five-year trade agreement. Canadian lumber exports to the United States were limited to 14.7 billion board feet (34.7 million cubic metres) per year. This agreement expired on April 2, 2001 and the two countries were unable to reach consensus on a replacement agreement.
In 2003, the World Trade Organization (WTO) issued a non-binding ruling in Canada’s favor with regard to U.S. anti-dumping duties. The decision was appealed to a legally binding NAFTA panel. This panel ruled that there was no “world market price” for timber, as the DoC had asserted, and it was therefore improper for DoC to calculate duties based on U.S. timber prices rather than Canadian market conditions. The U.S. government challenged this decision before an extraordinary challenge committee; this committee issued a unanimous decision against the United States.
On August 15, 2005, the United States said it would not abide by the NAFTA decision. A tentative deal was reached in July 2006, in which Canada got $4 billion of the $5.3 billion it lost because of the penalties with no additional tariffs to be imposed.
In November 2016, CNN obtained a leaked memo from the Trump transition team showing that Trump was being advised to include the softwood lumber dispute during any renegotiations on NAFTA and to get more favorable terms for the United States. Recently, Commerce Secretary Wilbur Ross imposed new anti-subsidy tariffs averaging 20 percent on Canadian softwood lumber imports. In response, the Canadian Federal government indicated that it was exploring the possibility of banning United States coal from being exported through Canadian ports and imposing a retaliatory tariff on lumber exports from the US.
Finally, the WTO represents the rules-based regime of the policy of economic globalization. The central operating principal of the WTO is that commercial interests should supersede all others. The US Lumber Industry Groups have lost their cases in the courts that were established to settle these disputes. They have refused to accept the courts rulings. There is a pattern to these court battles, when a Republican President is installed in the US these “free trade,” privatization battles become aggressive. In the case of Lumber, the US is dependent on Canada’s lumber.
When the US does not control a resource that they need, they demand that any government controlling this resource must open it to private enterprise. Once released, US capitalists move in and purchase it. In the current environment of a low Canadian dollar versus the US dollar, the US capitalists will purchase Canadian lumber plantations, cheaply.
The US lumber Industry Group has been told by its own US DoC and the WTO that the Canadian softwood industry is not subsidized. The Lumber Industry Group wants to own and control this resource, and will continue petitioning the courts until they get the result they desire: Privatization of the Canadian Lumber Industry.
Canada and Mr. Trudeau has been standing up against this attack, I hope that the Caribbean community support him in his stand against this bullying.
(Trinidad-born Carlton Joseph who lives in Washington D. C., is a close observer of political developments in the United States.)