Canada Braces for Additional Duties on Its U.S.-Bound Softwood-Lumber Exports
June 25 2017 - 11:47AM
Dow Jones News
By Paul Vieira
OTTAWA -- Canada is bracing for Washington to slap additional
duties on its U.S.-bound lumber exports, an expected move that
could complicate efforts to quickly renegotiate the North American
Free Trade Agreement, say lawyers and officials.
The Commerce Department is expected to release a decision as
early as Monday. The department has been looking at whether Canada
is selling softwood lumber, used mostly in the construction of
houses, into the U.S. at below-market prices.
The anti-dumping duty, a type of tariff on imports designed to
protect U.S. producers from unfair competition, would come just two
months after the Commerce Department found Canadian lumber
producers benefited unfairly from government subsidies. After that
finding, the Trump administration slapped an initial 20% tariff on
imported Canadian wood.
A new ruling against Canada could push the average tariff on
Canadian softwood lumber above 30%, according to trade lawyers at
law firm Dickinson Wright. A Canadian government spokesman said he
wouldn't speculate on what the Commerce Department will decide.
In 2016, the U.S. imported over $5 billion worth of Canadian
softwood lumber.
U.S. and Canadian officials continue to talk about a negotiated
settlement, although Canadian Foreign Minister Chrystia Freeland
said recently the two sides remain far apart. Trade watchers worry
that letting the current row drag on any longer threatens to cast a
pall over trilateral talks between the U.S., Canada and Mexico for
a revamped Nafta, which formally begin in mid-August.
"It would certainly be an advantage to both countries to settle
the softwood issue outside of the Nafta negotiations. Having them
injected into the Nafta negotiations would be a mistake because it
would add an enormously complex issue to those talks," said
Lawrence Herman, a Toronto-based trade lawyer and former Canadian
diplomat.
The bulk of wood used to produce Canadian softwood lumber comes
from forests on publicly owned land. Canada's provincial
governments, which have responsibility over forest management,
charge private companies a fee in exchange for the right to
harvest.
This regime has fueled decades of complaints from the U.S.
government and lumber industry. The U.S. argues the fees charged by
the province tend to be significantly lower than they would be in
an open-market environment, and hence gives Canadian producers an
unfair advantage over their U.S. peers. More than two-thirds of
U.S. lumber comes from privately held land and is sold on a market
basis.
The U.S. has also complained about rules that limit the export
of raw logs in the west-coast province of British Columbia, where
most Canadian softwood lumber is located. The regulations
artificially suppress the price of Canadian lumber, U.S. producers
say.
Commerce Department Secretary Wilbur Ross has said the
decadeslong disagreements over softwood lumber illustrate the
shortcomings of Nafta, which President Donald Trump called a
"disaster" and now seeks its renegotiation. U.S. Trade
Representative Robert Lighthizer told Congress last week the
administration intends "to move very quickly" on Nafta talks.
Mr. Ross is said to be engaged on the softwood-lumber issue, and
in frequent touch with senior Canadian officials such as Ms.
Freeland and Canada's chief envoy in Washington, David
MacNaughton.
He told The Wall Street Journal this month the administration is
"trying to solve some of the little disputes with Canada," much
like the U.S. did with Mexico over sugar. With that country, a
tentative pact caps the amount of refined sugar that Mexico can
send to the U.S.
"Disputes are resolvable if people are of reasonable will and
are willing to make reasonable compromises," Mr. Ross said.
Canada will only agree to a deal that works for its domestic
lumber industry, which ships roughly two-thirds of its exports to
the U.S., Ms. Freeland has said.
The U.S. Lumber Coalition, an industry group, said it wants the
amount of "subsidized" Canadian lumber entering the U.S.
limited.
"The Americans are willing to cut a deal. They would sign a deal
tomorrow but they want a quota. It's Canada that's unwilling," said
Brenda Swick, a Toronto-based trade lawyer at Dickinson Wright.
The softwood row dates back decades, she added, "and it is its
own beast, and I can't see how it would be resolved in any Nafta
renegotiation."
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
June 25, 2017 11:32 ET (15:32 GMT)
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