Canada right, U.S. right: panel

A ruling by a North American Free Trade Agreement panel last week was treated as a win by both Canadian and U.S. representatives as the dispute over softwood lumber subsidies and duties continues to plague cross-border relations.
The ruling decided that Canada’s provincial stumpage fees (for timber cutting) have a financial impact on Canadian softwood lumber, which Americans feel acts as a subsidy to keep Canadian prices artificially low.
But the ruling also declared the Americans did not calculate their countervailing duties (to counter subsidies) on Canadian softwood products correctly and has given the U.S. Department of Commerce 60 days to review them.
“I’m encouraged by the fact that the NAFTA panel found that the American calculation was incorrect,” said NDP leader and local MPP Howard Hampton. “They weren’t even following American law.”
The latest softwood lumber agreement between Canada and the U.S. expired in March, 2001—and the dispute reached its peak in August of that year when the U.S. levied a 19 percent countervailing duty and eight percent anti-dumping duty against Canadian lumber imports.
“The Americans figured that should drive the price up 25 percent, but it backfired,” said Dale Kaemingh, general manager and part owner of Manitou Forest Products at Barwick.
“It didn’t [raise prices]. All it really did was force the mills in Canada to be that much more efficient, in order to keep selling.
“If anything, the prices actually went down, even with the duty,” he added.
“Obviously, that’s why you see half the mills in Northwestern Ontario shut down or slowing production,” Kaemingh observed, “because they’re only going to operate in the red so long.”
It is hoped that with the recalculation, some of the money spent on the 27 percent in duties on lumber exports to the U.S. will be returned to Canadian producers.
“I don’t think we’ll get all our money back, but a good portion of it,” Kaemingh said.
“I don’t think this [the dispute] can last too much longer,” he added.
“We’re still trying to ship some product because we don’t want to lose our market share,” Kaemingh remarked. “You bite the bullet and take a bit of a loss for some of your product and hope that you get some of your money back that you’re paying into it.”
Last month, a similar ruling also declared the anti-dumping duty was illegal and ordered it to be reviewed. This led to a near deal being reached between the two sides two weeks ago, however, it collapsed due to objections from the American lumber industry.
“It doesn’t seem to matter how many NAFTA rulings, or WTO rulings, are released that say American duties are illegal,” said Hampton, adding the “softwood lumber barons” in the U.S. have the “president’s ear” and will continue to pressure the government not to settle.
“I think the trade harassment policy on behalf of softwood lumber barons in the U.S. will continue,” Hampton warned.
“We get close to striking a deal, they take it back to Washington, and they meet with their people and they come back and say, ‘Sorry, no deal,’” noted Kaemingh.
“They just want so much,” he added. “Our opinion in Ontario is to fight it ’til the end because they’ll never be satisfied.
“We don’t want a settlement where we still have to pay duty,” he stressed. “We’re not subsidized by the government by any means.
“I’m expecting they’ll [both sides] probably wrap up maybe by Christmas,” Kaemingh predicted. “Hopefully, our government won’t sell us short and give in to them for everything they want.
“They’ve broken enough mills already.
“We [the Ontario Lumbermills Association] want to negotiate a deal but we’re not going to sell the farm to them,” Kaemingh concluded. “It’s got to be fair.”
Hampton said the real problem lies in relying so heavily on the American market.
“I think it’s a mistake to put all our softwood lumber eggs in one basket,” he remarked, adding that a medium- and long-term goal should be to re-establish and expand Asian and European markets.
“So we’re not so vulnerable to the trade harassment as we are now.”
Hampton suggested the federal government plan trade missions to both Asia and Europe with the softwood lumber industry in Canada so those ties can be made.