The Softwood Lumber Deal

This is a column by Kim Pollock of the Steelworkers (ex IWA) in BC re the recent US Trade Court Ruling. I was out of the country at the time, but it strikes me that the basic issue (an un-necesary softwood lumber deal) has been incredibly ignored by the mainstream national media. Our lumber industry is about to be hammered as a result of the lethal combination of a high dollar, the export tax and the the US housing downturn. Log exports (free of the export tax) are already soaring as mills close. This issue is huge for rural





On October 13 the US Court of International Trade made it official: the Canada-US lumber dispute is over. Canada won. The tariffs and duties imposed by the US on Canadian lumber exports are illegal. The US must pay back every cent of the $5.2 billion collected from Canada since May 2002.


The same court already ruled in July that the tariffs are illegal and that the US must return at least the money collected since November 2004. In its October 13 verdict the CIT reiterated that judgment and ruled that all the money should be paid back.


Unfortunately, Canadians will not be cracking out the champagne any time soon. The court’s ruling doesn’t matter because Stephen Harper’s government has already volunteered to lose the dispute. Instead of holding on just a few more months to finally reap the full returns of Canada’s successful legal fight before North American Free Trade Agreement panels, the World Trade Organization and US courts, the Harper government locked Canadian lumber producers into a one-sided deal with George Bush.


In its ruling, the CIT justices recount the story of Canada’s impressive and successful legal challenges. In actions at the WTO, NAFTA and finally the CIT, Canada won round after round, appeal after appeal. The Americans’ legal avenues were cut off one by one. Back in April, following the defeat of US “extraordinary appeals” of NAFTA rulings, it appeared that justice would finally prevail. The US would be forced to concede at last that that there is no threat of injury to US lumber producers from Canadian imports, nor is our lumber unfairly subsidized merely because the Crown owns most of our timber rights.


But then, along came the Harper-Bush deal. Instead of the clear, precise legal determination that flowed from the CIT verdicts, Canada was locked into a deal that capped at 34 percent our share of the US market, even though other countries are still allowed to ship unlimited amounts of duty-free lumber to the US.


Canadian firms will pay a 15 percent border tax, not the zero rate that flows from the CIT judgment. Instead of getting back all the duties and tariffs as the CIT says we ought to, Canadians are forced to pay half a billion dollars in protection money to the same US firms that started the dispute. And they also had to sacrifice half a billion to a shadowy fund – described



as a political slush fund that would “grease the wheels” in the White House – to be used by George Bush in the run-up to crucial US Congressional elections.


The CIT’s ruling would have undermined the Americans’ ability to launch future trade actions – forever. We might have used it to negotiate away the threat of future actions by US companies or the US administration. Instead, we’re locked into a deal that could end in 18 months, allowing US corporations to launch new actions in only 30 month from now – using the half billion we gave them.


While the CIT ruling means there is no basis for claiming Canadian companies receive subsidies, the Harper-Bush deal gives the US oversight of Canadian provinces’ forest laws.


So instead of celebrating, today Canadian, companies, workers and forest-based communities merely feel numb. According to the Vancouver Sun’s Gordon Hamilton, “Friday’s court ruling is being viewed by most players as the ultimate irony rather than a chance to kick-start the legal battle again.” With the government implementing the agreement – even though a vote in Parliament making the border tax legal might still be weeks away – Canadian firms are already paying the 15-percent border tax. It won’t be long until producers in the BC Interior and perhaps other regions of Canada start paying a punitive “surge penalty” that adds another 7 ½ percent border tax on top of the 15 percent.


And the deal is already biting in Canada. Last week at least ten wood processing plants closed on this side of the border, throwing out of work some 2500 Canadians. “This is insanity,” says Russ Cameron of the Independent Lumber Remanufacturers Association, a man with an obvious gift for understatement. “We just gave away a billion dollars and subjected ourselves to a border tax. It doesn’t make a lot of sense. What we have done is rejuvenated the coalition, given them half a billion dollars for when we have to fight the next round.”


If we needed any convincing that Stephen Harper doesn’t get it, this should do it: This deal is Harper’s Avro Arrow.



Kim Pollock is a Canadian research representative for the United Steelworkers, based in Burnaby, BC.


One comment

  • The softwood lumber deal has nothing to do with most of the closures in the east. Quebec has reduced its allowable cut by 20% as a result of past overcutting. It is inevitable that mills will close. Moreover, home construction in the US is in a slump and likely to get worse.

    It has always been a major shortcoming of the FTA and NAFTA that each country is only bound to uphold its own trade and competition laws. They can even change them if they want.

    What Canada really needed, and successive governments failed to obtain, was to harmonize these laws with its trading partners and have them apply over all of North America.

    Unfortunately they failed. As a result, we were repeatedly forced into an untenable position with regard to softwood lumber. It is managed trade, not free trade. In that, it is really not all that different than the original Auto Pact except this time it is not to our benefit.

    Continuing to fight this case is pointless. Our timber allocation policies on public lands are dysfunctional. It is time to stop blaming the Americans and focus making our forest policy work.

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