WTO decision on softwood lumber cheered by Canadian producers, denounced in U.S.

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Ontario Construction News staff writer and The Canadian Press

The World Trade Organization dispute-resolution panel declared Monday that the U.S. Department of Commerce and the U.S. International Trade Commission were wrong in 2017 when they imposed countervailing duties on Canadian softwood lumber exports.

Canadian lumber producers cheered the latest decision Monday from the World Trade Organization on Canada’s long-standing dispute with its largest trading partner over exports of softwood lumber — a finding the United States quickly denounced as unfair, biased and flawed.

John Yakabuski, Ontario Minister of Natural Resources and Forestry, and Vic Fedeli, Minister of Economic Development, Job Creation and Trade, issued the following statement in response to the World Trade Organization (WTO) panel’s decision:

“Ontario welcomes the decision made by the WTO panel that the countervailing duties the U.S. placed on Canadian lumber exports violate the U.S.’s WTO trade obligations. This is an important step in ensuring the ongoing success of our forestry industries, which play an important part in our economy. As we move towards economic recovery, it has never been more important to vigorously defend and encourage this sector.”

The WTO dispute-resolution panel declared that the U.S. Department of Commerce and the U.S. International Trade Commission were wrong in 2017 when they imposed countervailing duties on Canadian softwood lumber exports, having concluded that Canada’s regulated forestry industry amounts to an unfair subsidy for Canadian producers.

In particular, the panel agreed with Canada’s argument that Commerce made a number of errors in determining the benchmark Canadian timber prices it used to determine whether producers north of the border were paying adequate stumpage fees to the provinces.

“For more than three years, our industry has paid billions of dollars in countervailing duties that [Monday’s] decision confirmed should never have been paid in the first place,” B.C. Lumber Trade Council president Susan Yurkovich said in a statement.

“This report is a scathing indictment of the U.S. Department of Commerce’s subsidy findings and the biased process it followed in reaching them.”

The 2017 flashpoint over countervailing duties was just the latest flare-up in a cross-border trade dispute that has raged between the two countries for nearly 40 years.

U.S. producers have long argued that Canada’s system of provincially regulating stumpage fees, which are paid to the Crown in exchange for the right to harvest timber, unfairly subsidizes an industry that is privately owned and operated in the U.S., with pricing set by the competitive marketplace. As a result, the U.S. argues, imports of Canadian lumber should be subject to countervailing duties.

The WTO report, which comes less than two months after the new U.S.-Mexico-Canada Agreement formally replaced the NAFTA trade deal, also follows the U.S. decision to restore 10 per cent national-security tariffs on exports of Canadian aluminum. The U.S. has accused Canada of violating the terms of the agreement that saw steel and aluminum tariffs lifted in 2018.

Deputy Prime Minister and now Minister of Finance, Chrystia Freeland had said Canada ‘intends to swiftly impose dollar-for-dollar countermeasures’ in response to Trump’s decision to restore a 10 per cent tariff on Canadian aluminum imports. (Stu Mills/CBC)

Similarly to the aluminum sector, Canadian exports fill a critical role in the U.S., where demand for lumber significantly outstrips domestically available supply.

“For three decades, we have been saying that the U.S. trade remedy process is flawed. Unfortunately, this is just the latest chapter in the ongoing attack on the Canadian lumber industry,” Yurkovich said.

“Each of the prior two lumber disputes ended with neutral, international tribunals issuing rulings that forced Commerce to rescind their flawed and unsupported subsidy findings for similar reasons.”

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