On June 30, 2016, Prime Minister Justin Trudeau and President
Obama issued a Joint Statement on Softwood Lumber. This is a
historic/ongoing trade irritant that could escalate into a trade
war on October 12, 2016.
After October 13, 2016, the United States may initiate new
antidumping and countervailing duty investigations against softwood
lumber from Canada. Canadian producers and exporters will face
voluminous production requirements in terms of information.
The Canadian Government and provincial governments will have to
devote thousands of hours in gathering information on alleged
subsidy programs for the United States Department of Commerce.
Litigation will take years and tens of millions of dollars to
resolve. This is why Canada is willing to enter into a Softwood
Lumber Agreement rather than waiting for the World Trade
Organization to issue decisions on Canada's compliance with
international trade obligations.
In the Joint Statement on Softwood Lumber, the following
information was provided:
On March 10, 2016, we instructed the
United States Trade Representative and the Canadian Minister of
International Trade to intensively explore all options and report
back on the key features that would address the issue;
Canadian and US negotiating teams
have been meeting diligently on softwood lumber over the past three
The U.S. and Canadian federal
governments have made significant advances in understanding our
industries' sensitivities and priorities since March; and
The United States and Canada are
working together to find a path forward that reflects our shared
goals and that results in durable and equitable solutions for
softwood lumber producers from both countries.
The Joint Statement on Softwood Lumber also indicates
what has been discussed in terms of what a new Softwood Lumber
Agreement will look like in terms of key features:
An appropriate structure, designed to
maintain Canadian exports at or below an agreed U.S. market share
to be negotiated, with the stability, consistency and flexibility
necessary to achieve the confidence of both industries;
Provisions for region or company
exclusions if justified;
Provisions promoting regional
policies that eliminate the underlying causes of trade frictions,
including a regional exit process that is meaningful, effective and
timely, recognizing that should an exit be granted, it would be
reversible if the circumstances justifying the exit change;
Provisions to ensure information
collection and exchange to create meaningful transparency;
Institutional arrangements to
administer the agreement;
Effective enforcement tools that are
neutral, transparent, binding, expeditious, and well-timed to
address concerns as they arise;
Associated commitments regarding the
use of trade remedies;
Provisions for appropriate duration
and flexibility to anticipate and adapt to a range of market
situations, industry innovations, and shifting demand
Provisions to address other issues,
such as product scope, re-manufacturers and joint market
The division of market share is the key sticking point that is
mentioned in the Joint Statement on Softwood Lumber. Obviously, the
United States producers want Canadian producers to have as low a
number of possible and Canadian exporters would like the number to
It is worth noting that Chapter 3 of NAFTA prohibits
quantitative restrictions. A quota on exports or a limit on market
share for Canadian goods in the United States is a quantitative
restriction. Quantitative restrictions are permissible after a
successful safeguard case – however, the U.S. lumber
producers would have to prove a surge and serious injury (a higher
level of injury than an antidumping or countervailing duty
A set market share is a big change from what was in the now
expired Softwood Lumber Agreement. What is proposed this time is
worse for Canadians. Whether this issue can be resolved by October
12th is yet to be seen.
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While that agreement mandated export measures on Canadian softwood lumber exports destined for the United States, it also protected those lumber exports from the potential imposition of onerous import measures by the U.S.
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