Canada braces for ‘tough times’ in U.S. lumber dispute
With warnings that job losses are inevitable, Ottawa looking at assistance to help Canada’s lumber industry after Washington slaps tariffs averaging 20 per cent on Canadian softwood.

thestar.com
By BRUCE CAMPION-SMITH
April 25, 2017

U.S. President Donald Trump unleashed a fresh offensive against Canada on Tuesday, denouncing Ottawa’s “rough” trade practices as his administration rekindled the long-simmering softwood lumber dispute by slapping new duties on Canadian lumber.

“People don’t realize that Canada has been very rough on the United States. Everyone thinks of Canada as being wonderful and so do I. I love Canada. But they’ve outsmarted our politicians for many years,” Trump said Tuesday.

In a White House meeting with farmers, Trump pledged to open foreign markets to their products and used the session to highlight his complaints with Canada over border trade in dairy and lumber. He complained that dairy farmers in Wisconsin, New York and other border states are not able to sell their products in Canada.

“This has been going on for a while and we’re not going to put up with it,” he said. “Separately, we will be putting a very big tariff on lumber, timber coming into this country.”

“We don’t want to be taken advantage of by other countries. That’s stopping and it’s stopping fast,” he said.

Asked whether he fears a trade war with Canada, Trumped responded, “No, not at all.”

But trade tensions have ratcheted up sharply over the past week. After an initially encouraging start to Canada-U.S. relations under Trump, Ottawa now finds itself fighting a two-front trade war laced with heated rhetoric, costly new duties and veiled threats of more action to come.

On Tuesday, Canadian officials scrambled to respond to Washington’s decision to impose countervailing duties averaging 20 per cent on Canadian softwood products, the latest chapter in a trade dispute that has spanned decades and successive governments on both sides of the border.

It means that Canadian lumber exports, worth about $5 billion a year (U.S.), will now be slapped with $1 billion in duties.

Justin Trudeau spoke with Trump by telephone Tuesday and in that call, the prime minister “refuted the baseless allegations by the U.S. Department of Commerce and the decision to impose unfair duties,” according to a summary of the call provided by Trudeau’s office.

“The Prime Minister stressed that the Government of Canada will vigorously defend the interests of the Canadian softwood lumber industry, as we have successfully done in all past lumber disputes with the U.S.,” the summary said.

Trudeau’s office said the two leaders agreed on the importance of reaching a negotiated agreement on the lumber dispute.

The Americans have complained that Canadian softwood lumber, typically harvested off Crown lands, is subsidized through artificially low stumpage fees.

But Natural Resources Minister Jim Carr said those complaints are “unfounded” and said the federal government “disagrees strongly” with what he called “punitive” duties.

“We will continue to press our American counterparts to rescind this unfair and unwarranted trade action,” Carr said.

One federal official said the fact that lumber prices are at a record high will help dampen the effect for now. But if past disputes are any indication, job losses are inevitable, Carr said.

“We will focus our efforts on doing whatever we can to ease the impact of those job losses,” Carr said. “That is the reality of this countervail, and it is going to result in some tough times for some operators across the country.”

But Canadians argue that driving up the price of lumber will have consequences south of the border too, making new family homes more expensive and costing jobs in the construction industry.

Additional trade penalties on Canadian lumber could be coming when the U.S. Commerce Department decides in June whether to impose anti-dumping duties.

In Washington, Commerce Secretary Wilbur Ross struck a tough line, praising Canada as an “ally” but accusing it of engaging in unfair trade practices.

“They are a close ally, they are an important ally. They’re generally a good neighbour. That doesn’t mean they don’t have to play by the rules,” Ross told reporters in a White House briefing.

“Things like this I don’t regard as being a good neighbour, dumping lumber,” he said.

Ross denied the lumber dispute was driven by Trump, who has vowed to protect American jobs and industry.

“It’s not a question of President Trump messing with the Canadians. We believe the Canadians violated legitimate practice,” Ross said.

The lumber dispute comes just a week after Trump complained about U.S. dairy products being shut out of the Canadian market, setting the stage for job losses for American farmers.

Asked whether this was linked to the sparring over dairy products, Ross said the investigation into Canadian lumber predates that spat. But he conceded that “everything relates to everything else when you’re trying to negotiate.”

Trump came into office pledging to either renegotiate NAFTA or tear it up. Ross said the two ongoing disputes highlight the need to get those negotiations underway quickly.

“If NAFTA were functioning properly, you wouldn’t be having these kinds of very prickly, very unfortunate developments back to back. In that sense, it shows that NAFTA has not worked as well as it should,” Ross said.

Reminded that dairy is not covered under the NAFTA, Ross added, “that’s one of the problems.”

He said no other trade actions against Canada are on the horizon and, as Trump did, he downplayed the possibility of a broader trade war between the two countries.

“We look forward to constructive discussions with the Canadians as we get into NAFTA,” he said.

Carr said the government is weighing all possibilities to fight the U.S. duties, including a challenge through the World Trade Organization or under provisions set out by the North American Free Trade Agreement.

But those challenges may have to wait until after the U.S. finalizes its tariffs, which may not happen until the end of the year.

Softwood lumber is an issue that has bedeviled past presidents and prime ministers. An agreement reached in 2005 between the two countries bought some peace, but the deal expired in 2015.

A hurried attempt to reach a new, negotiated deal before last November’s U.S. election was unsuccessful. Canadian officials say Ottawa remains interested in a “reasonable” agreement, perhaps one that restricts the share of Canadian lumber in the U.S. market.

And Tuesday, Trump was again complaining about Canada’s dairy practices and threatening that the U.S. would take action. “Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!” the president said on Twitter.

Ross said the U.S. is eyeing action here too. “We are looking at whether there are measures we can do to correct that,” he said.