Canada warns of ‘tit-for-tat’ trade moves to resist US softwood lumber tariff

VANCOUVER (Scrap Monster): Amidst widespread protests against the tariffs imposed on Canadian softwood lumber by the US administration, the Canadian government has determined to fight the move. The administration has threatened to impose several trade actions against the US. Meanwhile, the US action is expected to trigger another trade fight between the two countries. Further, the imposition of duties is feared to result in thousands of job losses in Canadian forestry sector.

Earlier, B.C. Premier Christy Clark had requested the federal government to think seriously about implementing a ban on exports of US thermal coal. In a letter, Prime Minister Justin Trudeau informed that the suggestion is being examined by federal trade officials and a decision would be taken at the earliest. As per government sources, the administration plans to impose broader trade actions including duties targeting different industries in Oregon. The government has already launched an investigation into illegal subsidies to plywood, flooring, wood chips, packaging material and wine businesses. These trade actions are considered to be in retaliation against duties imposed on Canadian lumber and are likely to be withdrawn in the event of a long-term softwood lumber deal between the neighboring countries.

Meantime, the action has invited severe criticism from Colin Robertson, a former diplomat. According to him, any move to tax or ban US thermal coal would affect port revenues. Incidentally, the country has invested millions of dollars in developing these ports over the past decade. Any trade action would stop Americans using out ports, which in turn may lead to loss of hundreds of Canadian jobs.

Meantime, Quebec-based Resolute Forest Products has warned of significant job cuts, in the wake of newly imposed preliminary duty for lumber. According to Richard Garneau, CEO, the company anticipated payment of $17 million this year and $50 million per annum from 2018 on account of recently imposed 12.82% countervailing duties. In addition, the company is already spending $25 million as cost of duties in the wake of 17.87% duties imposed by the US DOC on imports of supercalendered paper. Although the company declined to state how many workers could potentially be impacted, it noted that there would be obvious reduction in sawmill shifts, which in turn will have cascading effect on other jobs. Incidentally, rough estimates provided by Unifor forecast that duties are likely to hurt at least 25,000 Canadian forestry sector jobs. Also, the constrained exports will lead to fall in Canadian lumber prices.

The Trump administration had earlier imposed tariffs up to 24% on Canadian softwood lumber. A duty of 24.12% was applied to West Fraser, followed by Canfor (20.26%), Tolko (19.50%) and Resolute (12.82%). All other Canadian exporters are subject to 19.88% duties with the exception of J.D Irving whose duty is fixed at 3.02%.

The lumber trade dispute between the two countries is dated back to 1982. The two countries had signed a bilateral agreement in September 2006. The original seven-year agreement had an optional provision to extend for a period of two years upon consensus by both parties. Accordingly, the deal which came to an end in 2013 was extended until 2015. As per the terms of the deal, parties were prohibited from engaging in trade actions for one-year grace period, which has already come to an end on 12th October, 2016.