US-Canada softwood lumber deal before fall deadline looks extremely challenging

VANCOUVER (Scrap Monster): The Canadian chief negotiator in the softwood lumber talks with the US has stated that the two sides are yet to come close enough on several key issues, despite continuous deliberations between the two sides. Martin Moen added that a deal is unlikely to be reached between the two parties before the fall deadline. It must be noted that the one-year grace period of the already expired deal is set to expire by mid-October this year, following which the US is entitled to impose tariff on softwood lumber imported from Canada.

Addressing the special meeting of the all-party, international trade committee, Moen noted that constructive discussions have been taking place for the past several months. The talks have led to better understanding of the concerns expressed by both the countries in the event of a renewal of the deal. Officials from both countries have held a dozen face-to-face meetings so far. The next meeting is scheduled to be held on August 25^th, Moen added.

However, there are considerable gaps that are needed to be bridged for a new settlement to be reached between the two countries. The negotiations are currently centered on the structure in which certain export quotas and charges are to be used. The talks on regional exclusions for certain provinces and territories are also underway. Some provinces have already demanded for a provision in the deal that would allow them to get out of the deal even after it is implemented. Also, agreement has to be reached on several other key issues including treatment of high-value products and joint-market development.

Moen stated that there seems to be differences within the industry across Canada. A national consensus needs to be arrived at, as soon as possible. The Conservatives had proposed to conduct a discussion involving International Trade Minister Chrystia Freeland, industry stakeholders and government officials from each province in order to develop a national consensus on the new deal. However, the proposal was turned down by the International Trade Committee, which noted that such talks would duplicate the ongoing process and lead to further slowdown of negotiations.

Meantime, Canadian stakeholders have clearly stated their preference for ‘no deal’ over a ‘bad deal’. Accordingly, Moen cautioned the stakeholders to get them prepared for a situation where no deal is likely reached between the two countries. This could potentially lead to risks of trade investigations and possible litigations to follow.

It must be noted that US Senator Rod Wyden had recently urged the US administration to implement tougher trade policies against Canadian lumber imports. He had alleged that Canada has long been engaged in a system that allows massive subsidies aimed at protecting their domestic industry. He had further stated that imports of lumber from Canada at low market prices continue to hurt US competitors. Earlier, 25 US Senators had written a joint letter to U.S. Trade Representative Michael Froman, seeking a reduction in the cap on Canadian lumber sales.

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, that is about to come to an end on 15th October, 2016.