US trade protectionism likley to threaten softwood lumber deal

SEATTLE (Scrap Monster): The US-Canada lumber trade war is expected to get more complicated, with the US International Trade Commission (ITC) about to determine that Canadian lumber harmed US domestic lumber producers. This could lead to imposition of duties by the US administration.

The US president-elect Donald Trump has announced that he intends to nominate Robert Lighthizer, former deputy trade representative to replace Michael Froman. Known for his protectionist policies, Lighthizer had been the lead counsel in numerous anti-dumping and countervailing duty cases. The appointment of Lighthizer is feared to make trade deals including softwood lumber more intricate. The new administration is unlikely to show interest in reaching a quick deal with Canada on softwood lumber.

Meantime, BC Lumber Trade Council president Susan Yurkovich stated that the new US trade team is likely to be pragmatic about the significant role played by Canadian lumber in US housing construction industry. The Canadian softwood lumber exports accounts for much of the US lumber demand. She hoped that the trade team would take practical decisions in order to protect the interests of US consumers. Also, International Trade Minister Chrystia Freeland said that she looks forward to work closely with the new US administration on all issued including trade and investment.

As per reports, the US ITC is scheduled to arrive at a preliminary decision by Jan 9th on whether Canadian softwood lumber has harmed the US lumber sector. In the event of a positive determination, preliminary countervailing duties will be issued by Feb 21st. Also, preliminary anti-dumping duties, if any, shall be imposed before May 4th.

Failure to reach a bilateral agreement would lead to imposition of trade actions such as imposition of additional duties on lumber imported from Canada or restrictions on lumber import volumes. The imposition of duties will force Canadian timber companies to pay millions of dollars for exporting their lumber. Further, it may lead to job losses in the region due to mill closures. The imposition of duty by the US administration in early 2000s had led to almost 15,000 job losses in the province of B.C alone.

The duties are unlikely to have substantial impact on big Canadian lumber firms. As per sources major Canadian lumber companies including West Fraser, Interfor and Canfor has increased its presence in the US by owning more number of US sawmills during recent times. In fact, Interfor produces more lumber from its US mills than from its Canadian mills. However, small ticket producers would be affected severely.

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.