Lumber trade little affected even as US-Canada softwood deal expires

VANCOUVER (Scrap Monster): The one-year additional standstill period of the US-Canada Softwood Lumber Agreement came to an end midnight of October 12^th. This has opened up windows of possible legal action by US authorities on Canadian lumber, which they allege, are fairly subsidized. Despite the end of the deadline period, business saw little impact with lumber production remaining as usual. While talks are still on between both sides, a significant delay in arriving at a deal could trigger new trade wars, experts say.

According to Susan Yurkovich, president of the BC Lumber Trade Council, the flow of wood products from Canada into the US was only slightly higher so far this year. She added that the expiry of the deal has not made much impact on the cross-border trade between the two countries. The latest Bloomberg data indicates that softwood lumber shipments from Canada to the US have surged higher by almost 24% since the actual expiry date during mid-October last year. It must be noted that the US lumber production has gone up by only 2% during the same period. Also, value of softwood lumber exports have recorded 27% year-on-year jump during January to July this year to $4.2 billion. The value of exports had totaled $3.3 billion during the corresponding seven-month period in 2015.

The US has been the key importer of Canadian lumber for a long time. During the past decade, Canada had increased their shipments to Asian countries, especially China. However, the economic instability in that country coupled with rise in lumber availability from neighboring Russia has resulted in sharp decline in Canadian lumber shipments to that country. The Canadian lumber firms are likely to shift focus to the US, mainly on account of the anticipated boom in US housing sector in the forthcoming years.

Meantime, Chrystia Freeland, Canada’s Minister of International Trade, stated that the governments are still continuing their efforts to reach an arrangement, although the deal deadline has ended. The government officials from both sides are scheduled to meet in Washington, D.C. this week. Freeland noted that the country is optimistic of reaching a deal with its neighboring nation. She hoped that the new deal would maintain Canadian exports at or below an agreed-upon U.S. market share.

Speaking in the House of Commons, Freeland noted that the country is simultaneously preparing itself for any World Trade Organization (WTO) fight that may become necessary in case of filing of trade petitions by US authorities. She clarified that Canada would fight imposition of tariffs on Canadian lumber in front of the WTO. Freeland further stated that Canada is ready to face any situation.

Meantime, reports indicate that the US forestry trade groups are getting ready for the next softwood lumber battle between the two countries- the fifth one since 1980’s. The US Lumber Coalition has already started the process of collecting documents against Canadian lumber industry.

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.