Canada-U.S. Softwood Lumber Dispute: What's Changed? B.C. Log Export Restrictions (Lers) And Nafta Implications

Introduction

The softwood lumber industry is a vital component of the Canadian and American economies. Both countries have been trading lumber since the 1800s. The softwood lumber dispute is one of the longest and most important trade disputes between the United States ("U.S.") and Canada, affecting the lumber industry to the present day.

Though the central issue in this decades old dispute continues to focus on the alleged subsidization of Canadian lumber producers through what is known as "stumpage" (i.e. the provision of provincially owned government timber to producers for less than the market value of the timber), new threats and opportunities have emerged in this latest round. On one hand, the U.S. Department of Commerce ("DOC") recently found that log export restrictions ("LERs") in British Columbia ("B.C."), including those applicable to timber harvested off private land, confer a considerable countervailable subsidy, thereby adding to the list of issues in contention. On the other hand, it is well known that although the dispute has progressed through four separate rounds of litigation since 1982 (Lumber 1 through Lumber IV), the parties have tended to find more lasting resolution through negotiated settlements. Therefore, the recent launch of renewed NAFTA negotiations may become the forum in which to settle this long standing dispute once and for all.

Lumber V Will Hurt

Historic Context

Many things have changed since Lumber I in 1982 when the American industry filed their first of many countervailing duty petitions against Canadian exports of softwood lumber. Amongst the variability, there has been at least one constant: Canada and the U.S. are still at odds about softwood lumber. Indeed, the political backdrop in 2017 bears a striking resemblance to 1982, when a well-known Republican President (Ronald Raegan) sent cautionary rhetoric throughout the media to his Canadian counterpart, Prime Minister Trudeau, regarding Canada's policies governing its lumber industry. Then, like today, the Canada-U.S. trade relationship was ripe for change, including the potential for major adjustments to the Canadian softwood lumber industry and the federal and provincial laws which govern it.

Following Lumber IV, Canada and the US agreed to a Softwood Lumber Agreement, which came into force in 2006 and expired on October 12, 2015. Lumber V results from the expiration of that Agreement on October 12, 2015, which began a one-year truce during which the countries tried to reach a new deal. The expired Agreement ended a lengthy trade dispute between the two countries during which the U.S. collected approximately $5 billion in anti-dumping duties ("ADDs") and countervailing duties ("CVDs") from Canadian producers. As officials between Canada and U.S. failed to reach a new deal before October 12, 2016, the U.S. Lumber Coalition was free to initiate another round of litigation against Canadian producers.

The Petition

Last November, after the expiration of the litigation standstill, an association of U.S. lumber producers and associations the "Committee Overseeing Action for Lumber International Trade Investigations or Negotiations" filed a softwood lumber petition. The...