MONTRÉAL - Resolute Forest Products CEO Richard Garneau spoke out against reinstituting the softwood lumber agreement between Canada and the U.S., calling for unrestricted softwood lumber exports from Central Canada (Quebec and Ontario) to the United States.
Garneau, who has been a vocal figure in the ongoing softwood lumber dispute between the U.S. and Canada, does not want to see the agreement resumed or extended. Beginning this month, U.S. firms will be able to sue for relief and seek countervailing duties applied to Canadian exports.
"The last softwood lumber trade arrangement between Canada and the United States was incredibly destructive, particularly for Central Canada. The previous Government of Canada not only agreed to limiting access, through quotas and taxes, it also paid over $1 billion "in ransom" to the U.S. softwood lumber producers, financed by Canadian workers. The purpose of a deal must not be simply an alternative to litigation. It must be to assure fair and equitable trade," said Garneau.
At the center of the dispute is the claim by U.S. firms that Canadian lumber products are unfairly subsidized by local and national governments. Since governments own most of the timber, the prices charged to harvest the timber are set administratively, rather than in the marketplace as in the United States. U.S. firms say this constitutes an unfair subsidy, a makes softwood lumber from Canada subject to U.S. trade remedy laws. A settlement established in 2006 had remedied the situation, but it has expired and a grace period ends this month.
Canada argues that under U.S. trade remedy law, a countervailable subsidy must be specific to a particular industry. Sicne wood is used in so many arena, from railroads to chidren's furniture, a countervailing dutt doesn't apply.
"Managed trade increases volatility, creating an unpredictable and unstable trade environment between two of the world's largest trading partners," says Garneau. Resolute is Canada's largest forest products company and the largest producer of softwood lumber east of the Rockies.
Canada is divided on the subject, largely along goegraphic and market lines. Western Canadian softwood lumber producers benefiting from the voracious market in China were less affected by the trade agreement with the U.S., intended to protect panel producers south of the border from Canadian competition. The agreement,which expired
Extraordinary economic development, logistical limitations mean that Asian markets remain out of reach for Central Canadian producers. Additionally, Western Canadian softwood lumber producers' purchase of 39 sawmills in the U.S., with a production capacity of some five billion board feet, afford them an important measure of insulation from future restrictive measures.
"To put this capacity into context, it is over 150 percent of the total existing capacity of Ontario's sawmills. Canadian demand is simply not enough to absorb all the production of Central Canadian sawmills," says. Garneau. "We need to be able to sell freely to the U.S. Indeed, that was the whole point of the Canada – U.S. Free Trade Agreement and NAFTA. Just about every industry enjoys free trade, except for softwood lumber."
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