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Softwood dispute to spell pain for Canada, chief trade negotiator warns

A section of forest is harvested by loggers near Youbou, B.C., on Jan. 14, 2015. Canada’s top negotiator in the softwood lumber trade dispute with the United States says discussions around the disagreement have waned since President Donald Trump took office.

JONATHAN HAYWARD/THE CANADIAN PRESS

Lumber prices have surged in anticipation of U.S. tariffs on Canadian softwood exports, setting the stage for what Canada's chief trade negotiator worries will be a period of pain for forestry workers and communities across the country.

Kirsten Hillman described looming preliminary duties expected to be imposed by the United States as "artificial barriers" intended to reduce Canada's lumber shipments south of the border.

"They're not able to supply their own market. Their demand for lumber is never going to be satisfied by their own supply," said Ms. Hillman, assistant deputy minister of trade policy at Canada's Department of Global Affairs.

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She made the comments on Friday to delegates at the annual conference of the Council of Forest Industries, which represents producers in the B.C. Interior.

While Ms. Hillman didn't forecast how high the duties might be, industry analysts say the combination of countervailing and anti-dumping duties could total from 30 per cent to 40 per cent.

"The U.S. industry wants to constrain Canadian exports. They want to constrain Canadian share of the U.S. market," she said. "Those artificial barriers lead to cycles of litigation. The cycles of litigation cause pain and damage and loss until we're able to negotiate again. We consistently win as everybody knows in this litigation, but it's cold comfort when losses are felt across the country."

Canada had a 32-per-cent share of the U.S. lumber market last year, according to the B.C. Ministry of Forests.

Last November, a petition from a group led by the U.S. Lumber Coalition demanded that the U.S. Department of Commerce and the U.S. International Trade Commission challenge what it calls Canada's unfair lumber subsidies.

The Canadian government, industry and the provinces say they will vigorously defend Canada's forestry sector.

The new Trump administration, however, is still in the process of appointing key trade officials, Ms. Hillman said.

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"Unfortunately, right now, with the change of administration, there isn't much of a conversation happening," she said.

Lumber prices have already jumped before the preliminary determination on countervailing duties expected on April 24 from the U.S. Commerce Department, meaning higher costs for U.S. home builders.

"Buyers are reportedly up in arms with the price hikes," Daryl Swetlishoff, forest-products analyst at Raymond James Ltd., said in a research note on Friday. "However, Canadian producers are unapologetic – putting the blame squarely on U.S. protectionism."

Prices for benchmark two-by-fours made from Western spruce, pine and fir surpassed $400 (U.S.) for 1,000 board feet for May delivery. Benchmark prices have jumped more than 10 per cent recently.

In February, B.C. Premier Christy Clark appointed former federal cabinet minister David Emerson as B.C.'s trade envoy to the United States.

In remarks to conference delegates on Friday, he expressed frustration over the long-running softwood dispute.

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"We're dealing with what you could lovingly call a hardy perennial, but I think it would be more accurate to refer to it as a mutating form of bacteria that has become all but antibiotic-resistant," Mr. Emerson said to laughter. "We're in a situation where trade law adjusts every time we think we've found a basis on which to keep winning. The game rules have changed."

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About the Author

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More

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