The American softwood industry is urging the U.S. International Trade Commission to stand firm against Canada, accusing Canadian producers of flooding the market with subsidized lumber.
As the Washington-based ITC gets closer to issuing its final determination in December in the trade battle, the U.S. lumber lobby is taking the opportunity to hammer Canada.
"The softwood lumber dispute is indeed long-running, but that is because the fundamental problem driving this dispute has not changed: Canadian producers operate in a system that incentivizes production through the government's provision of low-cost raw materials and other assistance," the American group said in a recent 376-page filing to the ITC.
Barring a trade truce between United States and Canada, the ITC is expected to make its final ruling by Dec. 21. In January, the ITC issued a preliminary ruling, saying Canadian softwood is harming the U.S. lumber industry.
Provincial stumpage fees paid by Canadian lumber firms are too low and amount to subsidies, according to the influential U.S. group called COALITION, which stands for Committee Overseeing Action for Lumber International Trade Investigations Or Negotiations. COALITION also said Canada sells softwood below market value in what it calls pervasive dumping.
Canada has steadfastly argued that its industry isn't subsidized while maintaining Canadian lumber shipments help and don't hurt the U.S. sector.
But in its new submission to the ITC, COALITION countered that American producers are being injured because Canadian lumber is unfairly grabbing market share.
"These subsidies allow Canadian producers to produce at levels and sell at prices that are not responsive to or reflective of market signals," the U.S. group said in its filing in late September. "This allows Canadian producers to flood the U.S. market, thereby expanding supply and negatively impacting prices beyond what a natural market would normally bear. In the best of circumstances, U.S. producers pay the price for this distorted market with lost market share and missed opportunities for profit, investment, expansion and employment. In the worst of circumstances, U.S. producers lose their livelihood altogether."
This latest clash marks Round 5 in the cross-border fight dating back to 1982. The 2006 Canada-U.S. softwood lumber agreement expired in October, 2015. The American lumber sector petitioned the U.S. Department of Commerce to begin its probe in November, 2016, after the expiration of a one-year litigation moratorium.
The Commerce Department applied preliminary countervailing duties averaging 19.88 per cent on Canadian lumber for four months, expiring in late August, while preliminary anti-dumping duties averaging 6.87 per cent began in late June and will last until late December.
"In short, this dispute represents a textbook example of the unequal playing field that U.S. trade laws are intended to remedy," COALITION said in its filing to the ITC. "The evidence before the commission in this investigation demonstrates that the domestic industry was harmed by Canadian imports because subject imports were significant in volume and had a significant suppressing effect on price to the detriment of U.S. producers' market share and financial performance."
Unifor, Canada's largest private-sector union, said Monday that the rebound in the U.S. housing market has bolstered Canadian wood shipments but the export rally is being jeopardized. "The expiry of the Canada-U.S. softwood lumber agreement and imposition of new duties, if left unchecked, will dramatically affect Canadian softwood lumber producers' access to their key market," Unifor said in a 40-page report covering a wide range of forestry issues.
The U.S. lumber lobby is seeking to limit softwood shipments to cap the Canadian share of U.S. lumber consumption at a lower level than in the recent past. In 2015, Canada's market share in the U.S. was 30 per cent – below the maximum of 34 per cent allowed under the 2006 softwood lumber agreement.
Most of the trees in Canada are on publicly owned land, in contrast to the United States, where most timber is on private property and companies pay market rates to harvest it, U.S. producers say.
Within Canada, there are variations in the way that provincial stumpage fees are established. While B.C. and Quebec have auction-based pricing systems, Ontario and Alberta do not rely on market-based methods to set their stumpage prices, industry observers say.
U.S. lumber producers say they aren't impressed by any of the timber-pricing systems in Canada because they are administered by provincial governments.