Logs are piled up at West Fraser Timber in Quesnel, B.C.JONATHAN HAYWARD/The Canadian Press
It's nice that Justin Trudeau has become the It Guy in Washington.
For a couple of days, at least, Canada gets to bask in the warm glow of a U.S. official visit.
Mr. Trudeau is seen by many Americans as the anti-Trump – a youthful and progressive Gen X leader with a "positive and optimistic vision," as U.S. President Barack Obama put it. We are told Mr. Trudeau and Mr. Obama have struck up a "special relationship."
Don't be seduced by the back-slapping and the pomp. The U.S. spotlight will fade. Around Washington, all those Canadian flags have already been folded up and put back in storage. This week's White House bromance glossed over an embarrassing blot on Canada-U.S. relations – the intractable softwood lumber dispute.
The perennial U.S. industry gripe is that Canadian lumber is subsidized because provincial governments, who control timber rights, don't charge Canadian lumber companies enough to cut trees on Crown land. But unlike many other commodities, there is no recognized world price for timber. So who's to say what a subsidy is?
Mr. Obama insisted the dispute does not "define" the Canada-U.S. relationship. And he vaguely promised the issue would get resolved "in some fashion."
That's a problem. Canada's right to sell as much lumber as it wants in the United States – a country that doesn't produce enough of its own – should not be in question. This is 2016, after all. The issue has been litigated four times since the early 1980s, and each time Canada has won, exonerated of illegally subsidizing its exports by various arbitration panels and agencies.
Two free-trade deals have failed to liberate the lumber trade, worth $6-billion to Canada last year.
And forget the notion of a parallel in Canada's protectionist dairy and poultry industry, which is shielded by a massive tariff wall. Those tariffs may be misguided, but they're sanctioned by the World Trade Organization, and Canada pays a steep price because it's virtually shut out of export markets.
There is no similar example of managed trade between the two countries.
Softwood is a rigged game of "heads I win, tails you lose" for Canada. Canadian lumber exporters won the last round in 2006, but while the case was being litigated they still forked over $5.3-billion (U.S.) in duties. Desperate to get the money back, Canada would eventually agree to voluntarily limit future lumber exports, mainly through an export tax that ratchets up with the price of lumber. Only $4-billion of the duties were returned to Canadian producers.
That managed deal expired in October, leaving trade free for now. The U.S. lumber industry must wait at least a year to launch a new trade case against Canada.
Canadian lumber producers were willing to live with a rollover of the current deal, making the calculation that stability beats the cost and uncertainty of another round of litigation. But the U.S. industry isn't interested, and reportedly wants a hard quota.
The U.S. calculation – as it has been in the past – is that another trade challenge will ultimately get them a better managed trade deal. The U.S. Commerce Department can apply preliminary duties, based on minimal evidence that Canadian lumber is subsidized. Last time around, it took five years of litigation and appeals to get them removed.
"What is the incentive for the U.S. industry to agree to a new deal now? Nothing," argued Brenda Swick, a trade lawyer at Dickinson Wright in Toronto. "Just think of the economics. As long as there is that payout on the American side, there won't be a negotiated settlement."
The irony is that another litigation loss would be a victory for the U.S. industry because duties, even temporary ones, inflate lumber prices and protect their market share.
"The American producers are keen to bring another case, which they will win even if they eventually lose," said Lawrence Herman, a Toronto trade lawyer. "While Canadians are fighting the case, the Americans are sure to regain some of the market share now taken by Canadian imports."
This week, Mr. Trudeau and Mr. Obama directed their officials to "intensively explore all options and report back within 100 days on the key features that would address this issue."
Don't bet on it. Both sides know where this is headed because they've been there so often before, and no amount of It-power can wish it away.