U.S. and Canada Sign Softwood Lumber Agreement
The Office of the U.S. Trade Representative (USTR) has issued press release announcing that U.S. and Canadian officials signed a Softwood Lumber Agreement (SLA) on September 12, 2006, which aims to end a two-decade trade dispute between the countries and enhance the competitiveness of the North American lumber industry.
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According to the USTR, once the SLA is implemented, 99% of U.S. trade with Canada will be dispute free.
(The State Department's Washington File explains that the U.S. and Canada's softwood lumber dispute centered around the U.S.' claim that Canada was giving its sawmills certain subsidies. In retaliation, the U.S. had been collecting tariffs on Canadian exports.)
Canadian Parliament Must Approve SLA, U.S. Must Revoke Duty Orders, Etc.
Canada's Department of Foreign Affairs and International Trade (DFAIT) states that Canada must now take steps to complete domestic implementation of its commitments under the SLA. For Canada, this means introducing the legislation required to implement Canada's commitments under the SLA when Parliament resumes - specifically, the authority to impose the necessary charges, allocate quota to Canadian exporters and issue export permits.
DFAIT further explains that the U.S. will not require any legislative measures to implement the SLA; however, it must now revoke the antidumping (AD) and countervailing (CV) duty orders, among other things.
Canada to Collect Tax or Limit Exports if Market is Unfavorable, Etc.
According to the USTR, under the terms of the SLA, all litigation arising out of the AD and CV duty orders will be terminated or withdrawn, and the AD/CV tariffs will be replaced with a combination of export taxes and volume restraints - when favorable conditions in the lumber market do not exist, Canadian exporting provinces can choose either to collect an export tax that ranges from 5-15% as prices fall or to collect lower export taxes and limit export volumes.
In addition, the SLA includes provisions to address potential Canadian import surges and provide for effective dispute settlement.
Most of the Collected AD/CV Duty Deposits to be Returned to Importers of Record
The SLA also outlines the distribution of the AD and CV duty deposits that have been collected and are currently held by the U.S. Specifically, the SLA requires that $450 million be disbursed to promote meritorious initiatives in the U.S. Such initiatives include assistance for low-income housing and disaster relief, assistance for timber-reliant communities, and assistance in the development of forest management practices to promote sustainable forestry.
In addition, $500 million will be disbursed to the Coalition for Fair Lumber Imports, the petitioners in the underlying dispute, and $50 million will be disbursed to a bi-national industry council.
The SLA also provides that approximately $4.3 billion will be returned to the importers of record.
(The text of the SLA was initialed by the USTR and the Canadian Trade Minister in July 2006. Since that time, the U.S. and Canada have engaged in a legal review of the SLA's text and a discussion of certain clarifications of the text. See ITT's Online Archives or 07/11/06 news, 06071100, for BP summary of an earlier USTR press release on the U.S. and Canada's agreement to the SLA, as well as the terms of the SLA
See ITT's Online Archives or 08/28/06 news, 06082899 2, for BP summary of USTR's announcement of Canadian industry's support for the SLA.)
USTR Announcement of SLA Signing (dated 09/11/06) available at http://www.ustr.gov/Document_Library/Press_Releases/2006/September/US_Trade_Representative_Susan_C_Schwab_Announces_Signing_of_US-Canada_Softwood_Lumber_Agreement.html
USTR Announcement on Disposition of Funds (dated 09/12/06) available at http://www.ustr.gov/Document_Library/Press_Releases/2006/September/Schwab_Announces_Plans_for_Disposition_of_Funds_for_Meritorious_Initiatives_under_the_United_States-Canada_Softwood_Lumber_Agree.html
Remarks by USTR at SLA Signing (dated 09/12/06) available at http://www.ustr.gov/Document_Library/Transcripts/2006/September/Remarks_by_US_Trade_Representative_Susan_C_Schwab_at_the_Signing_of_US-Canada_Agreement_on_Softwood_Lumber_Trade.html
DFAIT Press Release and Backgrounder (dated 09/12/06) available at http://w01.international.gc.ca/minpub/Publication.aspx?isRedirect=True&publication_id=384359&language=E&docnumber=99