The Canada-US Softwood Lumber Dispute

Abstract

Gilbert Gagne is an Assistant Professor in Department of Political Studies at Bishop's University in Lennoxville, Quebec, where he teaches international relations.THE EXCHANGE OF GOODS AND SERVICES between Canada and United States constitutes largest trading relationship between two sovereign states. Each country is other's main trading partner. In 2000, value of Canada-US trade amounted to nearly CDN$700 billion; now, over CDN$1.5 billion of merchandise crosses border daily.(1) The overwhelming proportion (95 per cent) of this bilateral trade takes place smoothly and free of tensions. When disputes have arisen, two countries have held positions of plaintiff and defendant in almost equal proportions. Tensions and conflicts have tended to involve issues of essentially circumscribed economic and political scope.Canada's exports of softwood lumber to United States represents a notable exception to this generally harmonious trading relationship. The softwood lumber dispute has proven most significant between two countries in terms of trade volume, complexity, procedures, politicization and duration. Superlatives abound in references to this conflict: the largest trading dispute in largest trading relationship in world. Canada is highly dependent on American market, which in 2001 accounted for 40 per cent of country's gross domestic product (GDP) and 87 per cent of its exports. Softwood lumber is one of Canada's main export sectors, with exports to United States accounting for 70 per cent of Canadian lumber production and amounting to nearly CDN$10 billion in 2001.Trade disputes in agricultural and commodity products, as with softwood lumber, can take on a further political dimension because they affect large numbers of citizens, often regionally concentrated--a factor that gives their votes extra weight. The softwood lumber conflict has unfolded primarily between province of British Columbia, which accounts for about 50 per cent of Canada's exports, and US region of Pacific Northwest, which encompasses states of Washington, Oregon and California. In Canada, it has been estimated that more than 300,000 workers have been directly or indirectly affected by conflict and that roughly 300 communities are dependent on forestry sector as their primary source of employment.(2)Although it has historical antecedents dating back to 1950s, and even to turn of century, softwood lumber dispute began in 1983, when US authorities first asked whether Canadian lumber exports are subsidized. The main issue at stake is whether fees charged by provincial authorities to private firms--to harvest trees on public lands (stumpage rights)--are artificially low and constitute unfair subsidies. Canada has insisted that this is a matter of public policy that is in no way related to trade and subsidization. In contrast to United States, Canada and some other countries apply a more tempered model of economic liberalism, which allows for a greater role for State in certain key sectors such as ownership and management of natural resources. Debates over issues of this kind are likely to increase in a context of economic globalization.The softwood lumber conflict really began when US authorities concluded in 1986 that stumpage rights were specific and insufficient, and, as a result, could be subject to countervailing duties (CVDs). For Americans, position is that it is essential to protect a major industry that is under direct competitive threat from unfairly subsidized imports. For Canadians, argument is that United States is unilaterally and arbitrarily deciding how provincial governments should tax and manage their resource industries. The softwood lumber dispute has gone through different stages, some highly conflictual; there have been peaks followed by periods of relative calm when ad hoc, temporary arrangements have been implemented to prevent US retaliation. …