Trade war - Canada vs. USA

Great Debates
1

USA have slapped a crippling 29% tariff on imported Canadian softwood, the duty of lumber from Canada of goes up to 35% - or an average 29%. The Canadian government and lumber-industry officials characterised this as “outlandish”.

Indepth - British Columbia’s forestry industry needs a new softwood deal (CBC)

US slaps Canada with stiff lumber tariff (BBC)
Who is right, and what should Canada do? Should they fight it in court, stop the “illegal” funding, or go tic for tac and cut the US from their addiction to Canadian power (electricity).

2

A tough question, but one that concerns many people I know here in New Brunswick, Canada.

Going tit for tat is pretty risky. Canada depends a great deal on U.S. trade and it is easy to foresee this escalating ad nauseum… Yeah, while we’ll slap a duty on steel… Yeah, then we’ll slap a duty on chemicals… Where does it end?

Traditionally Canada has fought these things in court. They have some support in the US from the construction industry which benefits from lower cost wood. They have won many such cases in the past. Whether or not “subsidies” are “illegal” is very much in the eye of the beholder. The EU generally realizes that protectionist US policies against Canada will certainly also effect them, hence the BBC woud consider a duty outlandish… they’re next.

Many Americans think their country has no need to think multilaterally given their economic and military dominance. Such a view is short-sighted given the importance of soft power (getting others to do what you want via gentle diplomacy) and organizations outside the scope of national governments. The US would be foolish to burn bridges without reason, and I feel Canada should not hesitate to challenge these duties under arbitration as defined in NAFTA. I do not know what benefit a tougher line would have, but it could cause much harm.

3

On Vancouver Island here, we’ve been devastated. Ever since September when the forest companies were being put on notice on the tarriff, our island population of 500,000 has seen the loss of over 10,000 jobs, with more losses subsequent to this latest decision. My business is down, and if it weren’t for the tourist trade, I’d be wiped out right now.

I’m all for the 6 months notice to rescind the FTA. After all, if the Americans claim we are subsidizing lumber because we don’t auction off crown land to the forest companies why don’t they recognize our increased lumber costs because our forest companies and employees are required to pay higher taxes than their counterparts in the States.

We’ve fought the protectionist lobby in the States successfully many times in the past. But they keep trying, and in my opinion they’ll never stop. We always seem to be at the mercy of US trade law.

Either BC needs to secede from Canada and join the States or we need to rescind Free Trade. It ain’t free trade.

4

On behalf of the State of Illinois, I’d be delighted to adopt British Columbia. Do y’all wanna move down here with us, or do you wanna stay up there where you’re at? :smiley:

Bring the trees–we have no trees here.

5

I guess it’s pretty hard to have a war without someone from the other side.

Actually though, I commiserate with you.

It was my understanding that the serious effects were primarily with British Columbia and Alberta, that the Maritime Provinces were affected to a much lesser degree.

I have a forestry background and live in a timber dependent community within pissin’ distance of B.C… I hear lots on both sides of the issue.

The timber industry is subsidized on both sides of the border, just in different ways. Here in the states, we have been known to release timber companies from their bids because of a downturn in the lumber market. Most of the subsidies on this side of the border are in road credits. Logging companies of any size are also into the road building business and are offered timber for putting in the road to access the sales.

I wonder though how hard it would be to change the way Canadians award timber contracts if that is how the U.S. is measuring subsidies? The problem for the lay person and even those of us close to the industry, is the determination of what a subsidy actually is. There are many ways on both sides of the border to hide the benefits.

Then too, there are small businesses down here that are dependent on Canadian timber for their own products. Any of the small cedar mills require a steady supply of larger diameter cedar which is essentially unavailable here because we’ve already cut it.

When I heard that Chretien [sub]how 'bout that, a yank who knows the name of the prime minister[/sub] threatened to cut off supplies of natural gas last year if the U.S. imposed tariffs, I kinda had to chuckle. Perfect timing with the current supposed energy crunch going on here. It actually made folks stop and think.

The timber industry is undergoing tremendous change everywhere in the world. As we become more environmentally aware, we see the wisdom of maintaining old growth forest, something the U.S. is very slow about doing. We have, depending on who you believe, or your particular definition of old growth, between 3 and 10% left. In reality, there is little old growth available here anymore.

It is my understanding that 90% of Canadian timber production comes from old growth forest. That makes it doubly hard to present a case here in the U.S. because you are not only fighting the U.S. timber industry, but the environmentalists as well, who want you to save what you have left. So sorry, we cut all old growth, but we’ll help you save yours.

I do wonder why all the noise from you folks though. I always thought the lucrative markets for old growth were in Asia.

6

Possibly naive suggestion:

Canada should put ads in US newspapers telling US citizens directly that higher timber costs = higher costs for housing, home furniture, and anything else they buy that includes wood.

Similarly, foreign steel importers should tell the US consumer directly: tariffs on steel will put up the cost of the next auto you buy.

At the end of the day, tariffs are paid by consumers.

7

Thanks for reminding me about what I’m supposed to be doing when I’m wasting time on the SDMB. I am supposed to be an expert on the softwood lumber dispute, though I know next to nothing about it. I’m sure the U.S. government’s actions are hurting the Canadian lumber industry, but the U.S. is arguing that the Canadian government’s illegal actions are hurting the U.S. lumber industry. The only question is whether the Canadian subsidies are illegal. It seems to me that that’s what the NAFTA dispute resolution bodies are there for. Not only could the Canadian government be fighting against the U.S. timber industry and environmentalists, but Canadian Indian tribes could have a case. Indian tribes (called “bands” in Canada) have a legal claim to a lot of the “public” lands where the logging is taking place.

If you want to talk about really screwed up NAFTA disputes, look at the Canadian company that is suing the state of California for banning MTBE, a gasoline additive that was banned because it was poisoning drinking water.

8

Well, Canada is fighting back with some mighty tough measures.

Take that, USA!

::splat::

9

Well, it seems the EU will target politically sensitive states in response to the steel issue[CNN].

So, maybe Canada should retaliate with tariffs on OJ.

10

Oh, wait, you mean orange juice. Never mind.

11

Tell ya what, you Canucks bring your old growth cedar and we’ll bring our crappy, cardboard tasting tomatoes and we’ll just fling 'em at each other across the border.

12

EU set to retaliate on steel tariffs

13

He is picking trade-wars with everyone now-a-days.

14

I like the Russian chicken thing. Although there may be legitimate health reasons for not eating US chicken, I hardly think that a country with Russia’s pollution levels needs to worry too much. Hell, those antibiotics might actually be helpful.

Oh, and nice to see it didn’t take long for the OJ joke :).

15

This, of course, is utterly absurd. The decision to charge higher taxes in Canada was not made by the United States or lumber companies in the U.S. That is wholly the responsibility of the Canadian federal and provincial governments and the electorate that voted for them. If higher taxes are the reason crown land is sold at low prices, the appropriate fix is to lower taxes, not shift the cost of said higher taxes to foreign competitors.

That being said, this whole thing is a mess. I don’t think the U.S. is in the wrong, per se, except to the extent that punitive tariffs are always a bad idea. Of course, subsidies are also always a bad idea.

Sua

16

The problem with arguing over whether canadian softwood subsidies are illegal is kind pointless, considering there are no subsidies.

source (also has good
timeline of dispute)

There is no subsidy. This is an old conflict, and has been brought before international and bilateral trade commissions serveral times. Every time, the ruling has been in canada’s favour. In fact, canada has allowed duties in the past when we didn’t have to, just to shut up the american timber lobby, and have some peace and quiet. The reason there is a disparity in the logging industries of canada & the us is due to the fact that canada has 10% of the worlds forests. We supply less than 30% of american
softwood, (higher quality to boot) hardly swamping the market. American forests being smaller, and privately owned drives up the price of the timber. Not canada’s fault us can’t compete playing by the trade rules that amererica largely developed. You want your walmart’s & mcdonalds to have free access to our markets (and crush local competition), you gotta open your markets to our products - even if they crush local competition. That is what free trade is about. (if you really believe in that sort of thing)

some more links:
here
and here
[also
here](http://www.ilumber.com/_vti_bin/JavalinIIS.dll/PagePO.po/portal/news/mar02.xht
ml#New%20Duty%20To%20Impact%20Cost%20Of%20American%20Housing)

These duties will add about $1500 to the cost the average new american home, and put thousands of canadians out of work, all to make some investors in american forests a little richer.
(another sound economic policy brought to you by the Compassionate ConservativesTM and their corporate [in this case lumber] lobby)

17

Cite something. Were these NAFTA or WTO cases or what?

The text you quote is a bizarre, narrow interpretation of the WTO agreement. Read it yourself here. Plus there are cases that further define the various dumping standards that can be found on the WTO website.

18

I’m bumping this thread because the case goes on. A group of indigenous Canadians have filed an amicus brief with the WTO, and the WTO has not only accepted it, but asked the Canadian and US governments to respond to the legal issues raised. Read all about it here. The vast majority of land in British Colombia is “Crown land,” which is given to the lumber industries for free, with only a nominal stumpage fee paid. But meanwhile, the Canadian Supreme Court has ruled that the First Nations have a legitimate proprietary interest in the land.

Oh, and the ruling of the NAFTA in Canada’s favor happened only because Canada managed to get a majority on the panel. This time, they know they’ll lose if they don’t get a majority again.