U.S. presses Canada on softwood lumber
The United States on Friday requested consultations with Canada under the 2006 Softwood Lumber Agreement (SLA) regarding alleged unfair under-pricing of timber harvested from public lands of British Columbia.
The consultations provide an opportunity for the United States and Canada to exchange views and attempt to resolve their differences. If the matter cannot be resolved this way, then either the United States or Canada may request arbitration.
'The decision to move to consultations is intended to emphasize the importance of resolving this matter,' said U.S. Trade Representative Ron Kirk, in a statement.
To the United States, it appears that British Columbia is providing softwood lumber producers a low-cost input for their products and circumventing the SLA export measures.
The price of timber is a key factor in the pricing of softwood lumber. The SLA was agreed in part to resolve disputes as to whether Canada was unfairly subsidizing the price of timber sold to its softwood lumber producers. Under the SLA, Canada agreed to impose export measures under certain circumstances to affect the price of softwood lumber exports to the United States. The SLA also provides that neither party is to circumvent those export measures, including through providing grants or other benefits.
The SLA 'grandfathers' British Columbia's timber pricing system as it existed on July 1, 2006. Under this system, timber harvested from public lands in British Columbia's interior region meeting the definition of 'Grade 4' is priced at a fixed rate of 25 cents per cubic meter, while timber meeting the definitions of 'Grade 1' or 'Grade 2' is priced at a variable rate, which can in no case be lower than 25 cents per cubic meter, and often has been significantly higher.
U.S. trade regulators have noticed a significant increased in 'Grade 4' since the SLA entered force on Oct. 12, 2006. 'This increase does not appear to be justified under the grandfathered BC provincial timber pricing system, even when known factors affecting timber quality in BC (such as the mountain pine beetle) are taken fully into consideration,' the Office of the U.S. Trade Representative said.
The United States has sought information from Canadian federal and British Columbia provincial authorities. However, so far Canada has not sufficiently addressed the U.S. government's concerns.
The United States has brought two disputes under the SLA to ensure proper implementation of the agreement. In the first dispute, a tribunal found Canada failed to properly calculate quotas during the first six months of 2007 and that Canada should impose an additional CN$68.26 million in export duties on softwood lumber as compensation. The second dispute is ongoing and concerns several Canadian provincial programs that appear to provide subsidies in circumvention of the SLA. ' Chris Gillis