| When Stephen Harper and the Conservative government first announced that they had reached an agreement to end the Canada/United States softwood dispute that has been ongoing with various degrees of intensity since 1982, it appeared to be a political coup over the ousted Liberal party. While appearing too cozy with America has become a political liability in Canada, the Conservatives showed that their closer ties with the U.S. were more constructive than the cross-border name-calling that had marred the Liberal Party's dealings with America since George Bush's election. It seemed, at first, that Harper was doing exactly what he always said he was going to do: get things done.
The deal, which has recently passed its first reading in the House of Commons, is to bring back four out of the five billion dollars in softwood lumber duties that the United States has charged Canadian exporters, with the extra billion to be split between American lumber producers and joint initiatives. As well, the deal will once again get Canadian lumber moving duty-free across the border, replacing America's punitive tariffs with a system of quotas and export taxes that fluctuate with the price of lumber.
However, as the date for the two countries to sign the deal approached it started to look as though, in their haste to get things done, the Conservatives might have done the wrong thing. The initial optimism with which the Canadian lumber industry greeted the deal began to wane as it digested the details.
Parts of the agreement leave Canadian lumber producers on shaky footing. While many companies resent the fact that they are not getting all of their money back, the main sticking points are a combination of sneaky little caveats that the United States worked into the deal. One is that the deal can be cancelled by either party with six months notice after the deal has been in place for 18 months, and the other is that for the deal to go through, Canadian lumber companies must drop their lawsuits against the American government.
The softwood lumber dispute stems from differences in the method used by the opposing governments to sell logging rights to lumber companies. In the U. S., a competitive auction system is used where companies bid for the rights. Canada uses antiquated provincial government formulas to price its timber. American lumber companies have argued that the price the Canadian government charges lumber companies is too low, giving Canadian firms an unfair advantage. The Canadian side has argued that it has a natural competitive advantage due to vast timber resources and efficient mills. In March, a NAFTA panel ruled in Canada's favour stating that the subsidy on Canadian lumber was negligible, amounting to less than one per cent. Yet, there have also been NAFTA rulings stating that Canadian lumber is subsidized, and Canada has refused to move to a competitive bidding process for assigning timber rights. Given that there have been rulings in favour of both parties, and that Canada is unwilling to compromise on its selling process, it might be unreasonable for Canada to expect to get all of its money back.
However, the fact that the United States could choose to terminate the deal as early as two years out of its seven-year term leaves Canadian lumber producers with the possibility of starting back at square one just two years from now. Most of the lawsuits launched by Canadian companies against the American government have been successful to date, and many of them were moving toward a final decision. With the NAFTA ruling in March that Canada's subsidy on lumber was negligible, the possibility of a win for Canadian lumber producers was high. With these lawsuits nearing their completion and a fresh NAFTA ruling against them, it is not surprising that the United States took advantage of a friendly new Harper government to resume negotiations. Given Canada's relatively strong position in these lawsuits, the resulting deal that gives America everything it was looking for — an end to the lawsuits, a way to terminate the deal if necessary and a share of the money — is hardly the best deal Canada could have garnered, as is the claim of the Conservative party.
Another uncertainty raised by the deal is what it means for the future of NAFTA. When Canada signed the trade agreement it was with the understanding that any disputes would be solved by the dispute resolution system set up under the agreement, but the United States steadfastly refused to accept several NAFTA rulings in recent years. In the end, a trade deal had to be brokered by the federal governments of both nations. The main reasoning for NAFTA is that it allows free trade across most business sectors without governments having to negotiate separate deals for everything. How much faith should Canadians place in NAFTA's dispute-settlement system in future disagreements? It seems that we have subscribed to a policy of free trade when America agrees with it and negotiated deals when that doesn't work out. |
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