Prime Minister Mark Carney says trade talks with the U.S. are continuing.Chris Young/The Canadian Press
Prime Minister Mark Carney says securing a truce in the long-running Canada-U.S. softwood-lumber dispute is a top priority as Canadian producers brace for even heftier U.S. levies as early as September.
Mr. Carney said he hopes this could be part of an overall agreement to end the trade war with the United States – a deal he conceded earlier this week would likely not remove all of President Donald Trump’s tariffs from Canadian goods.
Speaking to reporters in Hamilton on Wednesday after unveiling additional measures to protect Canada’s steel industry, Mr. Carney declined to say what level of baseline tariff Ottawa would accept in a new trade and security pact with Washington. He said this remains a part of negotiations.
“It was a good question, but if I responded, it would be a bad response in the middle of a negotiation,” he said.
Mr. Carney was also asked whether Canada would impose permanent tariffs on U.S. products if the United States keeps a baseline levy on Canadian goods.
“We’ll see what the final agreement is, if there is an agreement,” he said. “We’re working towards an agreement in a constructive manner.”
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A deal on softwood lumber is ‘top priority’ for Canada, Carney says
Canadian softwood producers are facing threats of higher charges on shipments to the U.S. in the months ahead.
The U.S. Commerce Department said this spring that it plans to more than double the combined anti-dumping and countervailing duties against most Canadian softwood producers to 34.45 per cent. The preliminary plans for higher duty rates are set to take effect by September.
And in a March 1 executive order, Mr. Trump launched a new investigation into softwood lumber, which is global in scope but could hit imports from Canada hard. Mr. Trump’s order, which also threatened new lumber tariffs, cited Section 232 of the Trade Expansion Act, allowing him to connect the softwood file with national security. The probe into softwood and other wood products is scheduled to be completed by the end of this year.
Mr. Carney said he’s in close contact with B.C. Premier David Eby on the matter. B.C. accounts for about a third of Canada’s softwood-lumber production, and about 40 per cent of Canada’s softwood exports to the United States, according to the BC Lumber Trade Council.
Historically, Mr. Carney said, softwood-lumber deals with the U.S. contain “some element of managed trade” such as quotas on Canadian shipments to the United States.
The U.S. has for many decades targeted Canadian softwood as unfair trade because it says the fees that producers in Canada pay to chop down trees on Crown land are too low.
It has also repeatedly alleged that Canadian producers are dumping timber in the U.S. market at below fair value.
The 2006 Canada-U.S. Softwood Lumber Agreement brought trade peace between the two countries for nine years.
It expired in October, 2015, and since 2017, Canadian softwood-lumber exports to the U.S. have been subject to countervailing and anti-dumping duties.
In comments reported Tuesday, Mr. Eby told Bloomberg News that provincial officials have been talking to Mr. Carney’s government about a new softwood-lumber deal where solutions could include a cap on exports to the United States in the form of a quota.
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William Pellerin, a partner with McMillan LLP’s international trade group, said the U.S. lumber industry has long sought to reduce Canada’s share of the U.S. softwood market to between 25 per cent and 27 per cent.
He said that right now, due to lumber-mill closings or curtailment, Canada’s share of the U.S. market likely sits around 25 per cent.
Mr. Pellerin, a former Canadian government softwood litigator who currently works for parties in the conflict, said he thinks it would be unwise to strike a deal before litigation related to the softwood dispute plays out.
“I think it’s very important that Canada not capitulate to U.S. pressure by accepting a flawed deal under the shadow of tariff threats,” Mr. Pellerin said.
There are several challenges of U.S. duties on softwood proceeding under the United States-Mexico-Canada Agreement dispute mechanism and he advises that Canada should wait until these yield decisions – findings that could give Canada leverage in the conflict.
“Striking a deal under what is effectively economic duress would almost certainly lead to a bad outcome for Canadian lumber producers and workers, and probably set a very dangerous precedent that rewards coercion rather than principled trade,” Mr. Pellerin said.
Softwood-lumber agreements normally result in the return to Canadian producers of most duties collected by the United States, although U.S. timber interests may lobby to keep a share of this as they did in the 2006 agreement.
The international trade lawyer warned that this would be a mistake.
“Handing over hundreds of millions of dollars to the U.S. lumber industry to secure a deal, as was the case in 2006, would legitimize years of targeted litigation against Canada by U.S. lumber companies and encourage future trade aggression by the United States against Canadian businesses,” Mr. Pellerin said.
Ravi Parmar, B.C.’s Minister of Forests, said in an interview Wednesday that he’s worried about the prospect of a rise in U.S. levies on Canadian softwood.
He said increasing the cost of Canadian softwood for U.S. customers runs contrary to Mr. Trump’s campaign promise of building more homes. “We are starting to see declines in housing starts in the United States.”
He said he’s encouraged by Mr. Carney saying a solution to the softwood conflict is a priority.
“We don’t believe there has been strong leadership on this file previously.”
He said he’s not convinced that waiting for legal victories in continuing litigation with the United States will help Canada negotiate a better softwood deal.
“We’re dealing with a President of the United States that doesn’t believe in the rule of law,” he said, adding later: “so winning in the courts seems meaningless.”
Mr. Parmar said B.C. will expect federal support for the province’s forestry sector and workers if the U.S. hikes levies on Canadian softwood. He said there are 50,000 direct jobs in forestry and when indirect jobs are added, this rises to 100,000.
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The U.S. President has said that he will impose 35-per-cent tariffs on Canadian products on Aug. 1. The White House later clarified that this would only affect goods that are not traded in compliance with USMCA.
Ottawa and Washington remain in negotiations on a deal that could avert this action. Mr. Carney conceded this week, however, that a trade pact would likely leave in place some U.S. tariffs on Canadian goods.
The U.S. lumber lobby spoke out Wednesday against negotiations for a deal with Canada that would “set side enforcement of the U.S. trade laws against unfairly traded and unfairly priced Canadian lumber imports.” It called for continued enforcement of U.S. trade laws.
Zoltan van Heyningen, executive director of the U.S. Lumber Coalition, noted that the United States has collected US$7-billion in duties from Canadian lumber producers.
“Canada’s request to terminate these cases and refund money to Canadian producers would be the single biggest bailout of the Canadian lumber industry funded by U.S. taxpayers and would come at the expense of U.S. workers and loggers,” he said.
“Canada’s unsustainable excess lumber capacity and production, of which 60 to 70 per cent must be shipped into the United States because Canada has no other viable markets, is the root cause of Canada’s continued and harmful unfair trade practices,” he said.
Conservative MP Shelby Kramp-Neuman, the party’s critic for Canada-U.S. trade, said Mr. Carney set expectations high during the recent election campaign.
“Prime Minister Carney ran his entire campaign suggesting he will not back down, he suggested that he knows how to do this, that he’s the best negotiator,” she said.
“It’s not going extraordinarily well. The timetables keep shifting, concessions are being made, and nothing really seems to be done in return.”
She said the Conservatives want to work with the government to secure Canadian jobs and that she has consistently reached out to Dominic LeBlanc, the Minister responsible for Canada-U.S. Trade, to offer help.
“The government needs all hands on deck right now, and I’m concerned that’s not happening,” she said.