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Weekly Trade Spotlight: Montana and Softwood Lumber

08/24/2009 - 11:01am

Every week, the USTR website explores a new trade topic, with background information and current trade data. This week's trade topic focuses on Montana and the softwood lumber industry, and how trade helps Americans in states across the country.

Softwood Lumber

Montana and Softwood Lumber

If your house has a wooden deck for outdoor relaxation, or your garden is edged in treated timbers, or you've bought 2 x 4's from your local home supply store, softwood lumber is a part of your life. It is also one of the largest commodities we trade with Canada, and has been a major trade issue over the years.

The 2006 Softwood Lumber Agreement (SLA) is a bilateral trade agreement between the United States and Canada, two of the largest lumber-producing countries in the world. USTR is committed to leveling the playing field for the American worker by enforcing trade agreements, including the Softwood Lumber Agreement (SLA). Strong trade enforcement allows American workers to compete with anyone in the world.

Background on Softwood Lumber

In October 2006, the United States entered into the SLA with Canada to create a fair trade deal for U.S. softwood lumber producers. The SLA settled massive litigation in U.S. and international venues and resulted in the revocation of antidumping and countervailing duty orders on softwood lumber from Canada. The SLA is designed to create a downward adjustment in softwood lumber exports from Canada into the United States when demand in the United States is low through the imposition of export measures by Canada.

The SLA also provides for binding arbitration to settle any disputes about interpretation and implementation of the Agreement. On August 13, 2007, the United States requested an international arbitration under the SLA to resolve concerns regarding Canada's implementation of the export measures, in particular the operation of the Agreement's surge mechanism and quota volumes. On March 4, 2008, the arbitral tribunal agreed with the United States that Canada violated the SLA by failing to properly adjust the quota volumes of the Eastern Canadian provinces in the first six months of 2007. In a February 2009 decision, the tribunal ordered Canada to cure the breach within 30 days and prescribed compensatory adjustments to the export measures to remedy the breach. Canada failed to cure its breach within the time prescribed or make the compensatory adjustments determined by the tribunal. As a result, in April, USTR imposed a ten percent ad valorem customs duty on lumber imports from four Eastern Canadian provinces effective April 15, 2009. The duties will remain in place until the United States has collected $54 million dollars or until Canada acts to correct the situation. Canada has asked that arbitral panel, now reconstituted, whether a settlement offer it made but the United States rejected is sufficient.

The United States filed a second request for arbitration on January 18, 2008, challenging a number of assistance programs implemented by Quebec and Ontario, which the United States believes are inconsistent with Canada's obligations under the anti-circumvention provision of the SLA.

Awards on both arbitrations are expected in late 2009.

Montana Trade Facts

Montana exported $1.4 billion worth of goods and services in 2008. This export total represents a 146% increase over 2004 levels, the third largest percentage increase in the 50 states over this period.

Over 691 Montana businesses exported goods in 2006. Small and medium-size businesses made up 87 percent of total business exports. These same small and medium size companies accounted for 62 percent of total exports for Montana.

Manufacturing exports directly and indirectly supported 6,900 jobs in 2006. Many of these jobs are a result of foreign investment from the UK, France, Canada, and Switzerland.

In addition to manufacturing, agriculture represents a key industry in Montana. In 2007, the state's farm receipts totaled $2.3 billion, as agricultural exports boosted both farm prices and income while supporting about 7,705 jobs. Agricultural exports equaled 31 percent of Montana's farm cash receipts in 2007.

The largest countries receiving exports from Montana in 2008 were:

  • Canada ($696 million)

  • Japan ($131 million)

  • Taiwan ($75 million)

  • South Korea ($67 million)

  • China ($61 million)

2008 top exports were:

  • chemical manufactures ($353 million)

  • machinery manufactures ($185 million)

  • transportation equipment ($150 million)

  • primary metal manufactures ($115 million)