USTR - U.S., Canada Reach Final Agreement on Lumber Dispute
Office of the United States Trade Representative

 

U.S., Canada Reach Final Agreement on Lumber Dispute
07/01/2006

Geneva - U.S. Trade Representative Susan C. Schwab today joined Canada's International Trade Minister David L. Emerson, both attending World Trade Organization talks, in announcing that the United States and Canada have agreed on the text of an agreement on softwood lumber. The text incorporates and builds on the basic terms announced on April 27, 2006. The 80-page agreement, initialed today, was reached after intense negotiations over the last several weeks and reflects a balance of concessions made by both countries to resolve a two-decade old dispute.

"The resolution of this long standing dispute with our largest trading partner is another achievement for the President's broad trade agenda," said Ambassador Schwab. Ambassador Michael Wilson, Canada's chief negotiator, and his team have done a tremendous job of bringing this difficult process to a conclusion. In March, President Bush and Prime Minister Harper made clear the importance they attached to this effort, and I am delighted we could reward their confidence with this agreement."

"I am very pleased that we have reached an agreement with Canada to resolve the long-standing softwood lumber dispute," said Commerce Secretary Carlos M. Gutierrez. "This agreement resolves concerns on both sides of the border and allows us to focus on the larger positive trade relationship binding our two countries. We have an enormous trade relationship with Canada, with hundreds of billions of dollars of US exports flowing north across the border."

Key provisions of the agreement follow those of the April 27 basic terms. The United States and Canada will end all litigation over softwood lumber. The agreement provides for unrestricted trade when prices are over $355 per Thousand Board Fee (MBF), a condition that has existed for significant portions of the past several years. When prevailing prices are less than $355 per MBF, Canadian exports will be subject to a combination of export charges or volume limits that increase in steps the lower the market drops, with the maximum export charge at 15% when prices fall below $315 per MBF.

Of the estimated $5 billion in duties collected since 2002, most will be returned to Canadian interests. A total of $1 billion will remain in the United States. The U.S. lumber companies that brought the trade complaints against Canada will receive $500 million. In addition, $450 million will fund meritorious initiatives to include projects such as community assistance for timber-reliant communities, assistance for low-income housing and disaster relief, sustainable forestry practices, and other forestry initiatives. The remaining $50 million will be used to establish a binational industry council, with an advisory board composed of representatives from the Canadian and U.S. lumber industries. The council will seek to strengthen and further integrate the North American lumber industry.

The Agreement contains various forward-looking provisions. It establishes an 18-month process to develop substantive criteria for Canadian policy reforms that could exempt provinces from export charges and quotas and provides the basis for a long-term resolution of the dispute.

The agreement also includes provisions to address potential import surges from Canada, provides for effective dispute settlement, requires extensive information exchange and define special treatment for low- and high-value products.

The agreement initialed today will undergo a legal review with signatures expected in August. No U.S. legislation is required, but the Canadian Parliament must approve the export charge system after it returns in September. Entry into force is expected in the fall.


Background

On April 27, USTR and Canada's Department of International Trade announced that the United States and Canada agreed on the core terms of a softwood lumber accord.

Under the terms of the agreement initialed today, the United States and Canada will end all litigation over softwood lumber and provide for unrestricted trade in the favorable market conditions the industries have enjoyed for the last several years. When the lumber market is soft,

Canadian exporting provinces can choose to pay an export tax that ranges from 5 to 15 percent as prices fall. Canadian provinces also have the

option to pay lower export taxes and limit exports below their average levels over the past five years.

The agreement will also include provisions to address potential Canadian import surges, provide for effective dispute settlement, distribute

the duties currently held by the United States, and discipline future subsidies and trade cases.

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