Canadian Manufacturing

Canada may try NAFTA end-around to get softwood lumber deal

by Alexander Panetta, The Canadian Press   

Canadian Manufacturing
Exporting & Importing Regulation Supply Chain Mining & Resources Public Sector

Canada doesn't want to include softwood in NAFTA but ambassador David MacNaughton said "We're open to anything that's going to resolve it. Because it's just crazy right now"

WASHINGTON—Canada is prepared to pursue a permanent settlement in softwood lumber within the North American Free Trade Agreement if the U.S. lumber industry keeps blocking a deal, Canada’s ambassador to the U.S. suggested Thursday.

David MacNaughton expressed frustration at the industry using what is effectively its veto power to block any deal between the national governments and he raised the possibility of working around it to achieve a long-term solution.

Free trade in softwood lumber has never been part of any continental trade pact and the Canadian government has been wary of injecting it into this current negotiation, fearful that adding a contentious issue would make the already complex talks that much more difficult.

But that could change.


“We’re open to anything that’s going to resolve it. Because it’s just crazy right now,” MacNaughton said, when asked about adding softwood into NAFTA.

“I’m prepared to look at anything that’s going to resolve it. I just think it’s going to be difficult to put another thing—another contentious element into NAFTA. I think we’re better off to resolve it outside of the NAFTA framework.”

The reason the U.S. industry has veto power over any deal is that part of any softwood agreement would require it to sign away its right to launch trade actions against Canada.

The American industry alleges unfair subsidies in Canada and about once a decade launches trade actions, which lead to duties on lumber imports, higher prices, and years of international litigation, before there’s a new temporary deal.

MacNaughton accused the industry of dragging its feet because it serves its own financial interest: “They’re making a lot of money right now,” he said during a public forum organized by Politico.

He called it unfortunate that U.S. consumers have no say over this process _ such as homeowners, and homebuilders, now facing a national shortage of wood that will only be compounded by the massive task of rebuilding many thousands of homes damaged by hurricanes.

MacNaughton said he believes the U.S. government is working to bring industry to the table.

He credited U.S. Commerce Secretary Wilbur Ross for his mastery of the file, and said that’s one reason he’s worried about shifting the lumber talks to a new forum. The NAFTA negotiations are being led by U.S. trade czar Robert Lighthizer; the lumber talks are being led by Ross.

On Thursday, the commerce secretary underscored his desire for a quick deal. In a meeting with Ontario Premier Kathleen Wynne, he apparently referred to the urgency caused by hurricanes that have ravaged Texas, Florida and Louisiana.

“Secretary Ross himself brought up the reality that there’s a lot of rebuilding that’s going to have to be done over the next months, and quite frankly years,” Wynne said in an interview after her meeting with Ross in Washington.

“So this is an urgent issue, from our perspective.”

That sentiment was echoed by Canada’s natural resources minister. Jim Carr said demand for wood products to help rebuild will put pressure on the parties to get a deal. Carr made the comments in Ottawa at a meeting of the Canadian Council of Forest Ministers.

“We … know that Canadian producers offer a very, very good supply of Canadian lumber in the United States,” Carr said. “That’s an economic reality. I mean, market forces are important. So we think it almost certainly will have some impact on thinking.”

On Wednesday, Paul LePage, the Republican governor of Maine, asked the U.S. to at least suspend the tariffs until the hurricane rebuilding has been completed.

LePage said “corporate greed from a coalition of big lumber companies” has already sent softwood market prices soaring.

“Making a profit is the goal of any company _ and it should be,” LePage wrote in an op-ed in The Maine Wire. “But it is unconscionable that this coalition is in a position that could lead to price-gouging Americans in distress.”

The National Association of Home Builders in the United States made a similar plea to the White House earlier this month.

With files from Canadian Press reporter Mia Rabson in Ottawa


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