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Canadian lumber mills desire a new cope with the U.S — and their reimbursement

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Up to now, the Biden administration hasn’t given into pleas to barter a brand new deal.

U.S. Trade Representative Katherine Tai testifies during a Senate hearing on April 28, 2021, in Washington.

U.S. Commerce Consultant Katherine Tai testifies throughout a Senate listening to. | Sarah Silbiger/AP Photograph

Canadian lumber producers have their eyes on an enormous money prize if the Biden administration offers into strain from house builders and members of Congress to start talks with Canada on a brand new softwood lumber settlement.

They wish to be repaid the billions of {dollars} they’ve handed over to the U.S. customs authorities lately as a part of anti-dumping and countervailing duties imposed by the Trump administration in 2017.

“It’s our cash,” Susan Yurkovich, president of the British Columbia Lumber Commerce Council, stated in an interview, arguing the tariffs had been unjustified.

Canadian Prime Minister Justin Trudeau raised issues concerning the U.S. duties when he met with President Joe Biden on the sidelines of the latest G-7 summit, Alice Hansen, a spokesperson for Canadian Commerce Minister Mary Ng, stated.

“Canada believes the tariffs must be eliminated. Minister Ng has raised this challenge at each alternative attainable,” together with with Biden, U.S. Commerce Consultant Katherine Tai and Commerce Secretary Gina Raimondo, Hansen stated.

Up to now, the Biden administration hasn’t given into pleas to barter a brand new deal. However in a gathering with the Nationwide Affiliation of Residence Builders on Could 28, Raimondo said she took the industry’s concerns “very seriously.”

The NAHB estimated in April that sky-rocketing lumber prices have added as much as $36,000 to the worth of a brand new single-family house. Since then, lumber costs have retreated from nosebleed excessive ranges however nonetheless stay greater than double final yr.

Raimondo dedicated to working with the house builders “to establish focused actions the federal government or business can take to handle provide chain constraints.”

The U.S. Lumber Coalition, which accuses Canada of unfair buying and selling practices which have destroyed American jobs, says it’s “open to a brand new U.S.–Canada softwood lumber commerce settlement if and when Canada can show that it’s severe about negotiations.”

Up to now although, the group just isn’t satisfied that Canada actually desires to work out an association.

U.S. Commerce Consultant Katherine Tai used an identical line in Could, when she instructed the Senate Finance Committee that it was Canada, not the U.S., that didn’t desire a new deal.

“As a way to have an settlement and in an effort to have a negotiation, you should have a companion. And to this point, the Canadians haven’t expressed curiosity in participating,” Tai stated.

USTR spokesperson Adam Hodge elaborated in an emailed assertion, saying the U.S. is open to resolving variations with Canada over softwood lumber, “however it could require addressing Canadian insurance policies that create an uneven enjoying area for the U.S. business.”

These embody the “stumpage charges” that Canadian provinces cost lumber firms to chop bushes on public lands. The U.S. contends these are set at below-market charges and represent an unfair authorities subsidy.

“Sadly, thus far, Canada has not been prepared to adequately deal with these issues,” Hodge stated.

Any settlement would require the approval of the U.S. Lumber Coalition as a result of the Commerce Division made a authorized willpower that Canada is subsidizing its lumber exports and promoting them at unfairly low costs. The U.S. Worldwide Commerce Fee additionally discovered the U.S. business was harmed by Canadian commerce practices.

Earlier refunds: There may be precedent for an enormous U.S. reimbursement of duties in a 2006 agreement to settle a previous lumber dispute between the 2 nations.

The George W. Bush administration agreed to offer again $4.4 billion of the $5.4 billion in anti-dumping and countervailing duties the U.S. authorities collected on Canadian softwood lumber imports within the early 2000s. About $500 million of the duties went to U.S. producers.

The Bush administration agreed to make the reimbursement after the World Commerce Group and North American Free Commerce Settlement dispute settlement panels dominated in favor of Canada. By that point, each side had been uninterested in the litigation and the billions of {dollars} of contested duties helped ease the best way to reaching a settlement.

The pact introduced a interval of relative peace in lumber commerce between the 2 nations. It removed the U.S. duties and allowed British Columbia and the opposite Canadian provinces to control the commerce themselves by imposing both a tax on their exports or a mix of a quota and a decrease tax.

The export tax fee and quota values additionally diversified, relying on the worth of framing lumber utilized in house development. When the worth exceeded $355 per thousand board ft, all export taxes or quotas had been waived. Presently, framing lumber costs are about $1,000 per thousand board feet, far above the brink for no taxes or quotas beneath the 2006 pact.

How we bought right here: The 2006 settlement was prolonged as soon as earlier than it lastly expired in 2015.

After a one-year grace interval, the U.S. lumber business filed a brand new petition asking the Obama administration for anti-dumping and countervailing duties on the imports to offset what they stated had been unfairly low costs and authorities subsidies.

The Trump administration imposed these duties in 2017 after efforts to barter a brand new lumber commerce settlement failed. Nevertheless it had agency authorized floor to take the motion, since the U.S. International Trade Commission voted 4-0 that U.S. producers had been “materially” injured by imports of dumped and sponsored Canadian lumber.

Since then, the BC Lumber Council estimates the U.S. authorities has collected greater than $4 billion (or 5 billion Canadian {dollars}) price of duties on Canadian softwood lumber, which is primarily used to construct homes and in house renovation initiatives.

Ratcheting up of prices and costs: The mixed duties are at the moment about 9 % of the worth of every cargo. However as lumber costs tripled over the previous yr, Canadian firms have needed to fork over larger responsibility funds to U.S. customs officers.

As well as, the Commerce Division not too long ago introduced that it deliberate to double the mixed responsibility fee later this yr to greater than 18 %, primarily based on its second “administrative evaluate,” which checked out market circumstances in 2019.

Lumber costs have fallen sharply in latest days, however nonetheless stay at traditionally excessive ranges, so Canadian producers can look ahead to making billions of {dollars} in further responsibility funds within the coming years with out an settlement.

Including to the frustration, the excessive costs make it exhausting for U.S. producers to argue they’re being harmed by Canadian imports, Yurkovich stated.

“Canada is actually all in favour of a sturdy answer that enables for larger stability within the lumber market,” Yurkovich stated. “The U.S. wants lumber. The lumber business within the U.S. just isn’t capable of produce sufficient lumber to satisfy home demand. It is all the time been a North American marketplace for lumber. And so we might very very similar to to have this challenge resolved.”

Final shot: Yurkovich bristles on the suggestion that Canadian lumber is sponsored and bought at unfairly low costs. The Commerce Division made that willpower primarily based on the speed the Canadian authorities expenses personal firms to reap bushes on public land and different elements.

“It is a fairly neat enterprise tactic to make use of your commerce legal guidelines to place a tax in your rivals to maintain the product out, which retains your costs excessive, after which get a windfall from that,” she stated.

At a latest Canadian parliamentary committee listening to, Ng was requested about the potential for threatening commerce retaliation as a way of persuading the U.S. to the negotiating desk. Ng dodged the query and her workplace did not reply POLITICO’s request for clarification on the minister’s response.

“We stay targeted on defending Canada’s softwood lumber business and its staff by means of rules-based mechanisms, together with litigation” beneath dispute settlement procedures of the World Commerce Group, the brand new U.S.-Canada-Mexico Settlement and the outdated NAFTA pact, Hansen stated in an e-mail.

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Rachel Ha
Industrial and agricultural product enthusiast. Expert on Vietnam economy. Focus on FTA agreements between Vietnam and other countries.
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