West Hill Collegiate Institute - International Business

Established in 2012, by Daniel Shafransky and Raymond Ahmad

2006 Softwood Lumber Agreement

Source: A controversial agreement

  • Taimoor Khan
  • Annie Liang
  • Rasheed Mohammed

11 Comments

  1. Part 1 – Summary of 2006 Softwood Lumber Agreement

    In April of 2006, both governments of Canada and United States announce that they had reached a decision related to the softwood lumber dispute they were involved in. They had finally agreed to fix this mess regarding softwood lumber. In July of 2006, members from both countries, Canada and the United States, signed an agreement that was later passed by law to the federal Parliament in December of 2006. Once this agreement was signed, the United States government decided to remove its countervailing and anti-dumping duty orders on Canadian softwood lumber and to return more than $4.5 billion in duties that they have collected since 2002. They also agreed not to engage any new investigations against Canadian softwood lumber while this agreement lasts. In exchange, Canada decided to cap its softwood exports to the United States at 34 percent and they also agreed to create an export charge on their softwood lumber exports when the price of lumber is at or below $355 (US) per thousand board feet. Both countries also agreed to end all litigation’s before entering the agreement. This new agreement does not apply to the Atlantic provinces and territories which means they can export softwood lumber free of any restrictions or duties. This agreement is meant to last seven years before either renewing it or terminating it but a country is allowed to unilaterally leave after three years.

    • Part 2 – Summary of audio clip based on 2006 Softwood Lumber Agreement

      United States has to give $5 billion to the Canadian government but the United States customs is slowly taking their time to return that money. Canada is only receiving $4 billion out of the $5 billion. The Canadian government is trying to get the industry’s 80% of their money back. The Canadian government has decided to buy out the industry’s claims by paying around 80% of the value of their claim then Canada will try to get the money from the United States but Canadian taxpayers are basically paying the industries with their tax money which gives them the most risk if this deal falls off. The industries have decided to waive off $1 billion of their money but there is no guarantee that the taxpayers will get their money from the United States government.

      • Part 3

        I feel that the agreement is very fair in terms of the international needs of Canada and the United States but I feel that the citizens of Canada have to take a big risk with their money since nobody can guarantee that nobody will lose their money since there have been cases where people have lost their money and even gone bankrupt. I still feel like United States will keep their end of the deal and give their $4 billion back because this agreement is heavily benefiting them too. In my opinion though, the industries are being kind of selfish and greedy because they think that they are thinking about the nation’s deal with the United States but all they really care about is their own money so that they will not go bankrupt. In the end, this dispute helped both nations learn a lot from the previous mistakes and made me realize that they are only trying to keep their own country and their own citizens happy which is a good thing but the method they have used to do that is wrong and needs to be fixed.

  2. United States is one of Canada’s greatest trading partners, especially for lumber. The Canada-U.S. softwood lumber dispute has arose in 1982 and is still ongoing till today. In April 2006, Canada and the United States announced that they have created a settlement to end the softwood lumber dispute. In July 2006, representatives from both countries, David Emerson from Canada and Susan Schwab from U.S, came together and formally signed the agreement and was passed into law by the federal Parliament in December. The conditions stated that the period for this agreement would last for seven years and has the option to extend the agreement for an extra 2 years. Under the softwood lumber agreement (SLA), the United States agreed to remove to remove would lift countervailing and anti-dumping duties orders on Canadian softwood lumber. The U.S also agreed to return more than $4.5 billion in duties it had collected since 2002, of which $2 billion were returned to British Columbia and agreed not to initiate any new investigations against Canadian softwood lumber during the period of the agreement. Canada agreed to a limit on its softwood exports to the United States at 34% of the U.S market and agreed to impose an export charge on Canadian softwood lumber exports when the products selling at or for over USD $500 per thousand board feet. Canadian regions choose an export charge with a surge penalty (Option A) from (Option B) which was an export quota with a lower in-quota export charge. Canada and the U.S further agreed to terminate any legal proceedings before the enforcement of the agreement (like any pursuing cases through NAFTA or WTO) The new agreement only applies to the provinces of Alberta, British Columbia, Saskatchewan, Manitoba, Ontario and Quebec as the Atlantic Provinces and the territories are excluded from the agreement because their timber industries do not operate on a provincial/territorial stumpage fee system. Overall, the Softwood Lumber Agreement was a way to end the dispute between Canada and the United States to build a stronger relationship between each country and continue to succeed with their trades.

    Ministry of Forests Lands and Natural Resource Operations. “Background Information on the 2006 Softwood Lumber Agreement.” Province of British Columbia, Province of British Columbia, 25 Nov. 2016, www2.gov.bc.ca/gov/content/industry/forestry/competitive-forest-industry/softwood-lumber-trade-with-the-u-s/2006-sofwood-lumber-agreement.

    The Canada-US Softwood Lumber Dispute | Mapleleafweb.Com, http://www.mapleleafweb.com/features/canada-us-softwood-lumber-dispute.html#2001.

    CBCnews, CBC/Radio Canada, http://www.cbc.ca/news2/background/softwood_lumber/.

    • After reading Annie’s summary to the 2006 Softwood Lumber Agreement, I feel that the agreement is very fair in terms of the international needs of Canada and the United States but I feel that the citizens of Canada have to take a big risk with their money since nobody can guarantee that nobody will lose their money since there have been cases where people have lost their money and even gone bankrupt. I still feel like United States will keep their end of the deal and give their $4 billion back because this agreement is heavily benefiting them too. In my opinion though, the industries are being kind of selfish and greedy because they think that they are thinking about the nation’s deal with the United States but all they really care about is their own money so that they will not go bankrupt. In the end, this dispute helped both nations learn a lot from the previous mistakes and made me realize that they are only trying to keep their own country and their own citizens happy which is a good thing but the method they have used to do that is wrong and needs to be fixed.

  3. The video I chose to summarize is American Softwood Tariff Threatens free Trade Talk. As we know, the U.S is Canada’s number one trading partner. Canada exports 65% of its softwood lumber to the United States which represents 33% of the American market. In 1986, the United States wanted a 15% tariff on Canadian softwood lumber and planned to increase the tariff to 30% because U.S producers are furious that the rate is so low. Canada is not pleased with their decision because initially Canada wanted a free trade agreement where there is no tariffs on Canadian softwood lumber. The potential tariff can strip away the competitive edge of Canada and could threaten thousands of jobs. Because of the growth of protectionism in America, Canada had to balance between negotiation and retaliation and challenge the decision to fight and eliminate it. In order to be dominate in the ties between Canada and the United States, there must be trade laws enforced. Canada’s goal in this free trade talks is to get secure access to the U.S market. Although the negative desire the United States has put upon Canada which could have put terrific political fall out, Canada was still committed to the U.S and will continue to try and work with them.

  4. PART 3: My Response
    I strongly disagree with the fact that the taxpayers are having to pay more to the industry until America gives its money. Canada should not be waiting around to get the money, and instead I believe that Canada should demand America to give the money right away. It is wrong for Canada to make its own people pay more for the industry. I agree that this deal is beneficial in terms of the international needs of Canada and the U.S but its very unfair that taxpayers have to pay more just because America could not pay back in time.

  5. PART 1:
    Canada and the United States had been deadlocked in a softwood lumber dispute since 1982. Though by 2006 a deal endorsed by the largest suppliers of softwood lumber in Canada ( Ontario, Quebec and British Columbia ) and the United States had come together in talks to create a softwood lumber agreement. This agreement would be signed on September 12th 2006 by international trade minister David Emerson and the United States appointed trade representative Susan Schwab. This Agreement would allocate billions of dollars to both countries. 4 billion out 5 billion dollars were given back to Canada by the U.S and 1 billion dollars were given to the U.S to help those negatively affected by the trade dispute. Although all could not be well otherwise this would not be considered a “Controversial Agreement”. Many critics and private lumber companies criticized the Canadian government for getting bullied into an agreement. As companies who refused to pay the 1 billion dollar owed to the U.S were charged with a “Special Charge” of a 19 percent tax. All lawsuits against U.S lumber companies from Canadian Lumber companies had to be dropped and further more due to bureaucratic formalities Canadian Lumber companies would expect a delay in the 4 billion dollars they were owed. This left the Canadian federal government in charge of refunding the companies, companies who did not concede to follow up on their due refunds had their refund taken by the government or “kept”. These series of events during the 2006 softwood lumber agreement left it being a controversial one.

    Source: http://www.cbc.ca/archives/entry/a-controversial-agreement

  6. Part 2:
    Canada owes 1 billion dollars to U.S lumber companies and the U.S owes Canada a total of 5 billion dollars held at UNESCO that is to be returned to Canada although only 4 billion of those dollars will be given to Canada. The scale of writing millions of checks to Canada will take 2-3 years so to speed things up the Canadian government will allocate 80% of that money to the softwood lumber companies in Canada as quickly as possible. Also the claims produced by Canadian lumber companies will also be payed back in 80% and those claims then dropped by the Canadian government. Although currently the Canadian government and the Canadian tax payers are forking up the money to give to the Canadian lumber companies that are in need of money. The taxpayers hold the benefit of receiving whatever incentives are not collected by the Canadian lumber companies. Canada as a whole also benefits because of the interest applied to the pending 5 billion dollars. Although slow to arrive the 5 billion dollars Canada is owed will arrive and the relative risk to companies and tax payers are low.

    Source: http://www.cbc.ca/archives/entry/a-controversial-agreement (Audio clip)

  7. Part 3:
    I honestly think that the controversial agreement made between the U.S and Canada in September of 2006 is still better then the current situation we face with NAFTA and the larger scheme of the softwood lumber dispute. Although this agreement was controversial on both sides, it showed the ability of Canada and the United States to compromise for each other for sake of ending a dispute. Billions of dollars were moved around over the course of many years for this deal to seal and although Canadian tax payers and the Canadian Federal Government had to take initiative and pay the Canadian lumber companies off with 80% of what they were owed and 80% in claims, the overall risk of this trade off was only theoretical. If the U.S did not pay then neither would Canada, though the money would eventually reach us over the course of several years as promised with interest on the 5 billion dollars that were returning to us. This showed the ability of Canada to take risks and compromise with the United States. Action like that is necessary now, a compromise must be met and risks must be taken just like in 2006 to mend the current talks at NAFTA .

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