West Hill Collegiate Institute - International Business

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Lumber II: 1986-1987

Source: The softwood lumber wars, round two

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  • Emma Dempster
  • Purnima Gopie
  • Abdallah Mohamed

10 Comments

  1. LUMBER DISPUTE II 1986-1987
    After Lumber I, The Department of Commerce had issued new guidelines in other cases as to which subsidies fall within the CVD law. Based upon these new guidelines, a different United States industry group, the Coalition for Fair Lumber Imports (aka the “Coalition”), filed a new CVD petition in 1986, seeking an import duty of 27%. The ITC then again made a preliminary affirmative injury determination. Commerce preliminarily found that the under-pricing of Canadian government timber constitutes a subsidy and found that the subsidy rate was 15%. The United States and Canada settled Lumber II, through a Memorandum of Understanding (MOU), before the U.S. agencies issued final Lumber II, CVD determinations. Under the MOU, Canada imposed an export tax on shipments of softwood lumber to the U.S. This tax, originally set at 15%, could be reduced for provinces that increased their administered timber prices or took other measures to offset subsidization. On this basis, the import tax was lifted entirely with regards to British Columbia in 1987 and in partial regards to Quebec in 1987-1988.

  2. Works Cited
    Canada-United States softwood lumber dispute. (2017, October 03). Retrieved November 02, 2017, from https://en.m.wikipedia.org/wiki/Canada%E2%80%93 United_States_softwood_lumber_dispute

    Canadian lumber producers get reprieve with end of 20% of prelimentary duties. (2017, August 29). Retrieved Novemeber 02, 2017, from https://www.google.ca/amp/www.cbc.ca/amp/1.4267167

    Top facts to understand about the softwood lumber dispute. (2016, December 13). Retrieved Novemeber 02, 2017, from https://www.google.ca/amp/s/www.aacb.com/facts-to-understand-about-softwood-lumber-dispute/amp/

  3. 1988: Free Trade Agreement signed

    The Video I decided to base my summary upon was the signing of the free trade agreement. The signing of the Canada-U.S. Free Trade agreement on January 2, 1988, was met with fanfares and multiple of protests shown in the video clip. Many protestors were furious and acted out of control (protestors in Windsor), while others such as Mayor Bernie believed it was going to be a good step for both Canada and The U.S. As part of this agreement, those who supported it, traded flags between countries. Prime Minister Brian Mulroney has been fighting for this since 1985, when Mulroney and U.S. President Ronald Reagan first discussed the idea of free trade between the trading partners. Though, there is much work ahead for Mulroney and his Progressive Conservatives. The final message of the trade agreement still needs to be ratified in the Liberal-dominated Senate. Despite the signatures on the agreement, the Liberal Party leader, John Turner promises to do everything in his power to stop what he considers to be the sale of Canada.

    Works Cited

    1988: Free Trade Agreement Signed – CBC Archives. (2017, March 09). Retrieved November 02, 2017, from https://www.cbc.ca/archieves/entry/1988-free-trade-agreement-signed

  4. Canada’s forest products sector is modern, efficient and environmentally sustainable, and serves markets at home and around the world. In the United States, the demand for lumber exceeds the domestic supply. As a result, the U.S. housing sector and other industries depend on Canada for stable and consistent access to lumber. In fact, Canada is the number-one customer for forest products exports from 27 U.S. states, accounting for revenues to those states of USD 7.2 billion in 2016.Thus, there is no doubt that lumber is imperative to the health of each nation’s economy.
    In Phase II (1986-1987) however, the US Department of Commerce started to assert their trade laws more strictly, specifically in resource countervailing duty cases. Also, the Coalition for Fair Lumber Imports, which is the U.S. lumber industry coalition and lobby group that favours high duties on Canadian softwood lumber, emerged as a politically connected group in the U.S.
    In 1986, U.S. industry groups made a second claim on the Canadian stumpage system. The U.S. Department of Commerce then initiated another investigation of Canadian stumpage programs, this time concluding that they represented unfair subsidies. As a result, the US government levied a 15 per cent tariff on Canadian softwood lumber imports.
    Prior to the final determination, Canada and the United States signed a five-year Memorandum of Understanding (MOU) in which Canada agreed to collect a 15% charge on lumber exports; the charge could be reduced or eliminated for provinces initiating replacement measures (i.e. increasing stumpage) that in order words, worked to offset subsidization.

    SOURCES:
    –“The Canada-US Softwood Lumber Dispute.” (n.d.). Retrieved from http://www.mapleleafweb.com/features/canada-us-softwood-lumber-dispute#history
    –“Softwood Lumber Canada, Part V | EDC Trade.” EDC.Trade, 12 Sept. 2017, https://edc.trade/canada-lumber/
    –“Dispute Settlement.” GAC, 1 May 2013, http://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/disp-diff/section05-2.aspx?lang=en#summary5d.
    –“Language selection – Natural Resources Canada / Sélection de la langue – Ressources naturelles Canada.”, http://www.nrcan.gc.ca/.

  5. PART II: Lumber II (1986-1987)

    This video talks about the impact that this tariff imposition would have on Canadians, as shown here: “it could eventually cost Canada tens of thousands of jobs and lead to more than a billion dollars of tariff penalties on our exports”. Please note that it was reported on the day that news of the imminent investigation of our stumpage system was announced, thus before the 15% tariff for Canada was decided. Nevertheless, it highlights the detrimental effect that this taxation would have for Canadians. It also mentions the U.S.’s reasoning for such tariffs against its largest trading partner. Without this tariff, Canadian lumber could be sold in the U.S. for cheaper than American lumber. As a result, they would be promoting and heightening the sale of products from abroad instead of their home industries. An interesting point is brought into effect. The speaker asked the question of whether or not the Canadian industry actually was unfairly subsidized as the U.S. claimed. Canadian owners have been shot at by claims previously by Americans but failed since it was found that the subsidization of the Canadian lumber industry was “insignificant”. In the video, it is predicted that Canada will win this claim once again since they have not changed their manufacturing or production processes, so there is no new (or old) evidence to prove unfair subsidization on our part. However oddly, we lost.

    Original source: The National. 6 June 1986.

    URL: http://www.cbc.ca/archives/entry/the-softwood-lumber-wars-round-two

  6. part 1: In 1986, the US Department of Commerce started another examination of Canadian stumpage programs, this time reasoning that they represented unfair subsidies. at the end, the US government exacted a 15 for every penny tax on Canadian softwood lumber imports. Later in 1986, the governments of Canada and the United States signed a contract of 5 years for something called Memorandum of Understanding. This contract made the US drop its 15 per cent tariff. In its place, the Canadian government agreed to impose a 15 per cent export charge on lumber exports to the US to make it fair. The Memorandum of understanding also allowed provinces and territories to replace the export charge through other policy changes, such as increased stumpage fees. The Memorandum meant that Canadian softwood companies would have to submit to a 15 per cent charge when exporting their products to the US.

    http://www.cbc.ca/archives/categories/economy-business/trade-agreements/
    http://www.mapleleafweb.com/features/canada-us-softwood-lumber-dispute

  7. PART III Lumber II (1986-1987): Personal Reflection

    I will be focusing particularly on the the expiration of the lumber agreement in 2016 and onward. I feel as though the Canadian government is pivoting solely around trade with the US and reforming the agreement. Though yes, our public relations are crucial, this agreement worked in favour of the U.S. mainly. In my opinion, the United States kept having the upper hand.

    The SLA capped Canadian softwood at occupying a maximum of 34% of the market. Historically, Canada has held about 30%. Canada didn’t come close to the cap during the 9 years the agreement was in force. Right now, Canadian softwood occupies about 27% of the U.S. softwood lumber market and Canadian harvest levels could decline even further.

    Because of declining supply, Canada is predicted to hold about 25% of the U.S. softwood lumber market 10 years from now which is almost 10% less than the SLA cap.
    Even if Canada wanted to dramatically increase its exports to the U.S., it does not have the physical capacity to do so. It is also interesting to note that during the 9 years the SLA was in place, the U.S. share of its own lumber market increased ten per cent. Thus, the SLA succeeded in its aim to protect U.S. market share for domestic producers.

    I feel that Canada needs to work more towards diversifying their market instead of being so reliant on the U.S. for revenue. For example, China is a plausible alternative.

  8. part 2: this video follows up on the round 2 lumber. Four years after its unsuccessful complaint against alleged Canadian softwood subsidies, the U.S. forest industry prepared for another round. they claim conditions have changed, and this time U.S. Department of Commerce is on their side. And the stakes couldn’t be higher. As we learn in this report, by this fall the complaint could cost Canadians billions of dollars in duties, and put tens of thousands of Canadians out of work.

    http://www.cbc.ca/archives/entry/the-softwood-lumber-wars-round-two

  9. MY REFLECTION
    My overall reflection upon the Canada-U.S Softwood Lumber Dispute, is that this is one of the longest and most important trade disputes between Canada and the U.S, affecting the entire lumber industry to present day. Both countries have been trading lumber since the 1800’s but multiple times they have ran into some problems. With Canada being one of the largest lumber producers and exporters in the world, the U.S is heavily dependent on the import of their timber, as softwood is used for building construction sites, furniture, etc. The Lumber agreement would be seen as a good idea, as it will create good for both countries. In Canada, the production of softwood has created thousands of jobs directly, as well as indirectly, in the engineering, transportation and the construction sector but there are a few downfalls. While for the U.S, they will finally get what they want. All in all, the dispute is still going on but will hopefully, soon come to a final end.

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