The Canada–U.S. softwood lumber dispute is one of the largest and most enduring trade disputes between both nations. This conflict was given rise in the early 1980s and its effects are still seen today. British Columbia, the major Canadian exporter of softwoodlumber to the United States, was most affected, reporting losses of 9,494 direct and indirect jobs between 2004 and 2009.
The heart of the dispute is the claim that the Canadian lumber industry is unfairly subsidized by federal and provincial governments, as most timber in Canada is owned by the provincial governments. The prices charged to harvest the timber (stumpage fee) are set administratively, rather than through the competitive marketplace, the norm in the United States. In the United States, softwood lumber lots are privately owned, and the owners form an effective political lobby. The United States claims that the Canadian arrangement constitutes an unfair subsidy, and is thus subject to U.S. trade remedy laws, where foreign trade benefiting from subsidies can be subject to a countervailing duty tariff, to offset the subsidy and bring the price of the commodity back up to market rates.
The US views Canada’s way of setting stumpage fees as subsidization. The US lumber coalition claims that unlike the domestic action-based timber sale, Canada’s administrative pricing concept doesn’t reflect the market value of the goods.
By harvesting timber on Crown land at artificially low rates, Canadian companies are actually taking advantage of subsidies, which is an unfair practice and should therefore be subject to trade remedy laws. These laws envision the imposition of a countervailing (anti-subsidy) duty on this type of foreign goods as a way to compensate for the subsidy and restore the price to match market rates.
As a more recent development, USA also made “dumping” allegations, claiming that the price of Canadian lumber on the US market is lower than the cost of production or the selling price in Canada. As a result of this dumping, the lumber companies have acquired a larger share of the US lumber market.
The Canadian government defends its forest management system, challenging the subsidy claim itself, as well as the allegation that the lumber should be subject to a countervailing duty on those grounds.
Since the wood is used in a wide range of industries, it doesn’t qualify as a subsidy under US law, which stipulates that countervailable subsidies must be specific to a certain industry. According to Canada, the actions of the US are driven by protectionism, rather than unfair practices.