Canadian Prime Minister Justin Trudeau raised concerns about US rights when he met President Joe Biden on the sidelines of the recent G-7 summit, said Alice Hansen, spokesperson for Canadian Trade Minister Mary Ng.
“Canada believes tariffs should be removed. Minister Ng has raised this issue at every possible opportunity, ”including with Biden, US Trade Representative Katherine Tai and Trade Secretary Gina Raimondo, Hansen said.
So far, the Biden administration has not bowed to calls to negotiate a new deal. But during a meeting with the National Association of Home Builders on May 28, Raimondo said she took industry concerns “very seriously”.
The NAHB estimated in April that soaring lumber prices added as much as $ 36,000 at the price of a new detached house. Since then, lumber prices have retreated from high levels of nosebleeds, but still more than double last year.
Raimondo pledged to work with home builders “to identify targeted actions government or industry can take to address supply chain constraints.”
The US Lumber Coalition, which accuses Canada of unfair trade practices that have destroyed jobs in the United States, says it is “open to a new trade agreement between the United States and Canada on softwood lumber if and when Canada can demonstrate that it is serious in the negotiations ”.
So far, however, the group is not convinced that Canada really wants to find a deal.
U.S. Trade Representative Katherine Tai used a similar line in May, when she told the Senate Finance Committee that it was Canada, not the United States, that did not want a new deal. .
“To have a deal and to have a negotiation, you have to have a partner. And so far Canadians have not shown an interest in getting involved,” Tai said.
USTR spokesman Adam Hodge explained in an emailed statement saying the United States is open to resolving disputes with Canada over lumber, “but that would require tackle Canadian policies that create a level playing field for US industry. “
These include the “stumpage fees” that Canadian provinces charge lumber companies for cutting trees on public lands. The United States contends that these are set at lower than market rates and constitute an unfair government subsidy.
“Unfortunately, to date, Canada has not been prepared to adequately address these concerns,” Hodge said.
Any deal would require the approval of the US Lumber Coalition because the Commerce Department has legally determined that Canada subsidizes its lumber exports and sells them at unfairly low prices. The United States International Trade Commission has also found that the United States industry is harmed by Canadian trade practices.
Previous refunds: There is precedent for a large duty repayment by the United States in a 2006 agreement to settle an old timber dispute between the two countries.
The George W. Bush administration agreed to return $ 4.4 billion of the $ 5.4 billion in anti-dumping and countervailing duties collected by the US government on imports of Canadian lumber in the early 2000s. About $ 500 million in rights went to US producers.
The Bush administration agreed to make the repayment after the World Trade Organization and North American Free Trade Agreement dispute settlement panels ruled in favor of Canada. By this time, both sides were tired of the litigation, and the billions of dollars in disputed rights helped make the search for a settlement easier.
The pact brought a period of relative peace to the timber trade between the two countries. It removed US duties and allowed British Columbia and other Canadian provinces to regulate trade on their own by imposing either a tax on their exports or a combination of a quota and a lower tax.
The export tax rate and quota values also varied depending on the price of lumber used in residential construction. When the price exceeded $ 355 per thousand board feet, all export taxes or quotas were removed. Currently, lumber prices are around $ 1,000 per thousand board feet, well above the threshold for the absence of taxes or quotas provided for in the 2006 pact.
How we got here: The 2006 agreement was extended once before its final expiration in 2015.
After a one-year grace period, the US lumber industry filed a new petition asking the Obama administration for anti-dumping and countervailing duties on imports to offset what it called unfairly low prices and government grants.
The Trump administration imposed these duties in 2017 after efforts to negotiate a new softwood lumber trade deal failed. But she had a solid legal basis to act, because the United States International Trade Commission voted 4-0 that US producers have suffered “material” injury as a result of imports of dumped and subsidized Canadian lumber.
Since then, the BC Lumber Council estimates that the U.S. government has collected more than $ 4 billion (or C $ 5 billion) in duties on Canadian lumber, which is primarily used to build homes and in projects. home renovation.
Increase in costs and fees: The combined duties currently represent about 9 percent of the value of each shipment. But as lumber prices have tripled in the past year, Canadian companies have had to pay higher tariffs to U.S. customs officials.
In addition, the Commerce Department recently announced that it plans to double the combined tariff rate later this year to over 18%, based on its second “administrative review,” which examined market conditions in 2019.
Lumber prices have fallen sharply in recent days, but still remain at historically high levels, so Canadian producers can expect to pay billions of dollars in additional duty payments over the next few years without agreement.
Adding to the frustration, the high prices make it difficult for US producers to claim they are being harmed by Canadian imports, Yurkovich said.
“Canada is certainly interested in a lasting solution that allows for greater stability in the lumber market,” said Yurkovich. “The United States needs lumber. The lumber industry in the United States is unable to produce enough lumber to meet domestic demand. It has always been a North American lumber market. And so we would very much like this problem to be resolved.
Last shot: Yurkovich bristles at the idea that Canadian lumber is being subsidized and sold at unfairly low prices. The Commerce Department made this decision based on the rate the Canadian government charges private companies for harvesting trees on public land and other factors.
“It’s a pretty interesting business tactic to use your business laws to impose a tax on your competition to keep the product out, which keeps your prices high and then derives a boon,” she said. .
In a recent hearing of a Canadian parliamentary committee, Ng was asked about the possibility of threatening trade retaliation as a means of persuading the United States to the negotiating table. Ng dodged the question and his office did not respond to POLITICO’s request for clarification on the minister’s response.
“We remain focused on defending the Canadian softwood lumber industry and its workers through rules-based mechanisms, including litigation” under the Organization’s dispute resolution procedures. World Trade Union, the new US-Canada-Mexico deal and the old NAFTA pact, Hansen said in an email.
Zi-Ann Lum in Ottawa contributed to this report.