U.S. trade body rules Canadian softwood hurts U.S. industry

The U.S. International Trade Commission has unanimously voted that the American lumber industry has been harmed by Canadian softwood lumber imports.

In a 4-0 vote Thursday, the agency sided with the U.S. lumber coalition that it was materially injured by imports from Canada.

The U.S. lumber coalition position is that Canada unfairly subsidizes its producers with low stumpage fees for harvesting trees on government land and that Canadian producers are selling wood into the U.S. at lower prices than they sell it at home.

• U.S. sets final import duties on Canadian lumber

The U.S. Commerce Department last month lowered preliminary duties. Most Canadian producers will pay a combined countervailing and anti-dumping rate of 20.83 per cent, down from 26.75 per cent in the preliminary determinations issued earlier this year.

West Fraser Timber pays the highest duties at 23.7 per cent. Canfor is next at 22.13 per cent, followed by Tolko at 22.07, Resolute Forest Products at 17.9 per cent and J.D. Irving at 9.92 per cent.

Foreign Affairs Minister Chrystia Freeland reacted by calling the duties "harmful" both to Canada and to U.S. lumber consumers.

"As we have said throughout this dispute, punitive U.S. countervailing and anti-dumping duties on Canadian softwood lumber are unwarranted and troubling," she said in a prepared statement.

"Canada's forest industry sustains good, middle-class jobs across our country, including in our rural and Indigenous communities. The Government of Canada will continue to vigorously defend our industry, workers and communities against protectionist trade measures."

Exports down but prices up

Canada's softwood lumber exports to the U.S. have fallen since the Americans first imposed new duties earlier this year, but near-record wood prices have meant there has been less pain to the industry than expected.

Trade data from the United States Department of Agriculture shows the amount of Canadian softwood imported fell eight per cent for first nine months of 2017, compared with the same period in 2016.

However the value of those imports went up very slightly 0.15 per cent because even though less wood was shipped, each piece of lumber was worth more.

Demand from U.S. builders for lumber remains high and the additional cost is wrapped into the cost of new homes in the U.S.

No layoffs yet

Although workers in the Canadian industry fear layoffs, so far that hasn't happened, says Joel Neuheimer, vice-president of international trade and transportation for the Forest Products Association of Canada.

"If we were not seeing the same kind of demand and the same kind of high prices we're seeing then we might be in an entirely different type of situation," said Neuheimer.

Canada and the U.S. continue to negotiate a new softwood trade agreement.

The complaints led to the current duties imposed by the U.S. Department of Commerce last spring and verified in November. Canadian producers paid about $500 million in deposits for the duties thus far, with more to come in 2018 if there is no settlement.

Canada is challenging the duties under both the North American Free Trade Agreement and at the World Trade Organization. The NAFTA dispute panel has to make a ruling by next fall. The WTO process could take years.

The vote means $500 million in deposits for the duties paid by Canadian producers thus far won't be returned as the industry had hoped.

Canada won't sign a 'bad deal'

A Resolute Forest Products spokesman said the U.S. will now hold large industry deposits as "ransom" in hope of pushing the Canadian government to sign a "bad deal."

"Sorry U.S., that's not going to happen. Canada is not going to be bullied into submission," Seth Kursman said in an interview from Washington, D.C.

He added that the financial health of American firms is clear evidence that no injury has been suffered.

"The U.S. industry has been crowing about its prosperity for over a year. It is making more money than at any previous time in history."

The BC Lumber Trade Council said the ruling, while not unexpected, is "completely without merit."

Council president Susan Yurkovich said the process is biased in favour of the U.S. industry.

"We are confident that this latest decision by the ITC will again be reversed," she said in a news release.

ITC decisions in the two previous softwood lumber trade disputes didn't survive appeals, Yurkovich noted.

Yurkovich said the U.S. Coalition's claims of injury "ring particularly hollow" given the strong financial performance the U.S. industry is facing and Canadian imports are lower than in 2006 when imports were deemed non-injurious.