The big holdup in a Canada U.S. lum­ber deal? Rus­sian, Ger­man, Brazil­ian wood

The Guardian (Charlottetown) - - CANADA -

Canada and the United States must chop down one big, re­main­ing im­ped­i­ment to a deal on soft­wood lum­ber and this ob­sta­cle in­volves wood from nei­ther coun­try but from other places: Ger­many, Swe­den, Chile, Brazil and Rus­sia.

This ir­ri­tant over dis­tant im­ports is com­pli­cat­ing the goal of a quick soft­wood agree­ment, some­thing both North Amer­i­can gov­ern­ments say they want to achieve in or­der to start NAFTA talks in two weeks with­out a ma­jor trade ir­ri­tant loom­ing over­head.

This stick­ing point in­volves third-coun­try im­ports. More specif­i­cally, it’s about who gets to fill the U.S. de­mand for lum­ber in the event of a hot con­struc­tion mar­ket like the present one, when Amer­i­can sup­ply falls short.

The two gov­ern­ments have al­ready agreed to split the U.S. lum­ber mar­ket by per­cent­age. Ac­cord­ing to Canada’s am­bas­sador to Wash­ing­ton, Amer­i­cans would sup­ply around 70 per cent; Cana­dian im­ports would be capped around 30 per cent, which falls some­where in the his­tor­i­cal av­er­age.

“There’s a lot more de­tail than that,’’ am­bas­sador David MacNaughton said in an in­ter­view, say­ing the num­bers would be af­fected by other vari­ables.

“But roughly speak­ing, it’s a 70-30 split.’’

Where the third-coun­try problem oc­curs is when the econ­omy booms, de­mand soars and Amer­i­can mills can’t meet their 70 per cent, agreed-upon share.

In such an event, Canada is adamant that the agree­ment should con­tain what’s called a hot-mar­ket pro­vi­sion. There are dif­fer­ent ways to de­sign it. One ex­am­ple ap­pears in a sugar deal struck be­tween the U.S. and Mex­ico this June _ if the U.S. seeks ad­di­tional sugar im­ports, Mex­i­can sup­pli­ers would get a right of first re­fusal.

But the ba­sic point is to al­low Cana­dian ex­porters to sur­pass that reg­u­lar cap of 30 per cent, rather than have other coun­tries fill the gap. Other coun­tries, in­clud­ing Ger­many, Swe­den, Chile, Brazil and Rus­sia, cur­rently sup­ply a mi­nus­cule share of U.S. im­ports.

MacNaughton said it makes lit­tle sense for Canada and the U.S., to strike a deal that shifts pro­duc­tion to other coun­tries. This is­sue, he said, is a key bar­rier to an agree­ment.

“I don’t see any rea­son (for not get­ting a deal),’’ MacNaughton said.

“We should be able to reach an agree­ment. The ball is in their court. We have made clear we are pre­pared to man­age to a mar­ket share _ which is what they asked. We’re just wait­ing for them to come back, and say yes . ...

“The is­sue that is out­stand­ing at the present mo­ment is when there is a hot mar­ket . ... It’s got noth­ing to do with putting peo­ple out of work in the U.S. It’s got to do with mak­ing sure we’re not hav­ing mills idled in Canada in or­der to cre­ate jobs in Rus­sia and Brazil.’’

In shar­ing some de­tails of the on­go­ing ne­go­ti­a­tions, which to date have gen­er­ally been tightly guarded, MacNaughton was re­spond­ing to what he called mis­in­for­ma­tion being spread around Wash­ing­ton.

He ac­cused the U.S. lum­ber lobby of dis­sem­i­nat­ing the false idea that Canada won’t ac­cept a quota: “That’s sim­ply not true.’’

That sen­ti­ment was re­flected in a letter last week from U.S. sen­a­tors, who urged a cap on Canada’s share of the mar­ket. Their letter echoed the lan­guage used by the U.S. lum­ber lobby _ which de­mands what it calls a “clean quota.’’

Re­spond­ing in a state­ment to The Cana­dian Press, the U.S. Lum­ber Coali­tion said: “It is our un­der­stand­ing that there is no agree­ment as Canada still ap­pears un­able to have a co­he­sive po­si­tion that is con­sis­tent with their com­mit­ment in 2016 to an ‘at or be­low mar­ket share’ or quota agree­ment con­struct . ... An ‘at or be­low mar­ket share’ agree­ment... by def­i­ni­tion is a clean quota agree­ment.’’

The in­dus­try view mat­ters here _ its sup­port is likely es­sen­tial to a deal.

That’s be­cause any soft­wood agree­ment would re­quire U.S. pro­duc­ers to re­lin­quish their right to sue Cana­dian com­peti­tors. Some Cana­di­ans fret that the in­dus­try might pre­fer to let the is­sue drag on and play out in court.

CP PHOTO

Stacks of lum­ber are pic­tured at NMV Lum­ber in Mer­ritt, B.C., Tues­day, May 2, 2017. Canada and the United States must chop down one big, re­main­ing im­ped­i­ment to a deal on soft­wood lum­ber and this ob­sta­cle in­volves wood from nei­ther coun­try but from other places: Ger­many, Swe­den, Chile, Brazil and Rus­sia.

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