WASHINGTON — The U.S. lumber industry scored an economic victory Thursday after an international court ruled Canadian producers must pay millions of dollars in additional taxes for violating a bilateral trade agreement.
The London Court of International Arbitration said eastern Canadian producers violated the U.S.-Canada Softwood Lumber Agreement in 2007 by exceeding their export quotas. The agreement was designed to help U.S. producers compete on equal footing with Canadian producers, who can be subsidized when the provincial governments charge smaller fees to harvest timber from government land.
“We [the United States] felt strongly that they knowingly refused to implement it from day one, and we challenged it,” said Zoltan van Heyningen, executive director of the U.S. Coalition for Fair Lumber Imports.
The ruling requires Canada within 30 days to impose a 10 percent tariff on softwood exports from Quebec, Ontario, Manitoba and Saskatchewan until it collects $68 million in Canadian money.
The added charges, equal to about $53.6 million in U.S. money, make up a small slice of the more than $7 billion U.S. buyers spend annually on Canadian softwood lumber.
It is hard to quantify the ruling’s impact on U.S. producers, but they will be helped if the agreement is enforced, van Heyningen said.
Canadian Department of Foreign Affairs and International Trade spokeswoman Renee David said Ottawa was disappointed the court ruled against it and that there was no option for appeal. The government is reviewing the decision and deciding how it will enforce it, she added.
The cross-border dispute has by no means ended, with U.S. lumber advocates charging Canadian producers of dodging the agreement with new subsidies that include lower government fees and poorer quality ratings for timber.
In a statement released Friday, Sen. Olympia Snowe, R-Maine, said the success of the “hard-won deal” depends on whether provincial Canadian governments enforce the agreement and clamp down on current and future subsidies. Low Canadian land use fees are testing the agreement’s effectiveness, she said.
John Allan, Canadian Lumber Trade Alliance secretary, disputed Snowe’s allegations, calling accusations of Canadian subsidies untrue and the products of “economic competition for a dwindling market.”
“Given the prices that we’ve seen for the last couple of years, this will have a huge negative impact on the eastern Canadian lumber industry,” he said.
Van Heyningen agreed that the weak economy has especially hurt the lumber industry, after a collapse in housing prices halted new construction and reduced demand for all building materials.
“The housing market is horrible, which is why it’s more important that it [the agreement] is adhered to,” he said. “Will it solve everything? No. But it will certainly help.”