Politicians in the US have warned that a major trade-war could break out with Canada if the two cannot resolve differences over softwood lumber imports.
The countries temporarily settled the issue in 1996 with the Softwood Lumber Agreement, which enables Canada to export a set quantity of softwood to the US duty-free. This expires on March 31 and, so far, the two sides have failed to come up with a replacement.
Democrat senator Max Baucus has urged the incoming US trade representative Robert Zoellick to make the issue his top priority, warning that it is potentially the US’s biggest potential trade dispute with any country.
‘This could ignite into a trade war unless it is dealt with very quickly,’ he said.
The war of words over the lumber trade is continuing to hot up, with Americans repeating their long-standing accusation that the Canadian suppliers are unfairly subsidised.
Canada currently ships around US$11bn of lumber a year to the US, around 30% of the latter’s total market needs.
‘The trade is killing my state’s lumber industry,’ said Arkansas senator Blanche Lincoln. ‘Ten Arkansas mills have closed.’
The Canadians reject accusations that they are subsidised and are demanding totally free trade in lumber with the US.
‘In a perfect world, we’d like to have Canadian lumber enter the US under the North American Free Trade Agreement without the problem of duties,’ said Canadian industry minister Brian Tobin. ‘That would be our maximum position.’
If a new agreement is not in place by March 31, the US says it has the right to impose new duties on Canadian lumber until the matter is settled. Canada has appealed to the World Trade Organisation for a ruling that, if it rules these duties illegal, they should be refunded.
The dispute was due to be one of the topics of talks between US president George W. Bush and Canadian prime minister Jean Chretien last week.
