U.S., Canada reach settlement on softwood lumber

The United States and Canada signed an agreement Saturday to settle a drawn-out and heated trade battle over softwood lumber, a move hailed by Inland Northwest sawmills.

The long-awaited agreement, signed at a ceremony in Geneva, Switzerland, is a “fair compromise” that will benefit both sides of the border, said Jim Riley, president of the Intermountain Forest Association in Coeur d’Alene.

Local mill owners have played an active role in the discussions, with executives from Riley Creek, Bennett Forest Products, Vaagen Bros. and Potlatch Corp. flying to Washington, D.C., to testify that unchecked lumber imports have hurt U.S. industry.

Though the newly reached accord expires in seven years, Riley said he’s hopeful that it will serve as a platform for creating a permanent solution to the dispute.

Canada produces about 34 percent of the softwood lumber sold in the United States. The commodity spruce, fir and pine, used in home construction, compete directly with lumber produced by U.S. mills.

The U.S. industry has long argued that Canada subsidizes its mills through cheap log sales to support rural employment. The Bush administration agreed. In 2002, it imposed duties of 27 percent on lumber coming from Canada.

A series of appeals and litigation followed. The tariffs were eventually reduced to an average of 11 percent.

The agreement, the details of which were first announced in April, seeks to keep Canadian lumber imports from exceeding more than 34 percent of the U.S. market. However, the deal does not impose a specific cap.

Instead, Canada agreed to impose its own export taxes on its lumber shipped to the United States if prices fall below a specified level. The system protects U.S. producers by boosting the price of Canadian lumber. The agreement is expected to take effect in September.

The U.S. timber industry is supporting the accord but said Americans should not expect lumber prices to fall as a result of the deal. Softwood lumber is currently averaging $370 per 1,000 board feet.

“This agreement resolves concerns on both sides of the border and allows us to focus on the larger positive trade relationship binding our two countries,” U.S. Commerce Secretary Carlos Gutierrez said in a statement.

Canadian Prime Minister Stephen Harper, who took office in February as the Conservative Party returned to power for the first time in more than 12 years, had sought to resolve the bitter dispute that has strained U.S.-Canadian relations for at least two decades. Harper and President Bush discussed the matter in April before outlining the key terms of the agreement.

The agreement ends all litigation between the two countries over softwood lumber. In addition, $4 billion of the $5 billion in tariffs collected by the U.S. will be returned to Canadian producers.

No U.S. legislation is required for the softwood deal to take effect, but the Canadian Parliament will have to approve the new export tax system.