The Canada-US Softwood Lumber Dispute
| DOI | 10.1177/002070200305800306 |
| Published date | 01 September 2003 |
| Author | Gilbert Gagne |
| Date | 01 September 2003 |
| Subject Matter | Article |
GILBERT
GAGNE
The
Canada-us
softwood
lumber
dispute
A
test
case
for
the development
of
international
trade
rules
THE
EXCHANGE
OF
GOODS
AND
SERVICES
between
Canada
and
the
United
States
constitutes
the
largest
trading
relationship
between
two
sovereign
states.
Each
country
is
the
other's
main
trading
partner.
In
2000,
the
value
of
Canada-US
trade
amounted
to
nearly
CDN$700
bil-
lion;
now,
over
CDN$1.5
billion
of
merchandise
crosses
the
border
daily.'
The
overwhelming
proportion
(95
per
cent)
of
this bilateral
trade
takes
place
smoothly
and
free
of
tensions.
When
disputes
have
arisen,
the
two
countries
have
held
the positions
of
plaintiff
and
defen-
dant
in
almost
equal
proportions.
Tensions
and
conflicts
have
tended
to
involve
issues
of
essentially
circumscribed
economic
and
political
scope.
Canadas
exports
of
softwood
lumber
to
the
United
States
represents
a
notable
exception
to
this generally
harmonious trading
relationship.
The
softwood
lumber
dispute
has
proven
the
most
significant
between
the
two
countries
in
terms
of
trade volume, complexity,
procedures,
politicization
and duration.
Superlatives
abound
in
references
to
this
conflict:
"the
largest
trading
dispute
in
the
largest
trading
relationship
in
the
world."
Canada
is
highly
dependent
on
the
American
market,
Gilbert
Gagni
is
an
Assistant
Professor
in
the
Department
of
Political
Studies
at
Bishop's
University
in
Lennoxville,
Quebec,
where he
teaches
international
relations.
i
Canada,
Department
of
Foreign
Affairs
and
International
Trade,
Trade
Update
2001,
(Ottawa:
May
2001),
7.
INTERNATIONAL
JOURNAL
Summer
2003
Gilbert
Gagn6
which
in
2001
accounted
for
40
per
cent
of
the
country's
gross
domes-
tic
product
(GDP)
and
87
per cent
of
its
exports.
Softwood
lumber
is
one
of
Canada's
main
export
sectors,
with
exports to
the
United
States
accounting
for 70
per
cent
of
Canadian lumber
production
and
amounting
to nearly
CDN$10
billion
in 2001.
Trade
disputes
in
agricultural
and
commodity
products,
as
with
softwood
lumber,
can
take
on
a
further
political
dimension
because
they
affect large
numbers
of
citizens,
often
regionally
concentrated-a
factor
that
gives
their
votes
extra
weight.
The
softwood
lumber
conflict
has
unfolded
primarily
between
the
province
of
British
Columbia,
which
accounts
for
about
50
per
cent
of
Canada's exports,
and
the
us
region
of
the
Pacific
Northwest,
which
encompasses
the
states
of
Washington, Oregon
and California.
In
Canada,
it
has
been
estimated
that
more
than 300,000
workers
have
been
directly
or indirectly
affect-
ed by
the
conflict
and
that
roughly 300
communities
are
dependent
on
the
forestry
sector
as
their primary
source
of
employment.'
Although
it
has
historical
antecedents
dating
back
to
the
1950s, and
even
to
the
turn of
the century, the
softwood
lumber
dispute
began
in
1983,
when
us
authorities
first
asked
whether
Canadian
lumber
exports
are
subsidized.
The
main
issue
at
stake
is
whether
the
fees
charged
by
provincial
authorities
to
private
firms-to
harvest
trees
on
public
lands
(stumpage
rights)-are
artificially
low
and
constitute
unfair
subsidies.
Canada
has
insisted
that
this
is
a
matter
of
public
pol-
icy
that is
in
no
way related
to
trade
and
subsidization. In
contrast
to
the
United
States,
Canada
and
some
other
countries
apply
a
more
tem-
pered
model
of
economic
liberalism,
which
allows
for
a
greater
role
for
the
State in
certain
key
sectors
such
as
the
ownership
and
management
of
natural
resources.
Debates
over
issues
of
this
kind
are
likely
to
increase
in
a
context
of
economic
globalization.
The
softwood
lumber
conflict
really
began
when
us authorities
con-
cluded in
1986
that
stumpage
rights
were
"specific"
and
insufficient,
and,
as
a
result,
could
be
subject
to
countervailing
duties
(CVDs).
For
Americans,
the
position
is that
it
is
essential
to
protect
a
major
industry
that
is
under
direct
competitive
threat
from
unfairly
subsidized
imports.
For
Canadians, the
argument
is that
the
United
States
is
uni-
laterally
and
arbitrarily deciding
how
provincial
governments
should
tax
and
manage
their
resource
industries.
The
softwood
lumber
dispute
2
Statistics
Canada,
CANSIM.
336
INTERNATIONAL
JOURNAL
Summer
2003
Softwood
lumber
has
gone
through
different
stages,
some
highly
conflictual;
there
have
been
peaks
followed
by
periods
of
relative
calm
when
ad
hoc,
tempo-
rary
arrangements
have
been
implemented
to
prevent
us retaliation.
Twenty
years
in,
the
dispute
continues, with
no
"permanent"
settle-
ment
in
sight
that
is
acceptable
to
both
parties in
sight.
The
Canada-US
dispute
over
softwood
lumber
raises
crucial
ques-
tions regarding
the
definition and
evaluation
of
subsidies,
and,
more
generally,
involves
key
issues
of
public
policy. In
us
trade
legislation,
the
notion
of
a
countervailable
subsidy
has
expanded
over
the
years
and
in
successive
laws
to
include
any
government
policies
other than
those
of
a
general
character-in
other
words,
"domestic
subsidies
...
to
a
specific
enterprise
or industry,
or
group
of
enterprises
or industries."
US
CVD
investigations
must,
therefore,
determine
whether
a
subsidy
is
specific
or
generally
available,
and,
in
the latter
case,
if
defacto,
it
ben-
efits
certain
enterprises.
The
fundamental
legal
arguments
in
the
soft-
wood
lumber
dispute
have
centred
on
whether
stumpage
rights
are
general
or
specific
and
whether they
provide benefits
to
lumber
pro-
ducers.
Public
policies,
such
as
stumpage
rights,
are
"general"
measures
that
apply
to
many
industries,
such
as
pulp
and
paper. According
to
the
tenets
of
neo-classical
economics,
stumpage
fees
do
not
affect
relative
costs
within
a
national
economy.
Therefore,
they
normally
fall
outside
of
the
scope
of
provisions
on
unfair
trade
practices.
In
fact,
the
United
States
has
found
it
difficult
to show
that
trade
distortions
result
from
such
measures.
Softwood
lumber
may
be
seen
as
a
typical
or
classical
case
of
protec-
tionism,
in
which
an
inefficient,
but
politically
influential, domestic
industry
seeks
relief
from
import
competition.
In
this
instance,
it
alleges
unfair subsidization
and
dumping.'
As
we
will
see,
however,
the
dispute
can
only
be fully
understood
in
the
light
of
the evolution
of
us
and
multilateral
trade
rules.
3
Subsidization
generally
refers
to
a
financial
contribution,
taking
the
form
of
grants,
loans,
or
tax
concessions
that
benefit
firms.
CVDs
are
based
on
an
evaluation
of
the
subsidy
and
aim
to
offset
its
effect.
In
addition
to
CVDS,
the
us
trade
remedy
legislation
includes
anti-dumping
(AD)
measures,
safeguard
measures
(Section
201),
and
measures
to
deal
with
"unfair
trade"
under Section
301.
Only since
2001
have
AD
measures
been
used
in
the
softwood
lumber
dispute.
Dumping
generally
refers
to
a
product imported
at
less
than
its
normal
value,
specifically
if
its
price
is
lower
than the
one
in
the
exporting
country
or
when
destined
for
a
third
country,
or
less
than
its
cost
of
production.
Despite
successive
us
and
multilateral
provisions
aimed
at
clarifying
the
notions
of
dumping
and
subsidy
as
well
as
conditions
for
the
imposition
of
trade
remedies, these
remain
rather
elusive
and
could
lead
to
abuse.
INTERNATIONAL
JOURNAL
Summer 2003
337
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