US and Canadian officials on Thursday agreed to end a longstanding, bitter, 4.5 billion dollar trade row over softwood construction lumber tariffs. "I am delighted to announce to you that we have reached an agreement that will finally put an end to the softwood lumber dispute," Canadian Prime Minister Stephen Harper told lawmakers in the House of Commons.
"The United States has agreed to provide Canadian producers with unrestricted access under current market conditions," he said. "This means no quotas, no tariffs."
The United States claimed in 2002 that Canada subsidised its lumber and has collected 4.5 billion dollars in tariffs since then. "I am pleased that the United States and Canada concluded a framework agreement today to resolve the long-standing dispute on softwood lumber trade," US President George Bush said in a statement.
"This agreement shows how NAFTA partners can overcome differences and work together," he said, referring to the North American Free Trade Agreement that groups the United States, Canada and Mexico in a free trade area. In Ottawa, Harper said the deal has the support of all three provinces that represent the vast majority of Canada's softwood production: Ontario, Quebec and British Columbia.
However officials in at least three provinces were opposed to the terms, according to local media reports.
Canadian opposition leader Bill Graham blasted the deal. "It's a disaster for Canada, for free trade and the Canadian industry," Graham said. "We got stable, limited access. This is not free and open trade. This is capped and managed trade ... The interests of the Canadian industry were sold out to put an end to an issue that was embarrassing the government," he said.
According to documents obtained by AFP, the United States would refund Canadian forestry firms 80 percent of duties collected on softwood imports or up to four billion US dollars, plus interest.
The remaining one billion US dollars in duties collected from Canadian firms would be split between US forestry companies and projects to benefit the North American lumber market or for "meritorious initiatives like housing reconstruction in (Hurricane) Katrina-affected areas," according to the documents obtained from Canadian sources. Canadian provinces must also agree to a five to 15 percent "export charge" on softwood lumber exports to the United States.
Alternately, they may opt for a 2.5 to 5.0 percent export tax, plus limit exports to 30-34 percent of the US lumber market, depending on prices. "At today's market prices, there would be no such restrictions," US Trade Representative Rob Portman told reporters in Washington.
"After multiple lawsuits without resolution, we are now close to achieving what many thought would never happen," he said. Washington and Ottawa have jousted over lumber for several years at the World Trade Organisation, resulting in a litany of wins, losses and draws for both sides. The two have also turned to the North American Free Trade Agreement's dispute settlement body and US trade courts in an attempt to settle their differences.
The deal comes on the eve of a deadline for the United States to appeal the latest NAFTA decision that would have ended punitive duties on Canadian softwood imports.
In 2002, a US anti-dumping investigation found that Canada had unfairly subsidised its industry and dumped cheap wood on the US market, and resulted in Washington imposing new duties on Canadian softwood products.
The US-based Coalition for Fair Lumber Imports, an alliance of large and small lumber producers, said it "could support settlement terms that US officials have described".