Here We Go Again, Maybe – Trade Disputes Looming

By | March 9, 2015

Just when there was some feeling that the old Canada-US trade wars of a couple of decades back were really at an end, there are new and darkening clouds on the horizon.

The first bit of gloom is in softwood lumber, a dispute that’s been off the front burner for a while under a bilateral agreement with the Americans, allowing Canadian lumber imports over a stipulated price and suspending any trade case being launched by American producers.

That agreement expires in October of this year. As Barrie McKenna wrote on 8 March 2015 in the Globe and Mail, there are rumblings in Washington that the US industry won’t agree to its renewal.

Without that agreement, American producers will be free to file a new trade case again Canadian exports. Chances are, they will.

The numbers make a new dispute inevitable. Look at it this way.

Canada’s annual market share in the US is over $8 billion. By forcing Canadian producers off balance in fighting a trade case, win or lose, the US softwood industry will come out ahead.

With a new Commerce Department investigation, gaining a mere 1% at the expense of Canadian imports equals $80 million annually in the Americans’ pockets. Why not pay a Washington law firm just half of that to bring on a new case?

The second gathering storm comes from a new petition just filed by US paper producers, arguing that Canadian imports are both dumped and subsidized. The target is Canadian exports of soft – or supercalendered – paper used to print magazines, catalogues, flyers and the like. The target companies are exporting industries in the Maritimes, Quebec and BC, so it has a cross-Canada impact.

Part of the US industry’s petition is that Canadian manufacturers benefit from low stumpage rates, just like the allegation in the softwood lumber dispute.

So here we go again.

While it’s expected that the Canada-US border won’t always be friction free, given the amount of bilateral trade involved overall, these two cases are cause for some re-evaluation. It shows that no matter how closely integrated the two economies have become under the NAFTA, when it comes to trade litigation, the border is still very much there.