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Canadian Lumber Situation With legislation introduced in both House and Senate proposing to raise U.S. duties dramatically on Canadian softwood lumber imports, in excess of the 27.2% tax currently collected, the pressure is on to find an alternative solution that all interests will accept. As U.S. producers have discovered, Canadian mills' survival strategy for coping with the existing duty has been to increase production, rather than to limit it, in hopes of recovering some portion of their lost margin through lowering unit production costs -- and some U.S. manufacturers are alleging that the Canadian Provincial governments' effective "subsidies" to their industries have increased in the meantime. Furthermore, a North American Free Trade Agreement panel vote this spring may -- or may not -- rule that even the existing duty is illegal and refund some $800 million in duties to Canadian producers. In early February, U.S. and Canadian trade authorities, along with U.S. and Canadian lumber executives, met in Washington, DC to negotiate a resolution outside of the NAFTA framework. According to the February 4 Vancouver Sun, Canadian officials are increasingly open to the idea of turning the duty into an "export tax," which would go to Canadian, rather than U.S., public funds, accompanied by a rule that would allow individual Provinces to seek exemption from the tax to the extent that they reform their allegedly subsidized stumpage policies over time. Although there appear to be few objections to this policy on the U.S. side -- provided it is properly regulated -- the Sun reports that "Canadian unity is particularly fragile, and Ontario and Quebec are not eager for a border tax" perceived as favoring British Columbia. Return to Public Policy Archive Forest Resources Association
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