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Daily News / Market Analysis / Lumber / Global / North America
August 26, 2016

Canada-US: Fewer chances of a new softwood lumber trade deal

Canada-US: Fewer chances of a new softwood lumber trade deal

The US and Canada officials are depreciating the chances of reaching a softwood lumber trade deal before the October deadline, thus raising the likelihood of higher tariffs.

President Barack Obama and Prime Minister Justin Trudeau met in March and pushed the talks through June, but still haven’t reached any agreement, while acknowledging “significant differences” remain.

As reported by Bloomberg, the officials began two days of talks in Washington on Wednesday, the fourth round of negotiations since the leaders met. Canada’s Ambassador to the U.S., David MacNaughton, and the country’s chief softwood lumber negotiator, Martin Moen, have each said this month the sides remain far apart.

Moreover, Canada wants rather to pass the October deadline than to sign for a bad deal.

“We’re not going to be bound by any particular deadline. We’re going to try and reach an agreement, and we’re working hard now in the fall to do that,” Trade Minister Chrystia Freeland said.

If the standstill period gets to expire, the US is expected to begin a process to enact new tariffs, which would be a barrier to Canadian producers including major players such as Canfor Corp., West Fraser Timber Co. and Interfor Corp., according to Bloomberg.

The increased lumber demand from the US builders through April 2016 came mostly from Canada. The monthly softwood exports to the US are up by 23%, on a seasonally adjusted basis, since the agreement expired. Also, the value of softwood lumber exports to the U.S. is up 25 percent to C$3.6 billion ($2.8 billion) in the first six months of 2016, compared with C$2.9 billion in the same period last year. In 2015 only, Canada exported C$5.9 billion of to the U.S.

As Moen told a parliamentary committee this month, the US producers will certainly petition the Commerce Department to enact “high countervailing and anti-dumping duties on Canadian softwood,” if a new deal isn’t reached.

Yet, the new tariffs wouldn’t take effect immediately, but sometime in the spring of 2017, raising the hopes of a deal. The 2006 softwood agreement expired on Oct. 12, 2015. Canada wanted to extend the agreement but the U.S. refused.

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