The United States of America and Canada have had long term trade links. One of their major trading activities has been in the softwood lumber industry. For example, in 2005 Canada exported softwood lumber worth 8.5 billion U.S dollars to U.S. This trade is of great significance to both U.S.A and Canada. For instance, 275,000 Canadians are employed in the forestry sector, and approximately 295 communities in Canada are known to rely on the forestry sector for their survival. On the other hand, the lumber producers in U.S have been unable to produce enough lumber products for their domestic market demand. Consequently, U.S now depends on lumber exports from Canada to supplement its ever growing demand for softwood lumber. Over a third of lumber consumed in U.S is currently being sourced from Canada (Zhang 4).
Softwood lumber is of great value to the housing sector of U.S and other industries that depend on lumber. This long term lucrative trade has however been plagued by some serious misunderstandings between Canada and U.S.A. Resolving this conflict has been a top trade priority for Canada (Zhang 8). These disputes have been simmering for a long period of time and they are likely to strain trade ties between these countries. It is on this background that this paper tries to analyze the trade disputes with an aim of finding dependable solutions to them.
The Cause of the Problem
Disagreement between USA and Canada
The heated arguments about the lumber trade between U.S.A and Canada started several decades ago and it can simply be compared to a sibling rivalry. These wrangles existed even in Canada. Most of the stakeholders in the Canadian forestry sector have always advocated for a free trade in this industry. Lumber Trade Organizations have also noted that these disputes could have serious consequences on the economies of the two countries hence they need to be ratified (Griffiths 45).
High Import Duties
In 2001, the U.S.A government supported its lumber producers plan to impose high import duties on Canada’s softwood lumber exports. The new import duty was effected up on the expiry of the deal that controlled exports between1996-2001. The U.S government added anti-dumping duty to the already existing duty. Dumping refers to exportation of finished goods or raw materials to another nation at a relatively lower price compared to the cost of production of the goods. The duties were levied separately up on the expiry of the contract (Welsh 34).
Biased Trade Agreements
With the onset of the trade conflict, thousands of Canadians who worked in the forestry industry were laid off and there was also a significant drop in the earnings from lumber trade. The U.S government warned that the conflict would continue unless Canada came up with its own export levies (Cohen 57). Canada did not accept to impose export duties on softwood lumber. The latest dispute in the trade emerged in 2002.
In this case the U.S government increased its import duties on lumber to 27 percent on the premise that Canada unfairly gave subsidies to its lumber producers. In addition to this, U.S also failed to honor several clauses of the importation deal by restricting the number of products to be imported through Soft Lumber Deal. Amicable agreement was made in 2003 to solve the dispute, but it was breached after a few days. In several occasions, this issue was channeled to the World Trade Organization for further hearing and the rulings were always made in favor of Canada.
Solution to the Problem
This dispute was finally resolved in 2006. According to the agreement, U.S was to return about 80 percent of the import duties that it had tapped from lumber imports (Benitah 17).The deal was launched by signing an agreement in July 2006. In contrast to the agreement, a group of key players in the lumber sector declined to give their support to the final treaty. They only came to accept the terms of the deal after some revisions were made on it. The agreement aimed at repealing the punitive measures like tariffs that were set to control the import of lumber from Canada. However, import taxes would come to play incase of any decline in the value of lumber. This agreement was scheduled to be in practice for a period of seven years and there was also room for its renewal (Zhang 14).
From the above discussion it can concluded that trade disputes between Canada and U.S have adversely affected their economies in terms of job losses and a drop in profit earnings from the trade. It is therefore necessary for them to find ways of settling their disagreements in time before they spiral out of control (Zhang 19). This is because trade can only flourish between them if they are at peace with each other. Other countries that may be having a similar dispute to this can also learn from it. Now that they have solved the dispute we envisage better trade ties between them and they are likely to gain from the trade in future (Cohen 67).
Benitah, Marc. “Canadian softwood lumber.” American Society of International Law 6 (2002): 7- 15. Web.
Cohen, Andrew. While Canada slept: how we lost our place in the world. Toronto, Ontario: Mc Clelland and Stewart, 2004. Print.
Griffiths, Rudyard. Who we are. Washington: D and m Adult, 2010. Print.
Welsh, Jennifer. At home in the world. Canada: Harper Collins, 2004. Print.
Zhang, Daowei. The softwood lumber war: politics economics and the long U.S.-Canadian trade dispute. Washington D.C.: Resources for the Future, 2007. Print.