• No deal before October deadline could trigger U.S. tariffs
  • Deteriorating mood over trade also complicates EU trade hopes

Canadian Trade Minister Chrystia Freeland said growing protectionist sentiment in the U.S. risks escalating a trade dispute between the countries over softwood lumber.

Freeland, speaking in an interview with Bloomberg TV on the sidelines of the G-20 summit in Hangzhou, China, said there’s a chance the two sides won’t be able to reach a deal before an October deadline, raising the specter of higher U.S. tariffs.

Freeland said she discussed the matter Sunday with U.S. Trade Representative Mike Froman, and plans to meet with him again in the next two weeks.

“There is no guarantee we are going to get to a deal that works for both sides,” she said. Coming to an agreement “is harder in this protectionist, anti-trade climate.”

The spat over lumber between two of the world’s closest trading partners highlights the extent to which support for trade agreements is faltering globally. It’s a worrisome trend that is requiring policy makers to show trade is widely beneficial, Freeland said.

“We’ve heard here at this G-20 a lot of talk -- and I think it’s right that we’re talking about it -- about the protectionist sentiment which is really sweeping the world,” she said. “I think we need to be worried about it.”

If the deadline on softwood lumber is missed, the U.S. is expected to begin a process to enact new tariffs, which could hurt exports by Canadian producers.

The previous softwood lumber deal -- which included export quotas for Canadian producers -- expired in October, triggering a one-year standstill that includes a tariff freeze.

U.S. industry has long complained that Canadian “stumpage” prices for standing timber constitute an unfair subsidy and that Canada, the world’s largest lumber exporter, is therefore undercutting the U.S. market.

At a separate briefing, Freeland added the deteriorating mood toward trade is also complicating Canada’s efforts to conclude a free-trade agreement with the European Union.

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