Photographer: James MacDonald/Bloomberg

Canada-U.S. Lumber Spat Is Likely to Drag On After Duty Move

  • Major hurdles said to remain, preventing resolution of dispute
  • Issue may get caught up in looming Nafta talks, analysts say

A longstanding dispute over softwood lumber shipments from Canada to the U.S. is likely to drag on, according to people closely following the saga, despite reports that a deal could be reached soon.

Major hurdles remain before a new agreement would be possible, said a Canadian government official who asked not to be identified because they weren’t authorized to comment publicly on the subject. The U.S. lumber industry has yet to put forth a proposal Canada would accept, raising the prospect of litigation, according to Vancouver-based ERA Forest Products Research. Bloomberg Intelligence analysts say the dispute is likely to get mired in efforts by the Trump administration to renegotiate the North American Free Trade Agreement.

“I don’t think we’re anywhere close to a deal,” ERA Managing Director Kevin Mason said.

Reports earlier this week by the National Post and World Trade Online, citing unidentified people, suggested U.S. Commerce Secretary Wilbur Ross wants to conclude a new softwood lumber deal before Nafta talks start in August. Canada’s ambassador to the U.S. has said so publicly while also warning a deal is unlikely. There’s a real, albeit small, chance a deal could emerge this year with the involvement of Ross, CIBC analyst Hamir Patel said Wednesday in a report.

Shares of Canadian lumber producers rose in Toronto Wednesday: Canfor Corp. and West Fraser Timber Co. both climbed 2.6 percent while Interfor Corp. gained 3 percent.

U.S. Allegations

The decades-long dispute is one of the thorniest between the two countries and escalated this week when the U.S. imposed additional duties on lumber imports from Canada. U.S. producers allege Canadian wood is heavily subsidized and imports are harming American mills and workers. The dispute took on a new dynamic in November, and since then trade has become an increasingly fraught issue with President Donald Trump seeking to renegotiate Nafta.

Canada’s government has long welcomed Ross’s involvement and interest in the issue, but any deal needs more than his approval. There’s also little indication the Canadian view has changed since earlier this month when Foreign Minister Chrystia Freeland said "there is still a lot of work to be done” and ambassador to Washington David MacNaughton said a deal was far off.

Prime Minister Justin Trudeau said Tuesday he’s focused on "ensuring that we’re moving towards a deal" on lumber and that talks will continue over the summer.

The case could reduce the competitiveness of Canadian lumber companies such as West Fraser Timber, Canfor, Resolute Forest Products Inc. and Interfor, Bloomberg Intelligence analysts Caitlin Webber and Joshua Zaret said Wednesday in a report. The U.S. will probably delay an announcement on final duties until November “due to the case’s complexity and to provide more time for a settlement,” they added.

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