United States-Canada softwood lumber dispute

The Canada–U.S. softwood lumber dispute is one of the largest and most enduring trade disputes between both nations. This conflict arose in 1982 and its effects are still seen today. British Columbia, the major Canadian exporter of softwood lumber to the United States, was most affected, reporting losses of 9,494 direct and indirect jobs between 2004 and 2009.

The heart of the dispute is the claim that the Canadian lumber industry is unfairly subsidized by federal and provincial governments, as most timber in Canada is owned by the provincial governments. The prices charged to harvest the timber (stumpage fee) are set administratively, rather than through the competitive marketplace, the norm in the United States. In the United States, softwood lumber lots are privately owned, and the owners form an effective political lobby. The United States claims that the Canadian arrangement constitutes an unfair subsidy, and is thus subject to U.S. trade remedy laws, where foreign trade benefiting from subsidies can be subject to a countervailing duty tariff, to offset the subsidy and bring the price of the commodity back up to market rates.

The Canadian government and lumber industry dispute this assertion, based on a number of factors, including that Canadian timber is provided to such a wide range of industries, and that lack of specificity makes it ineligible to be considered a subsidy under U.S. law. Under U.S. trade remedy law, a countervailable subsidy must be specific to a particular industry. This requirement precludes imposition of countervailing duties on government programs, such as roads, that are meant to benefit a broad array of interests. Since 1982, there have been four major iterations of the dispute.

The softwood lumber industry is vital to the Canadian economy. It has allowed for the employment of thousands of people. The overall forest industry has contributed to direct jobs for approximately 232,700 individuals. Indirectly, 289,000 people have been hired to work in other sectors that depend on Canada's forests. They include engineering, transportation, and construction. Such benefit from this industry can be seen in the nation's GDP, which added $21.2 billion in 2014. That accounted for around 1.3% of real GDP. Canada has the biggest trade surplus in relation to forest products ($21.7 billion in 2015). As the largest market, the U.S. is heavily dependent on Canada's lumber. The needs of the country outweigh the domestic supply. With the housing market on a rebound, this demand is growing. Canada has also been expanding rapidly into the Asian market, with China being the second-largest importer. The U.S. accounted for 69% of Canada's softwood lumber exports in 2015. This is an increased share of Canadian softwood lumber exports, which reached its lowest level in 2011 accounting for only 54%. China in that same year accounted for 21%.

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