Nations reach timber accord


WASHINGTON (AP) – The United States and Canada announced an agreement on Thursday to settle a drawn-out and heated trade battle over softwood lumber, a major home-building component.

The U.S. timber industry said it could support the accord, but Americans should not expect a price break from the deal when they pay for their new houses.

The agreement was announced Thursday at a joint U.S.-Canada news conference at the Canadian Embassy.

“This agreement is an historic opportunity to resolve a dispute that has lasted for more than two decades,” U.S. Trade Representative Rob Portman said.

Canadian Trade Minister David Emerson called the deal “a watershed moment” in trade relations between the two nations.

“Today is a great day for Canada,” Canadian Prime Minister Stephen Harper declared in the House of Commons, where he received a standing ovation when he announced the agreement.

Harper, who took office in February as the Conservative Party returned to power for the first time in more than 12 years, has sought to resolve the bitter dispute that has strained U.S.-Canadian relations for at least two decades. Harper and President Bush discussed the matter in a telephone call last weekend.

Aboard Air Force One, en route back to Washington from the Gulf Coast, Bush spoke with Harper, according to White House spokesman Scott McClellan. The two leaders congratulated each other on bringing the long-running dispute to an end, he said.

U.S. tariffs on Canadian lumber started at an average of 27 percent in 2002, but now average 11 percent because of various reviews and trade panel rulings.

The U.S. goal is to keep Canada’s share of the U.S. softwood lumber market from exceeding the current level of around 34 percent. However, the deal does not impose any specific cap.

Instead, Canada agreed to impose taxes on its lumber exports to the United States if the price of lumber falls below a specified level. Softwood lumber is currently averaging $370 per 1,000 board feet.

The trigger point for Canadian taxes to be imposed would be about $10 below the current sales price. The tax would start at 5 percent and then go to 10 percent and as high as 15 percent, depending on how low lumber prices fell. The aim of this system would be to protect U.S. producers by boosting the price of Canadian lumber.

Analysts said the sliding scale of Canadian taxes will mean that Americans buying new homes will not get a price break from the deal.

“This is all organized to keep competition down and prices high for U.S. producers,” said Gary Hufbauer, an economist at the Institute for International Economics, a Washington think tank.

Said Jerry Howard, executive vice president of the National Association of Home Builders, “For an administration that espouses free trade, there is no logical reason to … engage in one-sided negotiations that would provide a massive subsidy to the U.S. timber industry at the expense of millions of American consumers.”

But lawmakers from timber-producing states praised the agreement.

Sen. Max Baucus, D-Mont., said the agreement “closes the book on a dispute that has poisoned U.S.-Canada relations for far too long.” Sen. Conrad Burns, R-Mont., said he hoped the deal would put an end to lumber mill closures in his state.

Speaking in Parliament, Harper said the deal would lift tariffs and quotas, and mean that $4 billion of the $5 billion in penalties collected by the U.S. on softwood imports from Canada since 2002 would go back to Canadian producers.

Canadian opponents of the deal want all of the tariffs returned to Canadian lumber companies because international trade panels repeatedly have ruled that the U.S. penalties were improper.

“It’s outrageous, it’s a sellout, it’s a crime that the Americans would keep a billion dollars of money that seven decisions have now said they shouldn’t have,” said Jack Layton, the leader of the opposition New Democratic Party.

Under U.S. law, American companies were awarded penalty fees when they won trade cases against foreign competitors accused of selling products in the U.S. at unfairly low prices. From the U.S. perspective, returning some of the escrowed money from taxes on Canadian softwood amounted to a concession in the bargaining.

Bush administration officials said the fate of the deal, reached Tuesday night but not announced until Thursday, would depend on industry support in both countries.

Neena Moorjani, a spokeswoman for U.S. Trade Representative Rob Portman, said approval could bring stability to the North American lumber market while rejection could mean “many more years of litigation, acrimony and market uncertainty.”

In a statement, the Coalition for Fair Lumber Imports, the U.S. industry group leading the fight against Canadian imports, said it could support the terms as U.S. officials have described.

Associated Press writers Beth Duff-Brown in Toronto and Matthew Daly in Washington contributed to this report.

AP-ES-04-27-06 2019EDT