Canada – US Softwood Lumber Trade Update

Canada responds to a new trade dispute launched by the US over supercalendered paper, and Canada’s new Minister of International Trade releases a statement about the current state of negotiation for the expired Canada-US softwood trade deal.

Canada-US Softwood Lumber Trade Update

This week Canada’s new Minister of International Trade, Chrystia Freeland, released through the media department a statement:

“Minister Freeland had a productive meeting with Ambassador Heyman on November 12 where they discussed ways our two countries could enhance the Canada-US relationship. Finding a suitable solution to the softwood lum- ber file is a priority for Canada, and the Government of Canada will continue to promote and defend the interests of the softwood lumber industry.”

Supercalendered Paper Duty Battle

Also this week, Prime Minister Justin Trudeau challenged a US decision to impose new tariffs on imports of glossy paper, just hours before the new Canadian leader held his first meeting with US President Barack Obama.

Canada has requested a review under the North American free- trade agreement of import tariffs imposed by the US Department of Commerce of as much as 20 per cent on supercalendered paper from four Canadian companies – Catalyst Paper, J.D. Irving, Port Hawkesbury Paper, and Resolute Forest Products. The tariffs were imposed after US producers filed a petition earlier this year claiming the Canadian companies were unfairly subsidized.

“Canada believes that the U.S. Department of Commerce erred in calculating subsidy rates on Cana- dian exports of supercalendered paper,” Trade Minister Chrystia Freeland said in an e-mailed statement to Globe and Mail Wednesday.

Canada Fights

US paper producers Madison Paper Industries and Verso Corp filed a petition with the US government in February, claiming their rivals north of the border were receiving unfair government subsidies. The 21-per-cent slide in the loonie over the past two years has intensified competition in an industry already under pressure. Demand for supercalendered paper, as the glossy paper is known, has fallen by 5 per cent annually over the past three years, according to Bloomberg Intelligence, as readers switch to digital products.

Compared with lumber, the market for supercalendered paper is relatively small. Imports from Canada were valued at US$868-million in 2014, according to the US Department of Commerce. Canadian companies supply about 60 per cent of the supercalendered paper market in the United States, Bloomberg Intelligence said in an October 16 report.

Twenty Per Cent Paper Duties

The highest duty, at 20 per cent, is directed at Point Tupper, Nova Scotia-based Port Hawkesbury Paper. The US government said the company, owned by Pacific West Commercial Corp, arranged a favourable electricity supply contract that was approved by the provincial government. As such, it constitutes a subsidy, the US said in a July 27 report. Port Hawkesbury said the contract was negotiated with a privately owned utility, according to Gary Horlick, a lawyer for the company. “I’m appalled by this decision,” Horlick said.

According to Bloomberg Monday, Catalyst has deposited about US$1.3 million with the US Treasury since August 4 to cover tariff payments on 17,000 tons of paper, the Richmond, BC-based company said in an October 14 statement, even as it vows to seek a review of the duties. JD Irving, Canada’s largest producer of supercalendered paper in 2014, is crying foul not only because it denies any subsidies but also because it says it wasn’t investigated following the initial complaint. The closely held company continues to appeal for an “immediate resolution,” said Mary Keith, a spokesperson for JD Irving. The companies are asking the U.S. Commerce Department for an expedited review. Catalyst has also filed an appeal in US Court of International Trade.

Softwood Lumber Negotiations

The absence of mention of the expired 2006 Softwood Lumber Agrement from Freeland’s ministerial mandate letters for the new cabinet is cause for concern for the Alberta Forest Products Association.

“I’m hopeful that it’s an oversight, rather than a conscious decision to exclude it,” said Paul Whittaker, association president and chief executive officer to iPolitics Tuesday.

Expert Legal Opinion:


Softwood lumber exports to the US totalled US$5.6 billion last year. They also account for thousands of Canadian jobs. But ex- port levels can be even higher. In 2005, they totaled US$8.4 billion. And despite sawmill closures and the mountain pine beetle infestation in BC, recent trends suggest we could be back to those 2005 levels or even higher in the years to come.

André Albinati and Paul Moen are principals at Earnscliffe Strategy Group and former senior advisors to the Chrétien and Martin governments.

Change in US Law: 2014

A change in US trade law last year has made it easier for companies to show they’ve been injured by imports, sparking a number of disputes in paper products and steel, said Caitlin Webber, a Washington-based Bloomberg Intelligence analyst.

US industries typically file these types of complaints as a “last resort” when they feel they can’t otherwise compete in the market, Webber said.

“That’s what the industry wanted when they were lobbying for this,” Webber said in a November 13 interview. “They would say it’s more fair, an accurate reflection of the company’s position.”