Softwood Lumber Negotiations Update and NAFTA

The latest movement from the new US Administration on trade issues is this week bringing forward NAFTA discussions to the US Congress.

Of most interest to the Canadian and US softwood lumber industry, a component of the Administration’s letter appears related to the softwood lumber dispute with Canada. The draft calls for eliminating a provision of NAFTA that Canadians could use to appeal any duties the United States imposes on Canadian softwood in retaliation.

There is much to happen in the coming months; most notably in less than 30 days the US Commerce Department will announce the scope of counter-vailing duties against Canada, and whether those are retroactive to January. In May will come that for anti-dumping, possibly retroactive to February.

The Trump administration has taken an early step in renegotiating the North American Free Trade Agreement, sending the US Congress Thursday a draft list of priorities for the negotiation that expresses hope for change in a broad range of areas, according to Canadian Press.

Now Congress will be involved in revising that list.

The administration will issue a formal notice that it wants to renegotiate the deal and spend a minimum of 90 days consulting lawmakers and industry, meaning formal talks with Canada and Mexico could begin in the summer or autumn.

NAFTA Machinations in the US


This preliminary consultation is required under the so-called fast-track law that allows trade deals to pass Congress with a simple majority and an up-or-down vote, with no amendments.

The letter includes vague references to making changes in a number of areas, including agriculture, government procurement, tax policy, intellectual property, rules of origin for things like car parts, telecommunications and dispute resolution.


Canadian-American trade lawyer Mark Warner told Canadian Press Thursday it’s too early to draw conclusions about how simple, or how elaborate, the talks might become on the basis of this single draft letter.

He says Congress will want to toughen it.

“I expect bilateral irritants will be pushed to be included by Congress,” he said.


The highlight of the package is a proposed “safeguard” mechanism in cases where imports from Canada or Mexico cause or threaten serious injury to US industry – seemingly fulfilling President Donald Trump’s “America First” threats, said former Canadian trade negotiator Andrei Sulzenko in Globe and Mail Thursday. That’s interesting, because the North American free-trade agreement already has such a provision that works in tandem with safeguard provisions under the World Trade Organization.

In other words, continues Sulzenko, there’s no free lunch; and that’s why safeguards are used relatively seldom. A US push to change existing rules, say to low- er NAFTA threshold levels for safeguard action, would be a non-starter, as Canada and Mexico would be better off under more stringent WTO provisions.

Stephen Vaughan, Acting US Trade Representative explained to the Washington Post also Thursday that there are several lines in the letter that indicate departures from past policy. One of the objectives listed is to “seek to level the playing field on tax treatment,” a brief and cryptic phrase that could suggest duties on Canadian and Mexican products.

Other language in the letter suggests the administration is skeptical of a process for resolving disputes between governments and multinational firms that has been criticized by liberal figures including Senator Elizabeth Warren (D-Ma.), who say corporations have exploited the system at the expense of the public interest. Some on the right have objected to the process as well, arguing that it impinges on American sovereignty by giving international tribunals authority that would otherwise belong to US courts.


Another component of the Administration’s letter appears related to an old dispute with Canada over softwood lumber. The draft calls for eliminating a provision of NAFTA that Canadians could use to appeal any duties the United States imposes on Canadian softwood in retaliation.