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U.S. seeks fast lumber deal as Canada braces for lengthy dispute

A machine unloads logs for processing at the West Fraser Timber sawmill in Quesnel, British Columbia, Canada, on June 5, 2015. David Ryder/Bloomberg
 
 
 
 

Canada's envoy to Washington says President Donald Trump's administration is interested in a quick deal to end a softwood lumber dispute although Prime Minister Justin Trudeau's government sees no imminent agreement.

Ambassador David MacNaughton said last week U.S. Commerce Secretary Wilbur Ross told him it would be good to get a softwood deal before renegotiation of the North American Free Trade Agreement, due to begin as early as August.

But MacNaughton said a deal is "a long way away" with a second round of duties on Canadian lumber expected this month. Canada Foreign Minister Chrystia Freeland also said a new pact on softwood -- one of the most persistent trade spats between the U.S. and its second-largest trading partner -- isn't imminent.

The dispute is raising the cost of lumber in the U.S., contributing to a more than 18 percent surge in wood prices from the end of January to mid-May, according to a Bloomberg Intelligence report. Additional U.S. duties are expected to further lift lumber prices as Canadian companies including West Fraser Timber Co. and Canfor Corp. offset the cost.

The U.S. is scheduled to decide on new anti-dumping penalties by the end of this month that may bring combined duties to more than 30 percent, according to RBC Capital Markets, after an initial round in April of as much as 24.1 percent. Canada announced a $655 million (C$867 million) funding package in June to cushion companies and workers. Final U.S. lumber duties are expected by January of 2018.

"There is still a lot of work to be done," Freeland told reporters Friday in a conference call from Miami. Canadian officials are bracing for a lengthy dispute and continue to both threaten legal action and say they would prefer a negotiated deal.

Ross is "rolling up his sleeves" and is engaged personally on the lumber file, MacNaughton told reporters in Ottawa last week. U.S. industry needs to approve any deal, a reality that complicates any preference by Ross for a quick pact.

"Everybody's going to have to figure out whether there is a deal to be done there, but at least when you've got somebody who is personally taking the time, making the effort, it gives me some hope," he told reporters. "So we'll see."

It was another trade deal -- the Trans Pacific Partnership -- that ultimately destroyed the chances of a lumber settlement under the administration of former president Barack Obama, MacNaughton said. Obama's officials refused to risk delaying passage of the TPP, now effectively dead in its current form, by pressuring Congress on lumber as well.

MacNaughton called his talks with the Obama White House "particularly frustrating" on lumber -- despite what he called the "nice words and so-called bromance," or close rapport between Obama and Trudeau.

"What I came to realize after several months is they actually had no interest in using any of their political capital to move that along," he said. Obama wanted TPP instead, and that was the priority with Congress. "If they had to lean on any of them to get a softwood lumber deal, they just wouldn't do it."

Former Canadian Prime Minister Brian Mulroney, who signed the NAFTA accord and has acted as something of an adviser and intermediary to Trudeau on the U.S., said slow lumber talks could stall the upcoming NAFTA process.

"I think both sides recognize that if we can, we must solve the softwood lumber case now, otherwise it runs the risks of poisoning the larger negotiations," he said on CTV's Question Period in an interview that aired Sunday.

Softwood remains a "notoriously difficult and complex file," Freeland said. Canada argues American lumber producers can't meet domestic demand, and Canadian lumber will need to fill the void. "The logic is in favor of a negotiated settlement," she said.

MacNaughton said last week the length of overall NAFTA talks will be determined in partly by the scope of changes being sought by the U.S., while Mulroney -- who has regularly applauded Trudeau's approach so far -- expects lengthy talks. "It's not going to be short and sweet. We should be ready not for a sprint but for a long-distance run.''

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