The U.S. timber industry is celebrating a recent World Trade Organization decision in a long-running trade dispute.
On Tuesday, the international body upheld part of the U.S. Department of Commerce's decision to place antidumping duties on imported Canadian softwood. The decision could be appealed, and it's just one of three softwood-related cases that the two countries have pending before international panels.
But Chuck Roady, vice president and general manager of F.H. Stoltze Land and Lumber Co., called Tuesday's news “excellent.”
“It’s very good for the U.S. and our industry,” he said.
Columbia Falls-based Stoltze has been on the front lines of a decades-long dispute between U.S. and Canadian softwood producers. For years, American timber firms have alleged that Canada’s federal and provincial governments unfairly support their timber industry. From 2006 through 2015, a bilateral agreement eased tensions between the two countries. When that pact expired, a new round of disputes and retaliatory measures began.
One of these measures came in late 2017, when the U.S. Department of Commerce determined that most Canadian softwood producers were “dumping” timber on the U.S. market at rates 5.57% to 8.89% below fair market value, and imposed offsetting duties.
Roady said that step “leveled the playing field,” to U.S. timber mills’ benefit.
“When you know you have those duties in place, you can make improvements in those mills, you can make investments,” he said. “We know that someone isn’t going to undersell you by a whole lot of money."
But Brock Mulligan, director of communications for the Alberta Forest Products Association, wrote in an email that “the duties have distorted the market and negatively affected people on both sides of the border. They have driven up the cost of housing on the U.S. side,” he added, citing U.S. National Association of Home Builders calculations that rising timber prices drove up the cost of a new home by $9,000 from 2017 to 2018. “On the Canadian side, it has caused a decrease in exports to the U.S.”
Soon after the U.S. duties were imposed, Canada challenged them in the World Trade Organization, arguing that the United States had violated existing trade agreements with the methods it had used to calculate the margin of dumping.
One of these methods, Canada alleged, was “zeroing.” To determine exactly how underpriced Canada’s “dumped” softwood was, the U.S. Department of Commerce compared sales prices in the U.S., Canada and other foreign markets. Not all comparisons showed underselling; some showed a U.S. price higher than the Canadian price.
Commerce “zeroed” these comparisons, assigning them a value of zero, rather than the negative value of the price difference, when it calculated the dumping margins. Canada took issue with this practice, but the World Trade Organization deemed it above-board in this situation.
The World Trade Organization did find that another part of the U.S. calculations, aggregating differences between a wide range of export prices, “was inconsistent with the requirements of the WTO Antidumping Agreement.” It recommends that the United States bring its duties into conformity with that treaty.
It’s too early to tell how the duties might change. The U.S. Office of the Trade Representative did not reply to a request for further information.
In Roady’s view, the problematic parts of the calculations “were very minor, they were pretty minuscule things.”
“The main part that they decided on was that the formula used and the calculations used was accurate and that it’s a fair way to determine the injury by the softwood lumber brought in.”
The U.S. Lumber Coalition agreed, calling it “vitally important to the domestic lumber industry” and “an essential affirmation of U.S. sovereignty and its rights to fully and properly enforce trade laws.”
All three members of Montana’s congressional delegation also back the decision. Sen. Steve Daines, in a press release, predicted that it would “help level the playing field against unfairly subsidized Canadian lumber.” In emailed statements, Sen. Jon Tester called it “a win for good-paying jobs in rural Montana,” and Rep. Greg Gianforte said that it “levels the playing field against Canada’s unfair trade practices.”
Both countries have the right to appeal the decision, and they have a separate softwood-related case also pending before the World Trade Organization, and another before a North American Free Trade Agreement-sanctioned panel.
The Alberta Forest Product Association’s Mulligan said his group is still reviewing the latest ruling, but he noted the two other softwood-related disputes pending, and said that Canada “will continue to press forward with all three cases.”