Since I'm not sure which side of the question you are on, Canadian or
US, I will try to give some perspective from both sides.
First, if you would like the complete text of the agreement which
ended in 2001, you will find it here in PDF format.
( http://www.dfait-maeci.gc.ca/~eicb/softwood/Archive/treaty-e.pdf )
According to Canada, the US breached several articles of the agreement
on a unilateral basis. The US expanded the variety of products
subject to trade restriction when exported under the Softwood Lumber
Agreement through the use of tariff reclassification by the U.S.
Customs Service. In particular, the reclassification on June 9, 1999
by U.S. Customs of rougher headed lumber from a tariff classification
heading that is not subject to restriction under the Agreement to a
tariff heading subject to restriction under the Agreement.
An arbitration panel was established in May of 2000 to address the
issue. Here is a summary of what the panel was to resolve:
________________
"1. This dispute concerns a unilateral action by the United States to
expand the scope of products subject to trade restriction when
exported under the Softwood Lumber Agreement ("the Agreement") through
the use of tariff reclassification by the U.S. Customs Service ( "U.S.
Customs"). In particular, it concerns the reclassification on June 9,
1999 by U.S. Customs of rougher headed lumber from a tariff
classification heading that is not subject to restriction under the
Agreement to a tariff heading subject to restriction under the
Agreement.
2. Under the Agreement, which went into effect April 1, 1996, the
United States committed to refrain from taking certain trade actions
(such as countervailing duty cases) with respect to imports of
"softwood lumber" from Canada. In return, Canada agreed to impose
substantial fees on exports to the United States above specified
quantities of "softwood lumber" first manufactured in the provinces of
British Columbia, Alberta, Ontario or Quebec. The Agreement also
requires Canada to implement a system of export permits to enforce the
export fee system.
3. The term "softwood lumber" is explicitly defined in Article IX of
the Agreement to include only articles classified under tariff
headings 4407.10.00, 4409.10.10, 4409.10.20 and 4409.10.90 of the
"Harmonized Tariff Schedule of the United States (1996)" ("HTSUS
1996"). Those items cover lumber that is in a relatively basic state,
such as ordinary 2x4 or 2x8 lumber that is not processed beyond
planing, sanding or finger-jointing.
4. "Rougher headed lumber", a processed softwood lumber product, was
classified under tariff heading 4418 of the Harmonized Tariff Schedule
of the United States ("HTSUS") prior to and at the time of the
negotiation of the Agreement and for more than three years after the
Agreement took effect. Tariff heading 4418 covers lumber that is
"builders' joinery and carpentry of wood" and is further processed
than lumber classified under tariff headings 4407 and 4409. Products
within tariff heading 4418 are not subject to restraint under the
Agreement. Rougher headed lumber was affirmed as being within this
tariff heading in publicly announced official rulings of U.S. Customs
in 1992 and 1994.
5. On June 9, 1999, U.S. Customs reclassified rougher headed lumber
from heading 4418.90.4090 to heading 4407.10.0002. This
reclassification followed the reclassification of drilled studs and
notched lumber (on July 1, 1998 and June 9, 1999, respectively) which
the United States had undertaken in response to a conspicuous campaign
by U.S. lumber producers to have U.S. Customs reclassify certain other
processed lumber products which were not covered by the Agreement but
whose exports from Canada to the United States had increased.
6. In the view of the United States, the reclassification had the
effect of making rougher headed lumber subject to the Agreement. As a
result, the United States has required export permits for all imports
of rougher headed lumber into the United States from August 9, 1999
onward. In addition to restricting imports of rougher headed lumber
into the United States, the U.S. action has also had the effect of
further restricting imports into the United States of legitimately
covered softwood lumber products in that such products must now share
their quota with rougher headed lumber.
7. The issue before this Panel is not whether the reclassification of
rougher headed lumber into heading 4407 was proper as a matter of U.S.
law in June of 1999. Rather, the issue is whether rougher headed
lumber falls within the scope of the Agreement as commonly understood
by the Parties when they concluded the Agreement in April of 1996 and
whether U.S. Customs' reclassification is consistent with that
understanding.
8. Canada contends that, whether or not the United States chooses to
classify rougher headed lumber under tariff heading 4407 for purposes
of U.S. law or other U.S. international law obligations, rougher
headed lumber does not fall within the scope of the Agreement as
defined in Article IX. As Canada will demonstrate, it is amply clear
that both Canada and the United States understood before, during and
after the negotiation of the Agreement that rougher headed lumber was
not included within either tariff heading 4407 or 4409. While the
Agreement defines the scope of the Agreement by reference to the HTSUS
1996, that reference does not allow the United States to unilaterally
alter the scope of the Agreement beyond what was the common
understanding of the Parties at the time of the negotiation and
conclusion of the Agreement.
9. The evidence of this common understanding is overwhelming. As
indicated above, U.S. Customs had classified rougher headed lumber
under heading 4418 on two occasions prior to 1996: in 1992 and 1994.
These rulings were consistent with the interpretation applied by, and
the practice of, U.S. Customs with respect to the classification of
softwood lumber products under heading 4418. Pre-existing trade under
tariff heading 4418 demonstrates that both Parties understood that
rougher headed lumber did not fall within the tariff headings
identified in the Agreement. This evidence of the common understanding
of the Parties makes it abundantly clear that Canada had no reason to
expect that the United States would unilaterally alter the scope of
the Agreement by reclassifying rougher headed lumber into a tariff
heading covered by the Agreement.
10. Further, at the time the Agreement was negotiated, U.S. customs
brokers and their importers were required, pursuant to U.S. law, to
make themselves aware of all classification rulings issued by U.S.
Customs and to exercise a standard of care consistent therewith. In
the face of U.S. Customs rulings that classified rougher headed lumber
into heading 4418, the United States agreed that the tariff headings
to be used to define the Agreement's scope would be headings 4407 and
4409.
11. In reliance on the understanding that rougher headed lumber was
excluded from coverage, and expecting that it would remain excluded,
Canada fully allocated quota to exporters of softwood lumber, as it
was required to do under Article II of the Agreement. To accomplish
this, it took such actions as conducting surveys to determine the
historical shipments of softwood lumber from the covered provinces.
Such allocation did not include quota for the export of rougher headed
lumber.
12. By reclassifying rougher headed lumber into a tariff heading
covered by the Agreement and requiring export permits for importation
of such lumber into the United States, the United States purports to
unilaterally increase the Agreement's scope beyond what was agreed to
by the Parties when it was concluded in 1996. The United States now
calls upon Canada to restrict the export of a product that Canada did
not agree to restrict in 1996, and allocate quota to export a product
that its allocation regime did not include or anticipate. This is a
breach of Article IX.
13. The United States took this action without any consultation under
the Agreement and without Canada's agreement, contrary to Article VIII
and fundamental principles of international law. It has resulted in an
undermining of the balance of commitments that were agreed to by the
Parties when they concluded the Agreement as well as a circumvention
of the commitments of the United States under Articles VII and IX.
14. Accordingly, Canada respectfully requests that this Panel find
that the United States has breached Articles IX, VIII and VII(2) of
the Agreement." - summary quoted from "Rougher Headed Lumber" provided
by the Canadian Department of Foreign Affairs and International Trade.
( http://www.dfait-maeci.gc.ca/~eicb/softwood/Archive/RHL-e.htm )
_______________
The findings of the arbitration panel were: - "The agreement in
principle which settles the rougher headed lumber dispute provides for
an additional 72.5 million board feet of fee-free quota for year five
of the Softwood Lumber Agreement in return for Canada withdrawing
arbitration proceedings under the Agreement." - quote from "SOFTWOOD
LUMBER: IMPLEMENTING THE AGREEMENT IN PRINCIPLE TO SETTLE THE ROUGHER
HEADED LUMBER DISPUTE" by Canadian Department of Foreign Affairs and
International Trade
( http://www.dfait-maeci.gc.ca/~eicb/notices/ser127-e.htm ) - at this
website you will find a lot of additional information, some of which
is in PDF format.
_______________
The above gives just one example of how intricate the negotiations and
clarifications are in this dispute, and it is only one of many.
Other questions to consider include tax issues. Allowing the trade
agreement to expire could save approx. $1000 on the average cost of a
new house build in the US. This letter to President Bush addresses
the Issue. The letter calls for an end to the agreement by letting it
die a natural death when it expired. The letter is signed by Don
Nickles, US Senator and Richard J. Durbin, US Senator. The arguments
for ending the trade treaty preceed the actual text of the letter.
( http://www.acah.org/Nicklesdurbin.htm ) - website of American
Consumers for Affordable Homes.
The Free Trade Lumber Council also wants an end to the treaty
agreement. -
"Two Washington-based organizations whose members annually purchase
more than 30 billion board feet of lumber today warned Canadian
softwood lumber producers that the Softwood Lumber Agreement will not
be extended. Canadian producers were invited to join with them and
aggressively pursue free trade.
Tom Ross, Chairman of the National Lumber and Building Materials
Dealers Association, with Michael Carliner, Vice President of the
National Association of Home Builders said Monday that bringing about
an end to the Softwood Lumber Agreement between Canada and the U.S is
the top government policy priority of both associations.
'I'm here to tell Canadian softwood producers that renewing the
Softwood Lumber Agreement between Canada and the U.S. will not be an
option,' Carliner said. 'I can assure you that the recent letter to
your government from US Trade Ambassador Peter Scher, was neither a
casual remark nor a bargaining ploy,' he added.
In September, Ambassador Scher wrote a letter to Canadian Trade
Minister Pierre Pettigrew in which he dealt exclusively with the
softwood lumber issue. In that letter, Mr. Scher stated emphatically
the US government's intention to not renew the SLA when it expires in
March 2001.
“The quota on lumber adversely affects downstream industries in the
U.S. and is, in effect, putting the American dream of home ownership
out of reach of hundreds of thousands of American families.”, Carliner
said." - quote from "Free Trade Lumber Council" website.
( http://www.ftlc.org/index.cfm?Section=7&Detail=17 ) - there is much
more information related to the free trade lumber issue.
Environmental issues also come in to play:
"The April 2001 expiration of the U.S.-Canada Softwood Lumber
Agreement (SLA) provides a unique opportunity to integrate trade and
environment in a way that will benefit the trees, wildlife and
watersheds of both countries. Until now, the United States and Canada
have seen the timber trade agreement as a way to address Canadian
economic subsidies that advantage the Canadian timber industry while
disadvantaging the U.S. timber industry. However, Canada also provides
substantial environmental subsidies to its timber industry that add to
the already-uneven playing field, as well as harming the environment
on both sides of the border. The Natural Resources Defense Council
(NRDC) asks that the United States not only push for negotiation of a
new Softwood Lumber Agreement, but that the new agreement explicitly
address environmental subsidies and environmental harm." - quote from
Environmental Media Services
( http://www.ems.org/softwood_lumber_agreement/questions_and_answers.html
) - In this case, this particular group is not only pushing for a new
agreement but wants one that addresses environmental subsidies and
environmental harm. This website also provides several arguments
backing their wishes.
The US has indicated that the trade agreement will not be renewed, at
least as of 1999. The main reason given is "for every $50 increase
for 1,000 board feet of lumber, we estimate that over 378,000
individuals or families can no longer afford to purchase a new home."
- quote from NAHB website
( http://www.nahb.net/press_releases/1999/NS1999_088.htm ) - This
website also contains dozens of press releases dealing with the issue
dating back to 1998. Only the 2001 press releases are available
without membership in the NAHB.
Here is a 70 year history of the lumber trade dispute between the two
countries:
( http://www.ftlc.org/index.cfm?Section=11&Detail=13 ) - From the Free
Trade Lumber Council. Just how much the past will point to the future
is still an open question. However, findings from July of this year
seem to favor the Canadian position, which is also one of free trade.
( http://www.ftlc.org/index.cfm?Section=7&Detail=66 ) - Also from the
Free Trade Lumber Council.
It would seem from the evidence that the "free traders" are on the
ascendent. If they have their way, it will mean lower lumber and home
prices for the US. However, the protectionist lobby groups and the
environmentalists have given up on the fight.
I also realize that much of the above answer is "cut and paste." The
reason being that the issue is so complicated that I figured it best
if the parties spoke for themselves rather than being filtered through
any biases or feelings I may have about the issue. The biggest issues
seem to be duty taxes and environmental concerns as well as the US
propensity to change things unilateraly which does nothing to create
'warmer' relations between the two countries.
Search - google
Terms - softwood lumber Agreement between US and Canada - that alone
opened doors to innumerable websites and opinions. I have tried to
digest an enormous amount of information into a single answer along
with pointing the way to additional material.
If you need any additional clarifications before rating the answer,
please ask.
Cheers
digsalot |
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