A week after announcing a single to double hike in countervailing duties on imports of Canadian lumber, the US Commerce Department officially increased its punitive taxes on Thursday, continuing for the fourth consecutive year the imposition of a An unfair and absurd toll on our lumber exports to the United States and on the backs of American consumers.
Let us first recall that the Canadian forest industry is currently undergoing a fifth assault in less than 40 years from the coalition of American lumber producers who have always sought to limit imports of Canadian lumber and especially to maintain high prices for their own products in their own market.
Despite four consecutive victories by Canadian producers before the World Trade Organization (WTO) or the North American Free Trade Agreement (NAFTA) tribunal, American lumber producers have launched their latest offensive in 2017, following the election of Donald Trump.
Claiming once again to be victims of unfair competition from Canadian producers because, according to them, they benefit from subsidies under favorable stumpage rights and they sell their production at a discount on the American market (dumping), the US producers have obtained a countervailing duty from the Commerce Department while the matter is investigated.
The US Department of Commerce has set the countervailing “investigation” rate at 20.23% for part of 2017 and all of 2018, the rate of the punitive tax that Canadian producers had to pay for all. throughout this period and which should have been revised at the end of the year according to the reality of the market, which was not done.
“According to Chapter 19 of NAFTA, which is actually the mechanism for resolving trade disputes between Canada, the United States and Mexico, the final decision on the rate of a countervailing duty must be made within 305 days, ”notes Michel Vincent, Director of Economics and Markets of the Quebec Forest Industry Council.
“We should have been fixed in October 2018, but it was not done. It was not until the end of 2020 that the Commerce Department ruled that the countervailing duty rate for subsidies and dumping should have been 8.9% in 2018. Our producers were taxed at 20.23% in 2018 and 2019 and 2020 rather than 8.9% ”, specifies the economist who was part of the Canadian negotiating team who ended the previous litigation in 2006.
So in 2020, the rate of 8.9% was introduced to be abolished last week and be replaced by a new rate of 17.9% which would reflect the new market conditions for the year 2019. Much of the increase is attributable to a marked increase in the punitive rate for the dumping.
Swimming in arbitrariness
Importantly, Canadian lumber producers have paid more than $ 6 billion in countervailing duties since 2017, including $ 1.2 billion for Quebec producers alone.
Even though the calculation of the duty rate was changed in 2020 for prior years, Canadian producers are not entitled to a refund until the dispute between the two parties is fully resolved.
Michel Vincent, from the Quebec Forest Industry Council, recalls that during the last negotiation in 2006, 5 billion in punitive duties were to be returned to Canadian producers following the settlement of the trade dispute.
“American producers got $ 500 million in compensation from our punitive rights and the American government kept $ 500 million to finance a marketing campaign to promote the use of wood. It is 20% of the money unfairly taken from our producers that has not been redistributed to them, ”deplores Michel Vincent, who fears a new sleight of hand to come during a possible settlement of the ongoing conflict.
The reason the U.S. Commerce Department has taken so long to set the right punitive tariffs is because it has been totally mired in the fury of tariffs the Trump administration has imposed on Chinese imports, Canadian aluminum and steel, European cars …
The US Department of Commerce also dragged its feet because it responded well to Donald Trump’s unbridled program with regard to international trade, but since the election of Joe Biden – who is also a great protectionist -, we feel that US authorities are keen to better meet their contractual obligations.
Recall that despite the renegotiation of NAFTA, Canada has been able to keep the trade dispute settlement mechanism alive, while the former chapter 19 of NAFTA has now become chapter 10 of the Agreement. Canada – United States – Mexico (CUSMA).
Even if the WTO ruled last year the Canadian producers in ruling that the calculation methods of the American panel on the alleged dumping Canada were totally wrong and gave a completely distorted picture of trade reality, the WTO has no enforceable power.
It is the mechanism for the settlement of trade disputes between Canada and the United States which must resolve the conflict once and for all and render a decision as quickly as possible which will become enforceable, until the filing of a next American complaint, of course. …