Lumber Tit for Tat

Canada Retaliates Against Lumber Tariffs By Threatening U.S. With Trade Penalties

Posted: Updated: WASHINGTON — The Canadian government is threatening multiple trade actions against the United States in retaliation for duties on softwood lumber, warning that several American industries could be targeted in the event of a protracted trade dispute.

A first salvo came from Prime Minister Justin Trudeau, who in a letter Friday informed B.C. Premier Christy Clark that he’s seriously considering her request for a ban on exports of U.S. thermal coal and that federal trade officials are examining it.

A broader threat is also in the works, said two government sources. It involves possible duties against different industries in Oregon, which is the home state of a Democratic senator who has been a hardliner on the lumber dispute.

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Justin Trudeau listens during an interview at the Bloomberg Businessweek Debrief in Toronto on April 20.
(Photo: Cole Burston/Bloomberg via Getty Images)

That state’s plywood, flooring, wood chips, packaging material and wine are among the potential targets as the Canadian government has launched a search for evidence of illegal subsidies to businesses in that state.

The sources insisted these threats are not indicative of any escalating hostility to President Donald Trump and are simply a one-off measure — specific to one dispute over softwood lumber, and one state, and one Democratic senator.

There’s an easy solution: a long-term softwood-lumber deal would put the issue to rest, one source said.

“We hope we don’t have to act,” said the source, speaking on condition of anonymity in order to discuss matters not yet made public.

“We hope this dispute can be resolved.”

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A worker walks past stacks of lumber at the Partap Forest Products mill in Maple Ridge, B.C. on Tuesday. (Photo: Darryl Dyck/CP)

The course of action being reviewed by the Canadian government is similar to the process used in the U.S. that slapped a 20-per-cent duty on northern lumber. It involves a request to the Canada Border Services Agency to study illegal subsidies in Oregon, a process that would take several months.

The government says it has identified nine programs in Oregon that assist businesses, primarily in lumber.

They include: the Oregon Underproductive Forestland Tax Credit, the Oregon Forest Resource Trust, the Oregon Tree Farm Program, the Pacific Forest Trust, property tax exemptions for standing timber, a small winery tax exemption program and other tax credits.

“It’s a real thing. Our officials have already been looking at this,” said one government official familiar with the plan. ”Wyden has been a chief proponent for years of the baseless and unfounded claims against the Canadian softwood lumber industry.”

Escalating trade hostilities

These threats arrive in a climate of escalating trade hostilities.

Trump’s recent digs at Canada — coupled with his embrace of ‘America First’ trade nationalism, his full-throated support of what was a widely expected duty on lumber, and his complaints about Canadian dairy — have drawn reactions north of the border.

The strongest reactions have come from provincial governments.

Ontario is reportedly examining targets for retaliation in the event of any new Buy American provisions. And B.C.’s premier has turned a threat of retaliation into the centrepiece of her current election campaign.

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B.C. Liberal Leader Christy Clark speaks to constituents in B.C. (Photo: Darryl Dyck/CP)

But a former diplomat urged caution.

Clark’s threat to ban or tax U.S. thermal coal would be against Canada’s own interests, said Colin Robertson, a former member of Canada’s NAFTA negotiating team, now vice-president at the Canadian Global Affairs Institute.

“You don’t want to stop the Americans using our ports,” Robertson said in an interview.

“I’d be surprised at having invested so much over the last decade — by the Martin government, the Harper government and the Trudeau government, at least in the early stages — that you would want to take actions that would make it more difficult for the Americans to use our ports.”

Ports in Seattle and Portland would be quite happy to snap up that business at the expense of Canadian jobs, Robertson added.

One federal official said there’s no need to let things escalate.

He said Canada’s government intends to maintain its general posture toward Trump, of low drama and active co-operation: ”This is not about the president. This is about the state… The strategy (with Trump) is still one of positive engagement…

”(That being said), we still have to respond to these issues as they come.”

— With files from Mia Rabson in Ottawa



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