30-Year U.S.-Canada Dispute Settled

The Bush administration announced Thursday that it had reached an agreement to settle a bitter three-decade-long battle with Canada over softwood lumber.

The agreement was announced late Thursday at a joint U.S.-Canada news conference at the Canadian Embassy.

"This agreement is an historic opportunity to resolve a dispute that has lasted for more than two decades," U.S. Trade Representative Rob Portman said.

Canadian trade minister David Emerson called the deal "a watershed moment" in trade relations between the two nations.

Canada's prime minister, Stephen Harper, told a standing ovation in the House of Commons, "This is a deal that resolves the long-standing dispute and allows us to move on."

The administration said it now wants to hear from American lumber producers to see if they accept the terms of the agreement. Their initial reaction was favorable, officials said. The United States has been imposing penalty duties on Canadian lumber for a number of years, contending that Canada is unfairly subsidizing its own producers.

"Given the nature of the agreement and ongoing litigation, it will ultimately be up to our respective industries to decide if they want to embrace a solid market-based agreement," said Neena Moorjani, a spokeswoman for U.S. Trade Representative Rob Portman.

Moorjani said the administration believed the deal would bring stability to the North American lumber market. She said the alternative was "many more years of litigation, acrimony and market uncertainty."

The agreement was reached late Tuesday night but was not announced publicly until Thursday to give administration officials time to brief U.S. industry representatives. Moorjani said that despite some reservations, American lumber producers have "indicated a willingness to accept it."

Softwood lumber, which includes pine and other varieties, is heavily used in the construction of new homes.

The U.S. side did not immediately release details of the tentative agreement but Canadian provincial politicians and Canadian media reports said the deal involved capping Canada's share of the U.S. lumber market at 34 percent. According to the reports, the United States agreed to return 78 percent of the $4.3 billion in penalty tariffs that had been imposed on imports of softwood lumber from Canada.

According to the reports, Canada would impose an export tax starting when North American lumber prices fall below $360 per 1,000 board feet of softwood lumber. The levy could go as high as 15 percent when the price goes below $310 per 1,000 board feet. This Canadian tax would serve to drive up the cost of lumber exported to the United States, reducing competitive pressures on U.S. producers while driving up the cost of lumber for American consumers.

The framework also reportedly requires all parties to drop trade litigation and puts a moratorium on future trade complaints.

Ontario's Natural Resources Minister David Ramsay told the legislature Wednesday that Ontario would be shortchanged by the deal as it would allow British Columbia to increase the volume of its lumber trade to the United States, but reduce Ontario's share.

Ramsay said he would be registering his displeasure with Prime Minster Stephen Harper and Michael Wilson, Canada's ambassador in Washington.

A similar agreement to resolve the lumber dispute was reached in 2003, but fell apart after some provinces balked. Canada and the United States have been battling over softwood lumber for three decades.

The U.S. imposed antidumping and countervailing duties totaling more than 27 percent in May 2002 after accusing Canada of subsidizing its lumber industry. The reductions since then have cut duties in both categories roughly in half, but Canadian lumber exporters have paid more than $4.3 billion during the period.