Ottawa may be pouring gasoline on Canada’s increasingly heated softwood lumber spat with the U.S. by extending a lifeline to the industry worth nearly a billion dollars, according to one analyst.
CTV News has learned the federal government will announce $867 dollars in aid, including $605 million in loan guarantees, $160 million in market transition help, and $9.5 million in EI support for workers.
Jon Johnson, a senior fellow with the C.D. Howe Institute, said the new aid package could rile up U.S. trade officials if Ottawa is seen to be tipping the scales further in favour of Canadian producers. He previously advised Canada’s Office of the Trilateral Trade Negotiations during the NAFTA negotiations.
Ottawa and Washington have been on a collision course over cross-border lumber since a one-year grace period elapsed, following the expiration of the previous 2006 agreement in 2015.
The latest U.S. salvo in the decades-old dispute came in the form of the new countervailing duties of between three and 24 per cent on Canadian softwood lumber exports announced in April.
Countervailing duties are used to level the playing field when a country believes that another country's product is unfairly subsidized.
The U.S. is also expected to tack on anti-dumping duties to its new suite of tariffs this summer.
The U.S. lumber industry argues that Ottawa is unfairly propping up Canadian producers because most Canadian timber is harvested on crown land, and says the provinces sell the wood at artificially low prices.
“Help in this form can be argued to be a subsidy, and it might exacerbate the situation in so far as the duties are concerned,” Johnson told CTV News Channel on Wednesday. “A loan guarantee where the person receiving it pays some sort of market price for the guarantee is okay. But if they are not paying a market price for it, then it can be treated as being a subsidy,”
Ottawa has been under pressure to safeguard Canadian exporters in the face of the Trump administration’s increasingly aggressive posture on cross-border trade.
Last month, a report from the Conference Board of Canada said U.S. softwood lumber duties will cut $700 million from Canadian exports over two years, and result in the elimination of 2,200 jobs. The report also notes that duties paid at current export levels will cost $1.7 billion a year until a softwood settlement is reached.
Johnson suggests Ottawa may be better able to stay below the radar of the hawkish U.S. lumber industry lobby by pivoting more of the proposed funding towards individual workers rather than companies. Aid for workers makes up the smallest slice of the planned funding, at $9.5 million.
“Helping out workers through EI and subsidizing workers because they lost jobs, that would not be a subsidy because it does not go to the producers,” he said. “I certainly think that is one approach they could take. That should not be attackable.”
Johnson applauds the $160 million earmarked for helping Canadian producers build business ties in new markets beyond the U.S., but notes the benefits will vary across the country.
“That is not so hard for British Columbia. There are markets in Asia, and that requires a lot of work to make them functional. They (B.C.) have achieved some success in this,” he said. “It’s a bit tough for Quebec and Ontario. They are a long way from Asia. I think Europe is probably out of the question because they have ample supply of softwood products through the Scandinavian countries and Russia.”
-With files from Laura Payton
