Natural Resources Minister warns of softwood lumber job losses

New U.S. import duties mark the fifth time since 1981 that Canada and the U.S. have sparred over softwood

A machine places freshly cut trees into piles before transport to the West Fraser Timber Co. sawmill in Quesnel, British Columbia, Canada, on Thursday, July 11, 2013. (Ben Nelms/Bloomberg/Getty Images)

OTTAWA – Canada is exploring how best to challenge the hefty import duties being slapped on Canadian softwood lumber exported to the United States, promising to support Canadian workers and companies in what is expected to be a lengthy — and difficult — battle.

Some people are going to lose their jobs, Natural Resources Minister Jim Carr warned Tuesday after the U.S. Department of Commerce announced import duties of as much as 24 per cent on Canadian softwood companies.

“If we look at the history of these trade actions there inevitably will be job losses,” Carr told a news conference in Ottawa.

“We will focus our efforts on doing whatever we can to ease the impact of those job losses. That is the reality of this countervail.”

It’s the fifth time since 1981 that Canada and the U.S. have sparred over softwood, and Canada has prevailed every time it has challenged the U.S. through the North American Free Trade Agreement, the World Trade Organization or in the U.S. court system.

“We have won them all.”

MORE: Is history repeating itself in the softwood lumber dispute?

Canada’s best course of action, however, won’t become clear until after it receives the reasons for the U.S. decision. And any challenge likely won’t come before January at the earliest, since final U.S. determinations on softwood won’t be in place until November or December.

The U.S. is going to decide on any anti-dumping duties in June, which will be applied on top of the countervailing duties. Those duties will take effect as soon as the U.S. publishes them in what is known as the federal register, sometime in the next week.

Neither government nor industry was willing Tuesday to say exactly what the impact is going to be. In 2001 when the last softwood dispute exploded, British Columbia alone lost 15,000 jobs from the forest industry in just a matter of months.

There are some differences now compared to 2001, however. For one, softwood prices are at record highs, which could help soften the blow if they stay that way.

The duties were in the range of what was expected and will be a burden for lumber producers, said Derek Nighbor, president of the Forest Products Association of Canada

“There is no short term fix,” Nighbor said, noting it was almost five years the last time from when duties were first imposed until the negotiated agreement was in place.

Canada and the U.S. are still trying to negotiate another softwood deal and Canada is prepared to make concessions like in 2006 that would impose quotas and smaller tariffs on Canadian softwood.

So far, however, the American asks have been more than Canada considers reasonable.

“We remain confident that a negotiated settlement is not only possible but in the best interests of both countries,” said Carr.

On Tuesday, Trudeau and Trump spoke about the issues by phone, the Prime Minister’s Office said in a statement.

MORE: Softwood lumber: Well, that escalated quickly

“On the issue of softwood lumber, the prime minister refuted the baseless allegations by the U.S. Department of Commerce and the decision to impose unfair duties,” the statement said. “The two leaders agreed on the importance of reaching a negotiated agreement, recognizing the integrated nature of the industry between Canada and the United States.”

On dairy, the PMO noted that the trade balance “heavily favours” the U.S., with Canada importing more than $550 million of dairy products from the U.S. each year, but exporting just over $110 million.

“Canada,” it said, “would continue to defend its interests.”

Canada is pushing back hard at the U.S., arguing the duties will negatively affect the American economy in higher prices for new homes and job losses in the U.S. housing industry.

Canada’s smallest producers might be hit hardest. All but Canada’s four largest softwood producers have to pay the duties retroactively for 90 days. Nighbor said the big companies were exempted simply because the U.S. is writing up trade rules as it goes.

The first three in that group are also somewhat shielded, because they have softwood mills in the U.S. that can help offset a hit on Canadian production, especially if prices go up there.

Carr said there are already a number of programs in place to help the industry, including loan guarantees through the Business Development Bank of Canada and Export Development Canada.

“These initiatives are available to businesses of all sizes and can assist companies looking to make capital investments, expand market opportunities and diversify into new markets with confidence.”

The government is also reaching out to a number of other countries including China, South Korea and the U.K. to promote Canadian softwood and diversify the Canadian export market.

About 70 per cent of Canadian softwood exports went to the U.S. in 2015.

Carr is reconvening a provincial-federal task force on softwood lumber later this week to look at what else can be done without triggering additional U.S. charges of unfair subsidies.

MORE: Canada courts China for softwood lumber as U.S. announces duties

Prime Minister Justin Trudeau held a conference call Tuesday with provincial and territorial premiers to discuss the softwood dispute, as well as U.S. President Donald Trump’s recent broadsides against the Canadian dairy industry. David MacNaughton, Canada’s ambassador to Washington, participated in the call.

According to the Prime Minister’s Office, the first ministers “acknowledged that while Canadians are polite and fair, we will always strongly defend Canadian interests.”

“The prime minister and premiers agreed to continue to vigorously defend the interests of the Canadian softwood industry across the country, including through litigation, and agreed that a negotiated settlement is in the best interest of both Canada and the United States,” the PMO said in a summary of the call.

“We’re pleased with the response today,” Nighbor said of the government’s response. “We know they’re standing with us.”

NDP Leader Tom Mulcair was less magnanimous.

“We don’t seem to have a plan,” Mulcair said of Carr’s comments. “When you’re dealing with a bully, at some point you have to stop backing up. That’s all Trudeau seems to be able to do.”

None of the actions the U.S. took this week were unexpected.

“I would not use the word surprise to characterize reactions to politics in the United States right now,” Carr said.

“From the moment that this administration won its term in office, we have reached out to them to make the arguments that the bilateral relationship between Canada and the United States is in the interest of both countries.”

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