Canada and the United States must chop down one big, remaining impediment to a deal on softwood lumber and this obstacle involves wood from neither country but from other places: Germany, Sweden, Chile, Brazil and Russia.
This irritant over distant imports is complicating the goal of a quick softwood agreement, something both North American governments say they want to achieve in order to start NAFTA talks in two weeks without a major trade irritant looming overhead. This sticking point involves third-country imports. More specifically, it’s about who gets to fill the U.S. demand for lumber in the event of a hot construction market like the present one, when American supply falls short.
The two governments have already agreed to split the U.S. lumber market by percentage. According to Canada’s ambassador to Washington, Americans would supply around 70 percent; Canadian imports would be capped around 30 percent, which falls somewhere in the historical average. “There’s a lot more detail than that,” ambassador David MacNaughton said in an interview, saying the numbers would be affected by other variables. “But roughly speaking, it’s a 70-30 split.”
Where the third-country problem occurs is when the economy booms, demand soars and American mills can’t meet their 70 percent, agreed-upon share. In such an event, Canada is adamant that the agreement should contain what’s called a hot-market provision. There are different ways to design it. One example appears in a sugar deal struck between the U.S. and Mexico this June — if the U.S. seeks additional sugar imports, Mexican suppliers would get a right of first refusal.
But the basic point is to allow Canadian exporters to surpass that regular cap of 30 percent, rather than have other countries fill the gap. Other countries, including Germany, Sweden, Chile, Brazil and Russia, currently supply a minuscule share of U.S. imports.