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Softwood Dispute: Canada drops its export tax

Canada and the United States are the world's largest trading partners, but there's one thing they've never agreed on: softwood lumber. The dispute dates back hundreds of years, but in the 1980s it turned nasty. The U.S. has slapped billions of dollars of fines on Canadian wood, jeopardizing thousands of jobs. The dispute raises serious questions about trade, sovereignty, and the real nature of Canada-U.S. relations.

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It's been five years since the controversial export tax was implemented to appease the American lumber lobby. Canadian provinces have spent that time working towards implementing forestry systems acceptable to the Americans, rendering the tax unnecessary. That time has come. "It's time for normal business practices," says Deputy Prime Minister Don Mazankowski, officially dropping the tax. As we see in this clip from The National, the announcement enrages the U.S. lumber industry, which threatens immediate retaliation. 
• As soon as Canada terminated the Memorandum of Understanding, the U.S. Department of Commerce launched a third countervailing duty case, again alleging Canadian subsidies (despite the "replacement measures" implemented by several provinces).

• In 1992 the U.S. International Trade Commission decided Canadian subsidies injured American producers, and levied a 6.5 per cent duty on Canadian lumber. Atlantic Canada, where most wood is cut from private land, was excluded because its stumpage fees were considered fair market value.

• In August 1992 Canada appealed to binational Free Trade Agreement panels, which eventually determined there were no subsidies to which a countervailing duty could be applied, and the countervailing duty was terminated.

• The U.S. then launched an "Extraordinary Challenge Committee," alleging the two Canadian FTA panellists had a conflict of interest. The majority of the ECC found no conflict.


• It was not until 1994 that Canada won the final FTA ruling (now under the North American Free Trade Agreement, or NAFTA). One billion dollars in duties collected by the Americans was returned to Canadian exporters and new softwood negotiations began

• 1992 was an election year in the United States. Critics in both Canada and the United States accused incumbent Republican president George Bush Sr. (and other candidates) of courting voters by assuming a tough, protectionist stance against foreign industry. Trade complaints were lodged over Canadian lumber, lobster, salmon, beer, and Honda cars. Candidate Ross Perot of the American Reform Party became famous for campaigning against "the big sucking sound" of American jobs heading to Mexico.
Medium: Television
Program: The National
Broadcast Date: Sept. 3, 1991
Guests: Mike Apsey, Carla Hills, Don Mazankowski, Alan Wolff
Host: Peter Mansbridge
Reporter: Denise Harrington
Duration: 2:37

Last updated: September 19, 2013

Page consulted on September 10, 2014

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