Baker Hostetler Washington, D.C., partner Elliot Feldman authored, “Taking Stock: The Softwood Lumber Agreement After Four Years,” in the November 15, 2010, issue of the North American Free Trade & Investment Report.
“No deal between Canada and the United States over softwood lumber has seemed as popular as the deal entered at the end of 2006,” Feldman began. “[I]n 2010 the government parties to SLA 2006 and their respective industries seem determined to prolong the deal past its 2013 scheduled expiration and to make managed trade of the second most important commodity sector on the continent a permanent feature of their relationship.”
Feldman explained that the deal was developed to put a stop to existing litigation and to create a “stable trading relationship for the forest industries. Free trade was to be sacrificed for the elimination of market volatility.”
However, “In fewer than six months after SLA 2006 entered into force (October 12, 2006), the United States asked for consultations because of alleged Canadian breach of the agreement,” he noted. He then explained the specifics of dispute resolution under the agreement, pointing out that “Litigation has been continuous, slow, and expensive.” He went on to detail the various arbitrations and the impact of continued litigation.
Feldman concluded the article with a discussion about the likely direction of renewal negotiations.
“Unlike in 2001 when U.S. demands for renewal of the previous SLA exceeded Canadian willingness to sacrifice all semblance of free trade, in 2010 Canadian fears of trade remedy actions exceed almost anything the United States might demand,” he said.
Feldman acknowledged that “Canada is not without leverage,” explaining that market contraction all but guarantees a demand for Canadian supply on both sides of the border, and Canada enjoys an advantage in the sought-after sustainable forestry niche. Nevertheless, he said, “[T]here will surely be other prices for Canadians to pay in order to avoid renewed trade remedy action.”
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