Softwood Lumber Case Study

Canadian government owns almost 94 % of the forestry land. softwood lumber is the one of the biggest export products of Canada valuing at 8.6% of total exports. Canadian softwood lumber is sold to united stated below the production cost. Due to market distortions in Canada encourage the government to overproduction of lumber, uneconomic decisions by lumber producers, and dumping of lumber in us. The US markets were bombarded with profit loss due to the cheap lumber from Canada; therefore the start of lumber dispute began. There has been numerous of disputed for almost 20 years. United States is saying that Canadian government is promoting unfair production of lumber. While on the other hand, Canadian is denying that statement. The softwood
The Canadian economy is completely dependent on the US for the exporting. The trade dispute is just the start of event which can occur all around the world. This dispute was mainly based on softwood timber fees, regarding the amounts that were being charged to companies, who exported lumber. In fact many people in the U.S. saw this as a threat to their economy because the Canadian stumpage fees were too low. The U.S. wanted Canadian lumber producers and the provincial government to sell the softwood lumber at market prices. Resulting in the U.S. to charge tariffs on imported Canadian softwood .This power struggle between Canada and the United States over softwood lumber has had a huge impact on the economy. A country often puts tariffs on imported goods in order to protect their economy. Taking this into consideration that Canadian softwood is cheaper than American lumber due to the currency rate. Therefore, the Americans were buying the cheaper lumber from Canada. If America did impose the tariffs, the state of the lumber industries would have been devastating. Nonetheless, by imposing these tariffs, America had the idea that the Market would be able to eliminate the advantage of foreign products. In long term, the effects would be
due to overwhelming costs. On the other hand, the Free Trade Lumber council, the lumber producer from Quebec and Ontario, wants to dispute against United States. The Canadian government had a similar belief as the Free Trade Lumber council about the free trade in softwood lumber market. In conclusion, after many disputes, the Canadian and United States government agreed upon softwood lumber agreement in order to resolve the disagreement. In the agreement, Canada was allowed tariff free exports to United States only 14.7 billion boards per year produced by provinces such as British Columbia, Alberta and Ontario. Under this agreement, after the limit was exceeded, United States had the right to collect fees based the fee system. The exports that exceeded the limit of 14.7 billion would be charged the lower fee base of US $50 per board. On the other hand, greater quantities of the boards were charge at US $100 per thousand boards under the upper fee base. Current State of Negotiations The Byrd Amendment is also called the continued dumping and subsidy offset act. The act of American legislation is related with the chief sponsor, Senator Robert Byrd of West Virginia. The main purpose