Lumber Wears

Wood is required for a whole range of different reasons and softwood in particular is in high demand. Traditionally, most of this wood comes from the Baltic Region but a part of the supply also comes from North America and China. The US does have a huge import section where it imports ties and handkerchiefs and softwood from other countries. However, the US imports most of its softwood from Canada, as it is the closest neighbor with a large supply of fresh softwood. The Softwood Lumber War refers to the supply and demand problem that occurs between the US and Canada.

The Root Of The Problem

The softwood lumber industry is an important part of the Canadian economy and it supports a huge internal industry. The country is entirely capable of exporting softwood to the US and the entire world. However, as the US is its closest neighbor, Canada exports most of its lumber to the US. The US does have its own internal production but supply is far more than the internal production and this had led to a very good supply and demand solution that works for both countries. However, the heart of the dispute is that a section of the US industry feels that the Canadian lumber industry is benefiting from unfair subsidies that are actually affecting the US lumber industry as well. for example, the price of softwood is set through administrative panels rather than through a competitive auction. The US also claims that Canadian lumber being sold at below market rates is not a good feature and it is cutting into the US lumber market as well. In 2006, the US and Canada signed the softwood lumber agreement or the SLA that was set up to settle the problem. Under the law, the US would remove duties imposed on lumber so long as the price of lumber remained within an acceptable limit. As a part of this settlement, more than 5 billion of collected taxes would be returned by the US Government to Canada over a period of time. The law also regulated a dispute settlement mechanism that would ensure supply was continued irrespective of the legal problems that occurred. In June 2012, an international arbitration panel ruled that Canada had not violated any agreements with US over the supply of beetle-ravaged wood. The wood had not been underpriced or overharvested and they had the right to sell the wood to local and international markets. Over the last two decades, the dispute has raged over several fronts and in the last two years, it has started up again. The SLA is also set to expire in the year 2013. A new agreement will be required to ensure safe, and health trade practices.

The Bottom Line

Canada has a huge internal production of softwood lumber and the country has actively started exploring other markets for its wood supply. Canada also actively support sustainable forest management and this has ensured a steady supply of new and old softwood lumber.