Some notes from Michael Hart and Bill Dymond, “The Cul-de-Sac of Softwood Lumber” in Policy Options, November 2005.
How did the two governments get into this mess, and how do they get out? A useful start is to understand the
nature of the problem. First, Canada is blessed with abundant supplies of readily accessible softwood lumber, 70 percent
or more of which is exported. It is used primarily in the housing industry, and only the United States is as reliant on
wood-frame housing as Canada. Marketing efforts to promote wood-frame housing in Europe, Japan, and elsewhere
have met with, at best, limited success. Consequently, the United States is the only serious market for Canada’s softwood
lumber, and the US softwood lumber industry is capable of supplying only 50 to 60 percent of US demand . . .The bilateral trade issue boils down to protecting profit margins for the major suppliers on both sides of the border and fees for the myriad of lawyers engaged on this issue . . .
In these circumstances, US disregard of the ECC decision should be seen as more than a softwood lumber or Canada-US problem. It has brought into question the fundamental commitment of the United States to the rule of law and to its treaty obligations. As Tom d’Aquino, head of the Canadian Council of Chief Executives, has pointed out: “At issue is whether Canada can rely on the United States to respect the rule of law and live up to its treaty obligations, or whether the United States is prepared to sacrifice these principles in order to satisfy narrowly based protectionist interests within its economy…
The way out is to pursue more coherent and consistent objectives, to integrate dispute settlement into the negotiations rather than treating them as alternatives, and to inject some new elements into the equation to provide the two governments with sufficient political room to justify a return to the table . . .
. . . the mere existence of trees and of production capacity in Canada does not constitute a threat to the US industry. Instead, there must be credible evidence on the record of price suppression, increasing exports, loss of employment, declining market shares, and similar factors to warrant a finding of threat of injury. Here the solution lies in an agreement that in any future cases, the ITC be held to the strict standard set by this panel in determining injury.