A temporary standstill softwood lumber agreement between Canada and the U.S. has expired, and the U.S. is expected to file a petition to impose duties on Canadian lumber as early as tomorrow. Those duties could be imposed by the end of March in 2017.
Negotiations to reach a long-term deal continue but all indications are that both parties are far apart.
READ MORE: Canada, US vow to continue softwood lumber talks despite deadline expiry
Here are five things to know about the deal and why a trade war between the two countries just won’t end.
1. Forest ownership is at the heart of the fight
Outside of the Maritimes, most forests in Canada are provincially-owned, while in the U.S. they’re privately-owned. The U.S. has long alleged that allows Canadian producers to sell their lumber at a lower price, undercutting American producers in the process. The Americans claim that amounts to a subsidy, a claim Canada has fought (largely successfully) at the World Trade Organization.
READ MORE: Blame game starts as softwood deal expires
2. It’s not new
This is the fifth battle between the U.S. and Canada over softwood lumber. The dispute goes back to the early 1980s. Since then, during periods when deals have expired, the U.S has collected billions of dollars from duties imposed on Canadian lumber. Some of that has been returned eventually.
There are two types of duties that can be imposed: countervailing and anti-dumping. The duties act as a tax on Canadian lumber exported to the U.S. and can cripple the Canadian industry.
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WATCH: Trade analyst Peter Clark explains why there is a dispute over softwood lumber
3. Big consequences
According to Statistics Canada, as of 2013 , about 360,000 Canadians were employed by the forestry industry. Job losses are a reality if duties are imposed.
In the early 2000s, for example, the U.S. imposed a combined duty of 27.22 percent and within months 15,000 workers in B.C. were laid off. Ongoing negotiations are so tenuous, Canadian producers refused to comment on potential job losses or hits to the industry.
WATCH: Trade analyst Peter Clark talks about the impacts of U.S. duties on the lumber industry in Canada
4. Sticking point
There are nine issues being negotiated in an effort to reach a long-term deal but the biggest sticking point appears to be market share. The U.S. wants a hard cap on Canada’s share of the American market. The Canadian and American ideas of what that cap should be, though, are said to be at least five percent apart and each percentage point is significant.
In a joint statement following President Obama’s visit to Ottawa last June, market share was established as an issue for negotiation. Today, the U.S. Lumber Coalition claimed, “to date, Canada has continued to insist on frameworks that are inconsistent with the joint statement.”
WATCH: Conservative MP Randy Hoback talks about what is at stake
5. It’s political
The opposition says Liberals dropped the ball by not getting a long-term agreement done before the standstill deal expired.
“Negotiating a new softwood lumber agreement has never been a priority for this government,” Conservative MP Randy Hoback said.
Liberals aren’t taking the criticism lying down though.
A government spokesperson told Global News, “the previous Conservative government allowed the softwood lumber agreement to expire, and failed to initiate negotiations.”
Outside of domestic borders, the political consequences could be greater. Both U.S. presidential candidates have expressed protectionist leanings around trade and that could have an impact on any deal that’s reached – or if it’s reached at all.
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