International Trade Committee on May 11th, 2023

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

I understand that there's no agreement in place now. However, in 2016, an agreement had just expired. That means it was possible, at one point, to reach an agreement. We could debate the agreement, because we don't all agree here, across the political parties, on how good it was. Nevertheless, there was an agreement. There was an openness and a dialogue in that regard.

Why didn't you move right away in 2016 to open the dialogue back up, to prevent another crisis?

[Aaron Fowler]

Thank you for the question.

I was in the chair that Michael occupies when the last agreement was coming to an end in 2016. I can tell you, because I was involved in those discussions, that we tried very hard to renew and to extend that agreement, and when the agreement could not be extended, to renew it, and when that could not be done, to put in place a new agreement that would result in a continued managed trade situation with the United States with no gap and no reimposition of U.S. trade remedy duties.

We engaged with officials of the Obama administration, and then, following the entry into the White House of the Trump administration, we engaged with Trump administration officials. Under both governments in the United States, there was no appetite to extend, renew or negotiate a new softwood lumber agreement in 2016 or 2017, and that has continued to be the case until today.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Chair, before I continue, could you tell me how much time I have left?

[The Vice-Chair, Conservative, Kyle Seeback]

You have 10 seconds.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Ten seconds isn't enough time to ask you another question. It will have to wait until the next round.

Thank you for your answers.

[The Vice-Chair, Conservative, Kyle Seeback]

Thank you very much, Mr. Savard-Tremblay.

We'll now go to Mr. Cannings for six minutes.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

Thanks to the witnesses for being here today.

I want to get some clarification on some of the answers.

From what I understand, a victory in litigation would be the return of the fees, fines and tariffs that have already been collected, whereas a victory in negotiations would be a long-term settlement of this dispute. Is that how it's best framed?

[Aaron Fowler]

Thank you for the question.

I think that's a fair characterization, but I would also say these two elements of the Canadian strategy are linked. We know from past practice that, as Canada enjoys success on the litigation front, the appetite in the United States—including among U.S. industries—to come to the table to negotiate a long-term solution increases.

The litigation strategy is itself a fundamental part of Canada's long-term negotiation strategy.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

You said there are two panels under chapter 19 of NAFTA that are in place now. You haven't named the members of those panels, I understand.

What aspects of the dispute are they looking into?

[Aaron Fowler]

Thank you for the question. I'm sorry if I wasn't clear.

The NAFTA panels have been established and the panellists have been named. We anticipate that those panels will issue their judgments either late this year or early next year. The panels will look at the initial U.S. countervailing duty order and anti-dumping order, both of which occurred when the NAFTA was still in.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

The chapter 10 CUSMA...those are later, because CUSMA came into force in the midst of all this. What will they be looking at later? Decisions by the United States...?

[Aaron Fowler]

Yes, that's it exactly. Chapter 10 of CUSMA is effectively the same as chapter 19 of NAFTA.

Every year, the United States will do an administrative review of both the anti-dumping and countervailing duty orders. When those reviews are complete, that becomes, itself, a new element of U.S. action that can be challenged. Those orders that came into force after CUSMA took effect would be challenged under CUSMA chapter 10, rather than NAFTA chapter 19.

I will invite my colleague, Mr. Owen, to correct me if there's anything that I've said wrong.

[Michael Owen, General Counsel and Executive Director, Trade Law Bureau, Department of Foreign Affairs, Trade and Development]

I think you said it very well.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Mr. Hoback mentioned that prices are low now. Certainly, mills and companies in my riding and throughout British Columbia are suffering because of those low prices. A lot of them are producing lumber and trying to sell it below cost. When they sell it at those low prices, from what I understand.... The vicious circle of it all is that the anti-dumping fees go up. When the companies aren't getting enough pay for their products in the States, because of low prices, they are also forced to pay more tariffs.

Is that a fair statement? I know there might be a time lag, but I'm just wondering how that works.

[Aaron Fowler]

I'll defer this one to my colleague, if that's okay.

[Michael Owen]

The anti-dumping duties in force in the current administrative reviews are a weighted average of the two largest softwood lumber producers' anti-dumping duty rates: Canfor and West Fraser. A weight average of their company-specific rates is taken, and that is applied as what's called an “all others” rate. The dumping duties that are paid currently would be an average of those two companies' dumping rates.

What you're getting at, though—to answer the question a bit more directly—is true. Generally, when market conditions are a bit poorer, dumping duties can go up, but they're ultimately determined by the commercial decisions and pricing of those two companies I mentioned just a few minutes ago.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I think I will finish with a question. In a couple of weeks, this committee is going to be travelling to Washington D.C. to talk about a number of issues, but softwood lumber will certainly be on our minds.

Do you have any advice as to how we might try to make some progress, or understand better what is causing this incredible delay in solving this issue that's so important to all of the country?

[Aaron Fowler]

I appreciate that question very much.

I think if you continue to reiterate Canada's interest in finding a solution, continue to reiterate the economic importance of this sector to Canada and continue to highlight the unfortunate costs and consequences to U.S. consumers at a time of high and increasing housing prices already, it would go some way to reinforcing the messaging.

We also have allies in the United States, such as the National Association of Home Builders, housing affordability groups and others, who I'm sure would be very happy to hear your perspectives and those of the committee.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Yes. We'll be talking to them.

[The Vice-Chair, Conservative, Kyle Seeback]

Thank you very much, Mr. Cannings.

We will now start the second round and go to Mr. Carrie for five minutes.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you, Mr. Chair.

It's important. Mr. Virani brought up the chronology. I remember in 2006, I was the parliamentary secretary for industry in the Harper government. We got an agreement. I'm glad you were there near the end.

We then had the original TPP, which people forget was the original NAFTA renegotiation. It was Mr. Obama's deal. It was an all-in deal. Our Prime Minister walked away from it and aggravated a lot of our trading partners. I worried about that at the time.

However, there was some news that seemed to be positive on March 10, 2016. I would like to read with you an article from Reuters:

The ongoing U.S.-Canadian trade “irritant” over softwood lumber is expected to be resolved soon, both countries leaders said on Thursday regarding the years-long fight over pine and other such soft wood.

U.S. President Barack Obama and Canadian Prime Minister Justin Trudeau, speaking at a joint press conference, said the issue came up at their meeting at the White House but that negotiations were ongoing.

I want to come back to that. The article continues:

“I’m confident that we are on a track towards resolving this irritant in the coming weeks and month,” Trudeau said of the trade dispute, which stems from an expired 2006 softwood lumber export agreement.

Obama added: “This issue of softwood lumber will get resolved in some fashion.... It’s been a longstanding, bipartisan irritant....

That was in 2016. Negotiations were ongoing. Mr. Obama and Trudeau instructed Michael Froman, whom you may remember, and Chrystia Freeland to avoid another protracted dispute over softwood lumber and report back within 100 days.

Are you aware of what the results were of those meetings with Mr. Froman and Madam Freeland? Did they meet?

[Aaron Fowler]

Yes. They met on a number of occasions.

[Colin Carrie, Conservative, Oshawa, ON]

What were the results of those meetings? Were there negotiations, or were there just talks?

[Aaron Fowler]

There were negotiations. In March 2016, the 2006 SLA was still in place and still operating.

The nature of the discussions at that time was related to either a renewal or an extension of the agreement that was already in place.

Those negotiations continued and incorporated elements related to the possible negotiation and structure of a new agreement that would have different aspects to it, up until the point the United States reimposed duties on Canadian softwood lumber exports in 2017. At that point, negotiations concluded and the litigation phase of Canada's strategy to manage this file began, although we have always been very clear that we remained poised and ready to negotiate with the United States at any time.

[Colin Carrie, Conservative, Oshawa, ON]

Basically, they fell apart, unfortunately, at that time.

In June 2016, there was a suggestion from industry, way back when, that the two countries could appoint a mediator. Do you know if there was any discussion back then, or if there were any names brought forward? We know Mr. MacNaughton was.... That name was brought out in March this year.

Were there any other names brought forward? What were the results, and why was a decision made not to appoint somebody who could help in the mediation, or at least get the issue resolved, because it has been since 2016?