Thank you very much, Mr. Chair, and honourable members. Thank you for the opportunity to participate in this discussion today and to provide you with an update on the softwood lumber file.
I am joined by Michael Owen, senior counsel and executive director in the trade law bureau; Colin Barker, director of the softwood lumber division at Global Affairs Canada; and Ronnie Hayes, senior business adviser at the trade sectors bureau at Global Affairs Canada.
Canada's forest sector supports over 211,000 jobs in 300 communities across the country. It contributed $25.8 billion to Canada's GDP in 2018. We are keenly aware that the forest sector has faced significant economic headwinds. This has serious impacts on the workers and communities that rely on it. The forest sector is currently facing challenging market conditions, including a reduction in the supply of harvestable timber, mostly in British Columbia, and increased competition in overseas markets.
Another challenge, of course, is the duties imposed by the United States on Canadian softwood lumber. Given Canada's geographic proximity and close commercial links with the United States, it is no surprise that the United States is our number one export market for softwood lumber. Today, the U.S. market accounts for nearly 80% of Canada's softwood lumber exports. For many decades, the United States has relied on Canadian softwood lumber to fill the gap between its domestic production capacity and its demand for lumber.
Despite this mutually beneficial relationship, the Canada-U.S. softwood lumber dispute has become one of the most enduring trade disputes between our two countries. Over the past few decades, the United States lumber industry has frequently petitioned the U.S. government to enact protectionist measures against Canadian softwood lumber imports, including through the application of import duties.
The basis for much of the American action against Canadian softwood lumber lies in the differences between how forests in Canada and the United States are managed. The United States has consistently alleged that public management versus private ownership results in unfair subsidies for Canadian lumber manufacturers. Time and time again, these arguments have been found to be without basis. Canada has brought challenges against the previous duty determinations under NAFTA chapter 19, and before the World Trade Organization dispute settlement system. The U.S. has repeatedly lost in those dispute processes, because Canada does not subsidize softwood lumber production.
Most recently, following the expiry of the 2006 softwood lumber agreement in 2015, and a subsequent one year standstill period, the United States began a new investigation into Canadian softwood lumber practices at the request of the U.S. domestic lumber industry. In January 2018, following anti-dumping and countervailing duty investigations by the U.S. Department of Commerce, the United States once again began imposing duties on softwood lumber imports from Canada.
These countervailing and anti-dumping duties are entirely unjustified. We firmly believe that these determinations are inconsistent with U.S. law and with the international trade obligations of the United States under the WTO. The Government of Canada is currently challenging the latest U.S. softwood lumber duties through five legal processes, three under NAFTA chapter 19, and two before the WTO dispute settlement system.
Under chapter 19, Canada is challenging the U.S. Department of Commerce's final countervailing and anti-dumping duty determinations, as well as the U.S. International Trade Commission's decision on material injury to U.S. industry. Panels established under chapter 19 review whether these determinations are consistent with U.S. law.
Let me add here that the Canada-United States-Mexico Agreement, or the new NAFTA, preserves the bi-national panel dispute resolution process for trade remedies that was in chapter 19 of the original NAFTA. This process protects Canadian companies and workers from the unfair application of U.S. or Mexican anti-dumping and countervailing duties with a transparent and independent dispute settlement system. This will continue to ensure that these measures are applied in accordance with each parties domestic laws. It is strategically important for preserving market access outcomes and defending Canada's interests.
Canada's success in maintaining the dispute settlement mechanism means that once the new NAFTA is in force, Canada's current chapter 19 challenges under U.S. law can continue in parallel with any new challenges under the new NAFTA's chapter 10 to unwarranted or unfair duties imposed in U.S. annual administrative reviews.
Amongst the NAFTA and the WTO cases, the most advanced is the injury challenge. On September 4, 2019, the NAFTA panel ruling on Canada's injury challenge issued its decision. It found that several key issues that are central to the U.S. International Trade Commission's determination of material injury were not based on substantial evidence, and were therefore inconsistent with U.S. law. It remanded the determination back to the commission.
This decision, while it did not immediately put an end to the U.S. duties, was an important step in the right direction. While the commission chose not to substantively alter its determination in this first instance, we will continue to pursue our claim and seek that the panel once again find this first redetermination to be inconsistent with U.S. law.
Our goal through this process is for the commission to reverse its initial determination and find that there was in fact no injury to U.S. industry, or be directed to do so by the NAFTA panel. This process may yet take some time and we will pursue it over the course of the coming year. If a finding of no injury is made, the basis for the imposition of duties disappears and the duties would be lifted.
Canada is pursuing two other NAFTA challenges against the United States Department of Commerce's final countervailing and anti-dumping duty determinations. We are still in the process of panel formation for those cases.
We are also pursuing challenges of two duty determinations through the WTO dispute settlement system. Panel hearings for these two WTO challenges have already taken place. The more complicated and perhaps more impactful of the two challenges is our challenge of the countervailing duty determination. The WTO panel has held two hearings on this challenge over the past year where Canada presented several days of arguments to the panel and numerous written submissions. We expect a panel decision to be issued sometime in the summer.
Under normal circumstances, WTO panel decisions can be appealed, as Canada has done in the case of our anti-dumping duty determination challenge. However, the current impasse at the WTO over the appointment of new appellate body members will delay any final resolution of these two challenges, which is why it is important that we continue to pursue the challenges under NAFTA's chapter 19.
While these legal processes unfold we are working closely with the provinces and industry. A legal counsel group exists that allows the Government of Canada counsel to work directly with counsel representing the provinces, industry associations and individual companies. This is truly a Team Canada approach that ensures that our legal arguments are as effective as possible.
Beyond the legal processes, important interactions continue with U.S. decision-makers to try to advance discussions toward a solution to the current dispute. The Prime Minister, Deputy Prime Minister and Minister of International Trade continue to be actively engaged on this file. Every opportunity is taken to raise the issue with U.S. counterparts, members of Congress and state-level officials.
The Deputy Prime Minister maintains a regular dialogue on softwood lumber with Secretary Ross at the Department of Commerce, and United States Trade Representative Lighthizer. Most recently, she and several premiers met with USTR Lighthizer in Washington where discussion on the softwood lumber file took place.
The Deputy Prime Minister also maintains a direct dialogue with Canadian industry stakeholders, union leaders and premiers to understand the various perspectives on this dispute across the country. Provincial governments and stakeholders have generally expressed strong support for the continued pursuit of litigation under NAFTA and at the WTO, recognizing that future legal decisions will strengthen Canada's position in the negotiation of a new softwood lumber agreement.
The Government of Canada therefore continues to pursue a vigorous set of legal challenges while also continuously looking for opportunities to engage with the U.S. government in discussions toward a new softwood lumber agreement. Canada continues to believe that a negotiated agreement with the United States is in both countries' best interests.
Unfortunately, the U.S. industry has blocked the U.S. administration from engaging meaningfully in negotiations, preferring the continued imposition of duties and the higher lumber prices caused by these tariffs to the detriment of U.S. consumers. In the meantime, we understand the harmful impact that U.S. duties have on workers and communities that rely on this important segment of Canada's forest sector.
In June 2017, the government announced the $867-million softwood lumber action plan over three years to support the needs of affected workers, communities and industry. An additional $251 million was allocated through budget 2019 to Natural Resources Canada's forest-sector innovation and diversification programs.
Global Affairs Canada sees continued trade diversification as critical to the future health of Canada's forest industries. This will help to sustain and grow Canadian forest sector jobs and support the communities that depend on these industries.
Global Affairs Canada supports forest product innovators in finding technology partners, foreign investors and new market opportunities for their next generation forest products, including bioproducts. Global Affairs Canada works closely with provinces and territories in promoting and advocating for Canada's environmental reputation in markets around the world.
Canada's bilateral and multilateral economic and trade agreements, either concluded or under negotiation, aim at increasing the international competitiveness of our natural resource industries, including the forest sector. For instance, the comprehensive economic and trade agreement with the European Union and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership have opened up new export opportunities for the Canadian forest sector in Europe and Asia.
The government's trade diversification strategy features an investment of $290 million over five years to help Canadian businesses export and grow by strengthening the trade commissioner service and enhancing the support it provides to Canadian exporters, including those in the forest sector.
In conclusion, we recognize that the United States will continue to be the most important market for Canadian lumber exporters. Analysis suggests that the gap between U.S. demand and U.S. supply of softwood lumber will actually increase over the next decade, so the United States will need more imports.
Naturally, because of geographic proximity and close commercial links, Canada is best placed to supply this demand. As a result, we are confident that a settlement that brings stability and predictability to the softwood lumber industry is the best option for both countries.
Throughout this entire process, we have worked closely with the provinces, territories and industry stakeholders to ensure a united Canadian approach to this dispute. We will continue to work closely as we move forward.
Thank you, again, for this invitation to appear today. My colleagues and I look forward to your questions.