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New agreement ''reflects a balance of concessions made by both countries''

GENEVA, Switzerland - 07/03/06 - In a move that is expected to resolve one of the thorniest issues to impact US-Canada relations, Washington and Ottawa have initialed the text of an agreement agreed on the on trade in softwood lumber. 

US Trade Representative (USTR) Susan Schwab and Canada's International Trade Minister David Emerson outlined details of the agreement from Geneva where both are attending the ongoing the World Trade Organization Doha Round negotiations.

"In March, President Bush and Prime Minister Harper made clear the importance they attached to this effort, and I am delighted we could reward their confidence with this agreement," said Schwab.

The agreement was reached after intense negotiations over the last several weeks and reflects a balance of concessions made by both countries to resolve a two-decade old dispute.

Key provisions follow those of the terms laid out in late April and call for the US and Canada to end all litigation over softwood lumber. 

The 80-page agreement also provides for unrestricted trade when prices are over $355 per Thousand Board Fee (MBF), a condition that has existed for significant portions of the past several years.

When prevailing prices are less than $355 per MBF, Canadian exports will be subject to a combination of export charges or volume limits that increase in steps the lower the market drops, with the maximum export charge at 15% when prices fall below $315 per MBF.

Of the estimated $5 billion in duties collected since 2002, most will be returned to Canadian interests.  A total of $1 billion will remain in the US.

Lumber companies in the US that brought the trade complaints against Canada will receive $500 million.

In addition, $450 million will fund meritorious initiatives to include projects such as community assistance for timber-reliant communities, assistance for low-income housing and disaster relief, sustainable forestry practices, and other forestry initiatives. 

The remaining $50 million will be used to establish a bi-national industry council, with an advisory board composed of representatives from the Canadian and US lumber industries.  The council will seek to strengthen and "further integrate" the North American lumber industry.

The agreement contains various forward-looking provisions. 

It establishes an 18-month process to develop substantive criteria for Canadian policy reforms that could exempt provinces from export charges and quotas, provides the basis for a long-term resolution of the dispute, and includes provisions to address potential import surges from Canada; provide for effective dispute settlement; require extensive information exchange; and define special treatment for both low- and high-value products.

The agreement will undergo a legal review with signatures expected in August. No US legislation is required, but the Canadian Parliament must approve the export charge system after it reconvenes in Ottawa in September.

The pact "resolves concerns on both sides of the border and allows us to focus on the larger positive trade relationship binding our two countries," said US Secretary of Commerce Carlos Guitierrez. "We have an enormous trade relationship with Canada, with hundreds of billions of dollars of US exports flowing north across the border."

Entry into force is expected in the fall.  

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