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Canada Applauds Softwood Lumber Ruling on British Columbia’s Timber-Pricing System

A welcome victory for workers in B.C.’s lumber industry, says Minister Fast

July 18, 2012 - The Honourable Ed Fast, Minister of International Trade and Minister for the Asia-Pacific Gateway, today welcomed a favourable ruling in the trade dispute with the United States over the timber-pricing system for British Columbia’s Interior. A tribunal of the London Court of International Arbitration (LCIA), convened under the Softwood Lumber Agreement (SLA), ruled that Canada had not circumvented the agreement, as alleged by the United States.

“This is good news for forestry workers in British Columbia,” said Minister Fast. “We applaud the tribunal’s decision in favour of our lumber industry. This positive outcome is the result of our close collaboration with provincial and industry partners and proof that the SLA is good for Canada’s forestry sector.”

In accordance with SLA rules, the arbitration process was conducted by the LCIA. A panel of arbitrators heard compelling testimony that the increased proportion of low-value logs in B.C.’s timber harvest was caused by the devastating impacts of the mountain pine beetle infestation.

“We are committed to the success of the Softwood Lumber Agreement, which has brought certainty and stability to a sector that is vital to the Canadian economy,” said Minister Fast. “Our government will continue to stand up for the workers and families that rely on Canada’s world-class forestry sector.”

Canada and the United States enjoy the largest bilateral trading relationship in the world, with two-way trade in goods and services reaching almost $709 billion last year. Softwood lumber bilateral merchandise trade accounted for $3 billion in 2011. Reducing obstacles to trade between the two countries contributes to mutually beneficial supply chains, making both countries more competitive domestically and internationally. All told, the jobs of more than 8 million Americans depend on trade with Canada, and more than 2.4 million Canadian jobs depend on exports to the United States.

For more information, please visit Softwood Lumber and LCIA Arbitration Rules.

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A backgrounder follows.

For further information, media representatives may contact:

Rudy Husny
Press Secretary
Office of the Honourable Ed Fast
Minister of International Trade and Minister for the Asia-Pacific Gateway

Trade Media Relations Office
Foreign Affairs and International Trade Canada
Follow us on Twitter: @Canada_Trade

Backgrounder - Softwood Lumber Trade Dispute with United States on British Columbia’s Market-Based Timber-Pricing System

In 2008, the U.S. lumber industry began repeatedly claiming that a high volume of logs affected by the mountain pine beetle in the British Columbia Interior were being misgraded as low-value Grade 4 logs. Under British Columbia’s market-based timber-pricing system, such low value logs are priced at an administratively set stumpage fee.

The industry claims led the U.S. government to request arbitration under the terms of the Canada-United States Softwood Lumber Agreement (SLA), alleging that this systemic misgrading circumvented the agreement by allowing the logs to be underpriced.

Canada argued that the increased volume of Grade 4 logs harvested in the B.C. Interior was a direct result of the devastating impacts of a mountain pine beetle infestation, which killed millions of hectares of timber in British Columbia and reduced the value and grade of the logs.

In 2011, the B.C. forest industry generated over 53,000 jobs and exported nearly $10 billion worth of forest products worldwide. British Columbia is Canada’s largest softwood lumber producer and exporter. In 2011, the province exported over $1.7 billion worth of softwood lumber products covered by the SLA to the United States, giving it a nearly 14-percent share of the U.S. lumber market.

The Government of Canada assisted B.C. and Alberta in slowing the eastward spread of the beetle, recovering value from beetle-killed trees and reducing post-beetle threats to public safety via the now concluded Mountain Pine Beetle Program. Significant resources were allocated to this program, including scientific support, as well as investments in transportation infrastructure and community economic diversification. The Government of Canada continues to assist the provinces, forestry stakeholders and communities in responding to beetle challenges.

Arbitration timeline

  • In October 2010, pursuant to the SLA, the United States requested confidential consultations, which were held in Canada, concerning B.C. timber pricing. Consultations are the first step in formal procedures under the dispute settlement provisions of the agreement.
  • On January 18, 2011, the United States requested arbitration with Canada, pursuant to the SLA. As outlined in the agreement, this arbitration process was conducted under the rules of the London Court of International Arbitration (LCIA).
  • In March 2011, an arbitral tribunal was established to hear the matter.
  • From February 27 to March 8, 2012, the arbitral tribunal held hearings in Washington, D.C., after Canada and the United States had filed their pleadings.
  • On July 18, 2012, the arbitral tribunal rendered its final decision in the case. The tribunal decision is final and binding.