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Resolving the Softwood Lumber Dispute

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Resolving the Softwood Lumber Dispute COMMENTS Resolving the Softwood Lumber Dispute Sarah E. Lysons t I. INTRODUCTION As international trade increases, domestic demands and regional trade disputes can strain relations among nations and produce intractable situations in which economics and politics conspire to impair long-term solutions. Such is the case in the decades-long dispute between Canada and the United States over trade in softwood lumber,' the building blocks of the United States housing industry! The United States lumber indus- try is facing plummeting demand! New housing starts are expected to reach fewer than half of the starts in 2005, the lowest amount since World War II. 4ta neTouhslyi, lsum ber delivery costs are rising with the price of oil,' which d e c l i nt J.De. Ca ndidate, Seattle University School of Law. 2009; B.A., English and philosophy, Tufts Uni- hversity. 2a001. The author would like to thank her editors: Danielle Cross, David Keenan, Josh Large. Joanne Montague, Jennifer Smith, Matt Sullivan. Pete Talevich, and (especially) Donald and Jsacque L ysons. This article is dedicated to the author's beloved grdndmothers. Dixie Lysons and lMuriel Heambly. I. Softwood is wood from a coniferous tree, which includes fir, spruce, pine. hemlock, and cdedar. Se e Harmonized Tariff Schedule of the United States—Supplement I . § IX. 4407.10.01. t4409.10.10..40_90 (2008). 19 U.S.C. * 1202, available at http://hotdocs.usite.govidocsitataihts/by ochapter/0810C 44.pdf. 2. The largest volume market for softwood lumber in North America is structural framing. lLloyd aC. Idand, Economic Structure and the US-Canadian Softwood Lumber Trade—Ant Connec- ylions too Trade Conflicts?, in JAMES B. HENRY CENTER, MICHIGAN STATE UNIV., U.S.-CANADA FOREST PRODUCTS: A BILATERAL TECHNICAL, SYMPOSIUM 95. 9 9 (2005), available at hfttpWwf ww.maes.rnsu.eduipublicationsiresearchreports/SR/SR125.pdf. s 3. Press Release, Western Wood Products Ass'n. Historical Housing Downturn to Continue in a2008, Impacting Lumber Demand. Western Mills (Mar. 26. 2008) (on tile with author). 4. Id n 5. WASH. STATE DEP'T OF NATURAL RES., ECON. & REVENUE FORECAST. FISCAL YEAR 2008, dFIRST QUARTE R 13 (2007), available at http://www,dnr.wa.gov/Publicationsiobe_econ_rprts_rev m i 407 l l c l o s u r e s . _ S i m u l - 408 S e a t t l e University Law Review [Vol. 32:407 reached record highs in 2008. Although low lending rates and a weak dollar mitigate against the complete demise of the United States lumber industry, its short-term outlook is grim: The outlook for Canada's lum- ber industry is not much better. Canadian lumber mills are also operat- ing under capacity. 8 Low lumber prices, thus, are taxing the lumber in- dustry on both sides of the border, and prices continue to droll' )w hMile, eanati-fnree- trade rhetoric grows in depressed local economies as American and Canadian jobs are outsourced, making a failing lumber industry and a backlash against free trade inevitable. Against this backdrop, the United States faces a lumber war against Canada. For the tast quarter of a century, the United States has accused Canada of dumping' uplIa ce at the expense of American lumber producers. Neither country, shouwebvesr, ci adn iclaimz e the high ground when government involvement in dCa nada gives rise to allegations of unfair subsidies and when powerful lobbuyingm in theb Unitede States subverts the nation's professed allegiance rto free trade. Moreover, the dispute resolution mechanisms that were isupponsed tot settle the dispute have only exacerbated the tension between the two countries. o The latest attempt to settle the dispute are proving, as contentiot4s as t h previous attempts. On September 12. 2006, the United States and Can- e ada signed the Softwood Lumber Agreement ("SLA 2006”). U n i 1te1rm sU, then twod e crou ntriei s wouldt s end litigation over softwood lumber and t e d S t a sepW7t.pdfihercmafterWASU. FOR VCAS 201,g1, e Altshoug v -ratr. P./ieee 4 m ha- mIWlbusainaess.tirileS4,nline.co.ukitollbuiliesslindustry- rstatse0se /a/cnl tCkeoams,llaa srigtnei de tlhe S4o3ftw6o0od0 L0um3 b.eer Agreementc e , on September 12, 2tX,/6. Softwood Lum. Ntvr .aAuTz,cekm orht. U.S.-eCan.. S ept. 12. 2006, as amended Oct. 12, N M . available hettp://wwwt,dfmacci.ge.eattradeicich/sofinood/SLA-rnain-en.aso thereinafter SLA 20061. A t the Ue si n i t e d -time, the price of nil W;15 less than $66 a barrel and fAing. Steven Malson, OPEC Legres Oil Out- i l t put 0; ,4t i n Place as Price 1,77,! t -% VFASaIL i ptSt ne egpf t . t 2 , 2006. at D 97. Inv/table h t t 4 b Cpdy:niO/co/ nat5enttiakrt;ide 2oowo9n IlAR20060911n0163.html. a c aw w 7w.t We.AwSH ad. FsOha ian tg t o r i p o s t . c o m l a p - e a -S. Wi yASH. VOHRECA: ( L a _A. rsenr operatinge at 70V ., capacity. mills in Canada are operating at o9. hi nat 14- b v2-T1J t2K0.10 8p. _ i v d10. Doumping occurs when a country exports a good at a lower price than the eood costs in its i t. au p r a , domesntic m)arket. B eat r i z _ M a r i o Ruiz Cornejo. Trading Remedic.5 to Remedy Trade: l n4 .l oM gt The N, AFTA Expwrience, in K r 4 e- y 2 ,available, -t Jt r2 ata h ttp://pdiciamu.ed n c 5I. Press. Release . Office of he 1.).S. Um& Rep.. Schwn Pica.ed by Canadian Action Ba g sOun 0R o D t F eR S eon Soaftwood Lune= isarcement (Sept, 19. 200()„ ovallahk O/ g i P0 E N r , t5-ryq/Pres..s Releas c:Lj2tWilScptember/Schw n a d ;- A t i o n _ 1)- a 1t 6h u p :7/ / w w w . u a t r . g t w / ,od Lu1arnh8er_A2Ftuet ramt .html. avD o9c u m, e n t , : .1 a 3 Iy l s 1, t i p (_ p dpr _ A A w 3WS e A 4 „ . I i L , o y v 4 n a s . r e t 7 r t ) . i a 7 J l , . S e a e d s v e . 2 a R 0 0 i o 0 . l b a i b n k P a p . 2009] R e s o l v i n g the Softwood Lumber Dispute 4 0 9 allow free trade when market conditions were favorable. I2me nTt sehemeed praomgisinrg:e ase U.S.- Trade Representative Susan Schwab announced, "[the United States has] closed this long-running dispute that has for too long created friction with our largest trading partner." 3Within a year of the agreement, however, the United States had initiated arbitration proceedings in the London Court of International Arbitration ("LO N)" to "compel Canada to live up to its trade obligations!" 5m onTthsw beofore the arbitration panel issued its decision settling the dis- pute," the United States filed a second request for arbitration. I7 As this current dispute and years of conflict demonstrate, the soft- wood lumber dispute is too political to be resolved by any legal regime. Although the efficiency, the technical expertise, and the apolitical nature of the LOA make it the best mechanism so far in settling trade agree- ment battles, the political and economic pressures inherent in this inter- minable lumber war mean that future battles are inevitable. This Comment argues that the LOA will be able to resolve disputes involving softwood lumber but not resolve the softwood lumber dispute. Part II reviews the history of the dispute. Part III discusses the lessons that Canada and the United States have learned about resolving trade disputes, several of which are reflected in the current agreement. Part IV examines why, although the current agreement provides a degree of neu- 12. Id During unfavorable times, Canadian provinces may either impose a five to fifteen percent export tax or impose a lower tax and limit export volumes. Id, 13. Press Release, Office of the U.S. Trade Rep., U.S. Trade Representative Susan C. Schwab Announces Entry into Force of U.S.-Canada Softwood Lumber Agreement (Oct. 12, 2006), avail- able at Intp://www.ustr.goviDocument_Library/Press_Releases/2006/0clober/US_Trade_Represcnt- ative_SusanS_Schwab_Annotmces_Entry_into_Force_of US-Canada_Softwood_Lumber_Agree- nwnthtml. 14. The LC1A is an established nongovernmental institution that has traditionally settled pri- vate commercial disputes. John R. Crook, United States and Canada Arbitrate a Softwood Lumber Dispute in the London Court of International Arbitration, 102 AM.). 1NT'L L. 192,192 (2008). 15. Press Release. Office of the U.S. Trade Rep., United States to Request Arbitration Chal- lenging Canada's Implementation of the 2006 Softwood Lumber Agreement (Aug. 7, 2007), avail- able at http://www.ustr.goviDocument_Library/Press_Releases/2007/AugustArnited_States jo_Req- uest_Arbitration_ChallengingSanadas_Implementation_of the_2006_Softwood_Lumber_Agreem- ent.html. The United States alleged that Canada had improperly implemented certain export meas- ures required by the agreement Id 16. In March 2008. the panel concluded that Canada had violated the SLA in its eastern prov- inces, but not in its western provinces. See Press Release, Office of the U.S. Trade Rep., USTR Disappointed with Tribunal's Mixed Decision on Softwood Lumber (Mar. 4, 2008), available at http://www.ustr.goviassets/Document_Library/Press_Releases/2008/Marchiasset_upload_file97_145 50.pdf. 17. Request for Arbitration. Softwood Lumber Dispute (U.S. v. Can.) (Lon. Ct. Intl Arb. Jan. 2008), available at litipg/www.ustr.goviassets/Trade_Agreements/Monitoring_Enforcement/2006_ Softwood_Lumber Agrzwilleid/Arbitration_on_Provincial_Subsidiesiasset_upload Jile409_14419.
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