Vigorous U.S. economic growth, a 15-percent increase in the value of the U.S. dollar over the Canadian dollar, rapid growth in U.S. housing construction, and reduced U.S. softwood production in the West fed the strong U.S. import demand, especially for softwood lumber for new housing construction. Despite these factors, Canada's share of U.S. wood imports remained at about 73 percent during the 1993-98 period. Additionally, the U.S.-Canada Softwood Lumber Agreement, reached in 1996 after years of negotiation, played a role in limiting U.S. imports from Canada. Under this agreement, Canada agreed to limit the tax-free volume of softwood lumber exported to the United States from certain provinces. In exchange, the United States pledged to refrain from bringing certain trade actions against Canada related to softwood lumber during the five-year agreement.
Some disputes continue to simmer, however.
For example, the U.S. industry continues to claim that Canadian mills are subsidized because Canadian provinces, which own most of the timber, charge low stumpage fees that do not reflect the true market value of the timber. The United States and Canada are in arbitration to settle a dispute over British Columbia's decision in 1998 to lower stumpage rates to help its ailing forest products industry. A number of other changes in how contracts are administered are currently under review by the United States. They are intended to lessen the financial burden on British Columbia's wood products industry. The author is an agricultural economist, formerly with the Foreign Agricultural Service's Forest and Fishery Products Division.