S ince the 1980s, there have been five major disputes (so-called lumber wars) between the United States and Canada, interspersed by three different trade agreements. The latest dispute, Lumber V, started after the expiration of the 2006 Softwood Lumber Agreement (SLA) in October 2015. The U.S. lumber industry petitioned for trade protections shortly thereafter. This report provides background information on the dispute, summarizes the key issues leading to the tensions between the United States and Canada over softwood lumber, and examines current developments in Lumber V. Softwood lumber, for purposes of this report, is lumber produced from conifer trees. The definition of the term had been an issue leading up to the signing of the 2006 agreement and is discussed more thoroughly in the Appendix . The SLA definition is based on four tariff items under the Harmonized Tariff Schedule of the United States (HTSUS) and includes essentially all traditional softwood lumber items intended for residential construction. Because softwood lumber is primarily used for residential construction, repair, and remodeling, the demand for softwood lumber is a secondary demand, derived substantially from the demand for new or remodeled houses and other buildings. Both the U.S. and Canadian softwood lumber industries are largely driven by the U.S. housing market in general and the new construction or remodeling market specifically. In the early to mid-2000s, the U.S. and Canadian softwood lumber industries enjoyed a period of prosperity as the residential real estate market boomed. However, the softwood lumber industry began to struggle when the real estate market began to crash in 2007. For example, from 2005 to 2009 the number of new home construction starts declined by 74%. Over that same period, the use of softwood lumber in the United States decreased by 41%. Further, the number of sawmills (used to process lumber) decreased by 17%, sawmill capacity decreased by 11%, and sawmill production decreased by nearly 30%. Since 2010, the U.S. housing and softwood lumber markets have made a modest recovery. New home construction starts have increased annually. U.S. consumption of softwood lumber has increased annually since 2009, although it remains well below the rates of the early 2000s and at levels not seen since the early 1990s. As a secondary demand, softwood lumber is largely price-inelastic. This means that modest changes in construction demand cause relatively large changes in lumber prices, but the price of lumber does not affect the supply or demand of lumber, or, debatably, the price of construction. For example, wood products are generally a minor component of construction costs. While some claim that wood products represent up to 15% of construction costs, using the 2014 average framing lumber composite price of $383 per thousand board feet (MBF), framing lumber in an average (2,690-square foot) new home would cost $7,512—3% of the 2014 median price of a new home. In contrast, the price of lumber dropped significantly as a result of the housing market crash. In 2009, the price of lumber fell below $200 MBF for several months, for the first time since the 1980s (see Figure 1 ). Since the expiration of the 2006 SLA, lumber prices have risen steadily, and they were above $400 MBF for both March and April 2017. When adjusted for inflation, however, the price of lumber remains relatively low, comparable to the prices of the early 2000s but below prices seen in the 1970s, 1980s, and 1990s in real terms. In the United States, the major stakeholders in the dispute include timber producers (forest land owners), lumber producers, and lumber consumers (homebuilders and home buyers). Timber producers are included with lumber producers, since many lumber producers also own significant tracts of forest land. In Canada, the major stakeholders include the Canadian lumber producers and the provincial governments, as the timberland owners. The U.S. lumber producers support trade restrictions on Canadian imports. In contrast, U.S. lumber consumers prefer access to affordable lumber and therefore many generally oppose trade restrictions on Canadian imports. The National Association of Home Builders (NAHB), representing the interests of U.S. lumber consumers, contends that American home buyers are the ones who eventually pay for the cost of the trade restrictions and that unrestricted trade benefits the U.S. economy as a whole. Further, they maintain that the restrictions have "reduced the incentive for U.S. producers to adopt new and innovative technology to increase production and improve efficiency of their mills so as to be internationally competitive." In response to the expiration of the agreement, NAHB and other partners have formed the American Alliance of Lumber Consumers to advocate for trade on lumber. However, under U.S. trade remedy laws, U.S. lumber consumers do not have standing in the dispute and may only participate as an interested party. Historically, Canada has been the largest foreign supplier of softwood lumber in the United States, accounting for 95% of imports since 1965 (see Figure 2 and Figure 3 ). In 1965, the United States imported less than 5 billion board feet (BBF) of Canadian lumber, accounting for only 14% of U.S. consumption. However, Canadian imports rose to more than 20 BBF in 2004 and 2005, including an 80% increase from 1990. In comparison, U.S. lumber production for the domestic market (i.e., excluding U.S. lumber exports) during that same period increased by only 56%. The Canadian share of the U.S. market peaked at more than 35% in 1995-1996 and fluctuated around 33% until 2005. Over the nine years the 2006 SLA was in place, the Canadian share of the U.S. market averaged 28% annually. The main basis of the United States-Canada softwood lumber dispute is the allegation that Canadian lumber production is subsidized by the Canadian government. U.S. lumber producers allege that these subsidies give Canadian lumber producers an unfair advantage in the U.S. market, causing injury to U.S. producers. The U.S. Lumber Coalition, which represents the U.S. lumber industry, has argued that absent a trade agreement or other trade protection measures, Canadian imports have risen due to government programs in Canada. In particular, they assert that the fees set by the provinces for government-owned timber are less than prices in a competitive free market in North America would be. However, comparing the relative competitiveness of U.S. and Canadian lumber producers is challenging. This is due to differences in land ownership and thus timber supply, pricing and allocation systems, and measurement systems, among other factors, as described below. The United States and Canada both have vast forest resources, but the ownership patterns, development pressures, and forest management policies in each country are very different. In Canada, about 94% of the timberlands are "crown lands" owned and administered by the federal and provincial governments. Overall, the provinces own 90% of the timberlands, the Canadian federal government owns 2%, and 6% is in private ownership, although the provincial ownership percentage varies by province. Most of the federally owned timberlands are northern boreal forests located in the Yukon, Nunavut, and Northwest Territories that do not produce significant amounts of softwood lumber. This contrasts with U.S. timberlands, where 42% are owned by the government (31% federal, 9% state, and 2% local) and 58% are privately owned. As a result, the U.S. lumber industry relies more heavily on private timber sources, whereas the Canadian lumber industry relies mostly on public sources of timber. Each Canadian province has its own forestry laws, regulations, and standards, and Quebec enacted forestry reforms in 2013 in part as an effort to employ the "exit ramp" provisions of the 2006 SLA. In general, the provinces require management plans for forested areas, typically prepared by certified professional foresters and subject to participation or review by a broad spectrum of users and interests. The provinces also allocate timber harvest. The provinces typically use tenure agreements, or leases, which grant exclusive rights to the specific annual harvest level with various management obligations (e.g., road construction and reforestation). The tenure agreements may be long-term (5-25 years) or short-term (as brief as 6 months, with fewer management obligations). Many provinces also have other agreements for selling various types of timber to specific, often quite small or family-operated firms. In large part due to the different land management regimes in the two countries, the United States and Canada each rely on different price allocation systems to determine the cost of lumber. In the United States, prices are established in competitive markets between willing buyers and willing sellers, often through auctions. This is the situation for wood product manufacturers and private timberland owners and, arguably, federal timber sales in areas with competitive bidding. Thus, much of the timber from lands in the United States is sold at relatively fair market values. This may not be the case in Canada, where leases (rather than competitive bids) are used to allocate timber. In Canada, the provinces charge fees for timberland leases and timber harvests. There is generally a flat annual fee for maintaining the leases and a stumpage fee—a per-unit-of-volume fee charged for the right to harvest the trees—for the timber harvested. In many of the provinces, stumpage fees are determined administratively and range from a fixed, province-wide fee to fees established separately for each tenure agreement. These fees are adjusted periodically to reflect changes in the market prices of lumber and other wood products. As discussed above, while the 2006 SLA was in force, Quebec modified its stumpage pricing systems.