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| You are here: Home > Features > Softwood Lumber Dispute |
Regulation of the softwood lumber industry
Who has jurisdiction
over forest management in Canada? Who regulates trade disputes
at the bilateral and international level?
In addition to owning most of the country’s forest land, provinces
enjoy constitutional authority over forest management. Under
the Constitution Act, 1867, provincial governments have
jurisdiction over creating laws and establishing regulations
and standards affecting all aspects of forest management within
the province, including protecting forests, disposing of timber,
and harvesting lumber. (With respect to the territories, the
federal government has handed over management of federal Crown
Lands residing within the territories to territorial governments,
while retaining ownership of the land).
The importance of forestry to the national interest, however, means
the federal government continues to play a key role in forest
management. To this end, the Government of Canada conducts research
programs, administers federal-provincial forestry agreements,
and represents Canada’s interests internationally – both
in forestry organizations, and with respect to trade issues.
Federal forestry policy is managed by Natural Resources Canada;
the Department’s authority over the forestry industry is
outlined in the Forestry
Act.
North American Free Trade Agreement (NAFTA)
Regulation of trade in softwood lumber between Canada and the United
States falls under the North
American Free Trade Agreement (NAFTA). Implemented in 1994,
NAFTA is a comprehensive agreement designed to create a free
trade zone between Canada, Mexico, and the United States by phasing
out duties and tariffs over a 14-year period.
With respect to the softwood lumber dispute, the relevant section
of NAFTA is Chapter
19, Review and Dispute Settlement in Antidumping and Countervailing
Duty Matters.
This portion of the document outlines the procedure for resolving
disputes involving the imposition of duties by one country on
imports from another country. Specifically, Chapter 19 covers
the application of “countervailing duties”and“antidumping” duties.
A countervailing duty is a tax assessed on a product
by the importing government to counter the effects of subsidization
of the product by the exporting government. An antidumping
duty is a tax assessed on a product by the importing
government, levied when the specified good is being sold in the
importing country’s domestic market at a price below market
value. This is more commonly referred to as “dumping.” Countervailing
and antidumping duties can only be imposed if the importing country
can demonstrate that the subsidized, or dumped, imports are causing,
or may cause, a threat of injury to the domestic industry.
Chapter 19 provides a mechanism whereby one NAFTA member, NAFTA
Member A, for example, can appeal the imposition of duties on
its imports by NAFTA Member B, without having to pursue
the case in the domestic courts of NAFTA Member B. Specifically,
Chapter 19 permits NAFTA Member A to launch an appeal with a
special bi-national panel consisting of five independent experts.
The panel subsequently reviews the evidence and determines whether
the actions of NAFTA Member B, in imposing duties, conflicts
with its own domestic trade law. Normally, NAFTA decisions are
binding and must be implemented within 60 days. However, either
side can appeal the panel’s decision through an “Extraordinary
Challenge” method. Under this mechanism, a three-member
judicial panel reviews and rules on the decision of the five-member
panel.
World Trade Organization
The World Trade Organization (WTO)
is an international organization set up by member states to reach
a consensus on international rules of trade. Like the North American
Free Trade Agreement, the WTO has a dispute mechanism for handling
trade disputes between member states. Disputes are handled through
a Dispute Settlement Body, which has the authority to convene
a panel of experts to examine the issue. The standard that the
panel uses in its determination of a case is, quite simply, whether
a country’s trade policies are consistent with WTO agreements
and obligations.
The WTO’s dispute resolution mechanism does not enforce punitive
measures. Instead, it is designed to help the two parties reach
agreement. Initially, the process consists of consultations between
the disputing parties. In the event that a settlement cannot
be reached, however, a panel will be convened to consider the
evidence and release a report. As in NAFTA, both parties can
appeal the findings. Ultimately, if the offending country fails
to bring its policies into line with the panel ruling, the other
country in the dispute can apply to the WTO for permission to
impose limited trade sanctions against the offending country.
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