Checking the fine print on softwood deal

Thursday, July 13, 2006

As it prepares its bid for a majority government (date of election to be announced), the Harper government is keeping careful track of its “successes”. High on its list of worthwhile initiatives that it will present to the electorate is the softwood lumber deal with the United States. But, careful scrutiny shows that the deal is anything but a success for Canada. In fact, it is a huge sellout of Canadian sovereignty, jobs and commercial interests.

Anyone who has followed the softwood lumber issue knows that Canada had and continues to have a strong hand. NAFTA panels ruled on three separate occasions that the United States was acting illegally by imposing duties on softwood lumber. Those rulings were ignored, even as the total duties collected escalated to five billion dollars over the past four years. But, instead of playing that hand, the Canadian government folded.

The key person on the Canadian side of these negotiations has been David Emerson, the Conservatives’ International Trade Minister (formerly known as the Liberals’ Industry Minister). This is despite the fact that, according to the PoliticsWatch website, he had signed a written agreement in 2004 with the Ethics Commissioner promising to stay away from the softwood file. “As former president and CEO of Canfor Corporation, I have an entitlement to an unregistered pension plan, partially funded through a Retirement Compensation Agreement,” the document reads. “In order to prevent the appearance of a conflict of interest situation from arising, I have undertaken, in the exercise of my duties and responsibilities to abstain from any participation in discussions or decision-making processes involving direct dealings with Canfor Corporation, its subsidiaries and affiliates.” Apparently that conflict of interest disappears when Emerson woke up one day and discovered that he was a Conservative.

But Emerson was reportedly never very far from the softwood file even when he was a Liberal. In February, Jim Travers of The Toronto Star reported that Emerson had not only been heavily involved in negotiations to reach a deal, but that he had personally intervened to scuttle a flawed deal which bore a curious resemblance to the one that the Harper government eventually signed (a deal referred to obliquely in November 2005 by former Prime Minister Paul Martin as “an announcement [that] will be made”). It was apparently in the Liberals’ political interests to avoid appearing to be too friendly with the Americans, so the deal was never signed. By contrast, the Conservatives are only too eager to curry favour with the Americans. They want to be seen as having a more cordial relations simply for the sake of being able to say that they’ve created more cordial relations.

But, a bad deal is a bad deal. While their reasons for not signing it were cynical, the Liberals were right to withhold the signature last fall (at least Stephen Harper thought so at the time, calling on Martin to take a tough line and to send our lumber to Asia if the Americans refused to co-operate). The Conservatives shouldn’t have signed the deal either, and not just for the sake of consistency. They should have refused to sign because it’s not a fair deal for Canada.

So, what’s wrong with the deal? Well, for starters, the Americans get to keep more than a billion dollars out of the illegally collected duties (the rest of which will eventually go back to the companies that paid them – including $475 million to Canfor). The percentage of the American market that Canada can fill has been capped. The Americans also maintain the right to force Canada to impose export taxes if our lumber prices fall below a certain level. They can unilaterally dictate how Canada regulates its own forestry practices. And, they can pull out of what was initially announced as a seven year agreement after only two years.

The framework deal was signed on April 27, less than a week before the NAFTA panel was to hear our “final extraordinary challenge” on the illegal duties. This was the final victory that Canada had been seeking. That challenge was withdrawn and the four years of successful rulings of the NAFTA panels were completely set aside. It’s like a reward for bad behaviour.

Writing in The Toronto Star after the deal was announced, Thomas Walkom correctly summed up the real message of Stephen Harper’s softwood lumber capitulation. “The 1989 Canada-U.S. Free Trade deal and its successor, the North American Free Trade Agreement were designed specifically to solve trade disputes like that of softwood lumber. But they did not and cannot. The U.S. government is a complex beast that, in the end, will always act in American interests.” Knowing that, would it really be too much to ask to have a Canadian government that that always acted in Canadian interests?
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