Softwood deal tears a hole in NAFTA
by Margret Kopala

Published in the Ottawa Citizen, August 26, 2006

Industry-wide resignation greeted the Harper-Bush softwood-lumber agreement but Rick Wangler, president of Steelworkers Local 1-363 in Campbell River, probably said it best when he asked a British Columbia newspaper: what’s the point of cutting a deal when Canada is winning the legal battles against American imposed tarrifs?

“I liken it to being in a poker game and having a royal flush but not betting on it,” he said.

Elliott J. Feldman, a prominent Washington lawyer who represents several Canadian industry players, including the Free Trade Lumber Council and Tembec Inc., goes further and describes Canada’s victories in the NAFTA panels and U.S. courts as a “legal rout”, with other victories likely onstream.

In the August edition of The American Lawyer, he says on April 27 the U.S. signed a settlement term sheet with Canada but only because it was on its knees. “It had lost the Byrd ruling in the Court of International Trade - losing its right to the $5 billion pot of duties collected since 2001 – and saw the Commerce Department enforce NAFTA’s ruling on the absence of subsidy... The U.S. had to sit down and talk.”

Never mind what this deal - signed so auspiciously in Geneva on July 1st as the World Trade Organisation’s Doha round of agriculture talks were crashing - does to Canada’s bona fides as a rules-based fair trader.

Never mind the implications for the NAFTA’s Chapter 19 dispute settlement mechanism. Never mind how President Bush and the notorious U.S. Lumber Coalition for Fair Lumber Imports couldn’t believe their luck when Canada agreed to let each keep almost half a billion dollars of illegally obtained duties.

Despite more charitable options, the Whitehouse share could go straight into the Republicans’ campaign war chest, Feldman says.

All of this suggests the unsavoury optics of a deal concerned more with mutual Conservative-Republican re-election prospects than anything to do with the mutual interests of chronically challenged, cross border softwood-lumber relations.

This deal is hardly typical of a prime minister famously driven to lead rather than consult but who still aspires to principle over pragmatism. Now it’s politics as usual but this government, unlike the previous government, didn’t have to be a marshmallow on this file. Having established its credentials in foreign policy, in trade panels, and in U.S. courts, it was in a strong position to strong-arm the Americans on softwood lumber.

Instead it did an end-run around and strong-armed a core constituency, some 300 companies, to sign onto a deal it didn’t fundamentally want.

Now the question is who is next and all indications are it’s the world’s most successful grain marketing agency and trade dispute survivor, the Canadian Wheat Board. Since taking office, Agriculture Minister and Minister of the Canadian Wheat Board Chuck Strahl has given officials all of two meetings, including one held yesterday, but removed it from the guest list when he called a meeting in Saskatoon in July to discuss its future.

A far reaching proposal drafted by representatives of its 85,000 farmers that would turn the wheat board into an independent, non-profit farmer co-operative too has been ignored.

Instead, a private member’s bill, C-300, is due for third reading this September. It could deal the first of many legislative blows to an entity whose legitimate purview is western farmers.

This is not to deny the wheat board needs shaking up or the softwood lumber industry isn’t happy with refunded duties it can invest or save for the next round of disputes. These, in any case, could arrive sooner rather than later. Elliott Feldman is nonetheless adamant the current softwood lumber deal kills Chapter 19 and with it, the NAFTA. “No Washington lawyer will recommend NAFTA arbitration,” he told me in a telephone conversation from Washington.

Feldman may be right in at least one respect.

The highly influential corporate, scholarly and policy elites who comprise the independent, tri-national task force on Building a North American Community have called for the creation of a new dispute settlement mechanism by 2010 to replace NAFTA’s seemingly unworkable Chapter 19.

For good or ill, the Harper/Bush softwood lumber deal, replete with early termination provisions, obliges with a wholly new mechanism. Is anybody paying attention as yet another end-run appears to be in progress, this time around all of us?

MARGRET KOPALA’s column on western perspectives appears every other week.

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