When U.S. trade disputes are in the news they usually center on Japan, Germany, France, China, Mexico or other neighbors south of the border - not our "best friend" and No. 1 trading partner to the north.
Well, that's about to change. A doozy of a trade dispute between the U.S. and Canada is brewing and if it's not resolved before April 1, America's lumber industry - critical to Georgia's and South Carolina's economy - could be devastated. The rift has already prompted U.S. Reps. Charlie Norwood and Saxby Chambliss, R-Ga., to urge President Bush to block Canadian timber imports.
First, a little history. Timber tension between the two nations began in the early 1980s when U.S. foresters suspected Canada was selling timber on the U.S. market at less than free market prices. In trade jargon this is called "dumping," and it's done when the government, not private firms, takes the financial hit for selling a product at unprofitable prices.
Free and open trade is supposed to be about private companies competing for profits against one another on an even playing field. Dumping amounts to a government subsidy that tilts the field unfairly to one side. The U.S. struck back by limiting Canada's timber exports.
This angered Canadians no end, but an investigation by the International Trade Commission ruled in 1992 that the U.S. action was justified.
Finally, Canada came to the table in 1996 and agreed to a limit on lumber sales in the U.S. if the U.S. agreed not to launch any new trade investigations against Canada for the next five years. The five-year pact ends April 1 and if a new agreement hasn't been reached Canada will flood the the U.S. with its timber.
Canadians are in no mood to negotiate. They say the North American Free Trade Agreement makes it unnecessary. They want free and open border NAFTA trading in timber just like in other products. That's a farce. The Canadian government (apparently) isn't helping other industries to sell their products at less than the cost of producing them.
The Bush administration needs to take a hard line - and quickly. If Canada won't extend the current pact beyond April 1 until a new agreement is negotiated, then the U.S. should block imports, as the congressmen urge, or impose countervailing duties on Canadian lumber - a tariff, if you will - to offset the government subsidy and force prices up to free market value. NAFTA can work only if it's fair to both sides.