Trudeau under fire after U.S. raises duty rates on Canadian softwood producers

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Prime Minister Justin Trudeau’s government was criticized Thursday for its handling of Canadian-American relations in the wake of an announcement by the United States that it would double the rate of punitive duties on most softwood imports from Canada.

The hike in financial penalties on Canadian softwood is the latest in a series of American measures, including a campaign by Michigan to shut down Enbridge’s Line 5 pipeline and electric-vehicle subsidies that would shift North American production to the U.S., that have jeopardized Canada’s economic interests, opposition MPs charged in the House of Commons.

Canada also halted the export of Prince Edward Island potatoes to the U.S. on Nov. 2 after being warned they would be blocked over a fungus despite no evidence the parasite has showed up in the market 20 years after it was discovered.

U.S. doubling softwood duty rates against most Canadian producers

On Wednesday, the U.S. Department of Commerce announced a new duty rate of 17.9 per cent for most Canadian softwood producers, down slightly from the proposed 18.32 per cent that it had considered imposing after a preliminary assessment in May. But most Canadian producers are currently paying a duty rate of 8.99 per cent for shipments south of the border. New tariff rates are expected to take effect on Dec. 1.

The U.S. revealed the pending doubling of the duty rates just six days after Mr. Trudeau met with U.S. President Joe Biden at the White House.

“The Prime Minister committed to a renewed relationship with the Biden administration. Instead, we got electric vehicle tax credits that threaten our auto jobs, stringent buy-American policies, measures targeting our dairy farmers, actions against pipelines that have contributed to skyrocketing energy prices and now a doubling of softwood lumber tariffs,” Conservative foreign affairs critic Michael Chong said Thursday in Question Period.

“It is clear the Prime Minister does not have a close working relationship with the President. What is the government going to do about this?”

Bloc Québécois natural resources critic Mario Simard said Ottawa can no longer blame poor relations with Washington on former U.S. president Donald Trump.

“What is happening in the United States is very disturbing. Ottawa was supposed to be campaigning to end softwood lumber tariffs; Washington responds by doubling them. Ottawa is supposed to be campaigning for exemptions from protectionism for electric vehicles; Washington responds by adding a new layer of protectionism,” Mr. Simard said.

“We used to say it was Trump’s fault. The problem is, today we have Biden. Whose fault is it? I wonder if the problem is not the Liberal government’s.”

Deputy Prime Minister Chrystia Freeland said Mr. Trudeau gets along well with Mr. Biden.

“The Prime Minister has a very strong, very effective working relationship with the President. I was there. I saw it in action. I saw their extensive tête-à-tête where important issues were raised,” she said during Question Period.

Ms. Freeland said the Trudeau government would keep defending Canada’s interests and warn Washington it is prepared to retaliate. “We will do precisely what we have done successfully with two previous American administrations: We state our case clearly and rationally.”

The U.S. lumber industry has cast a wide net in seeking to punish Canadian softwood producers, succeeding in persuading the Commerce Department to impose duties on companies big and small.

The U.S. Lumber Coalition’s main targets, such as Resolute Forest Products Inc. and Canfor Corp., are high-profile producers based in Canada, but much-smaller GreenFirst Forest Products Inc. has been singled out and forced to pay higher duties on lumber shipments into the U.S.

Montreal-based Resolute and Vancouver-based Canfor are notable outliers that will need to pay higher tariffs than most other producers. Resolute’s new tariff will be 29.66 per cent, up from the current 20.25 per cent, while Canfor will see its duties soar to 19.54 per cent, up from the current 4.62 per cent.

GreenFirst has been paying a tariff of 20.23 per cent, comprising 14.19 per cent in countervailing duties and 6.04 in anti-dumping duties.

GreenFirst’s chief executive officer is Rick Doman, son of legendary B.C. lumber baron Herb Doman. The company’s chairman is Paul Rivett, who controls NordStar Capital LP with businessman Jordan Bitove.

The countervailing tariff levied by the Commerce Department is targeted at what the Americans deem to be unfair subsidies in Canada, while the anti-dumping duty is designed to penalize Canadian producers for allegedly selling softwood at below-market value.

Last week, the Commerce Department dismissed efforts by GreenFirst to obtain a “changed circumstances review” of countervailing duties. A decision on anti-dumping duties is pending. GreenFirst said it will have comment in the future for The Globe and Mail.

GreenFirst’s combined duty rate is slated to decline slightly soon to 17.9 per cent, but the company will be continuing to seek trade remedies to overturn the 20.23 per cent.

GreenFirst shares reached a 52-week high of $11.36 in April on the TSX Venture Exchange. On Thursday, GreenFirst dropped 4 cents to close at $1.74 a share, after issuing its third-quarter results late on Wednesday.

The company, which is focused on sawmills in Ontario and Quebec, lost $14.3-million for the three months ended Sept. 30, compared with a $641,000 loss for the same period in 2020. GreenFirst is registered corporately in Vancouver and lists its head office as Toronto.

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