Since the last lumber trade agreement in 2006, Québec’s forestry industry has lost thousands of jobs due to the rights and quotas imposed by the United States. This agreement ended in October 2015 and, since then, the barriers to exporting lumber were eliminated. However, this period ended in October 2016, meaning that companies now have to pay exporting charges that can rise up to 25%.

The forestry industry is Québec number 1 manufacturing sector with 60 000 direct jobs. It represents 11.7% of the province’s total exports. It is also one of the only sectors that is present throughout all of Québec’s regions: it supports the economy of 1 in 5 municipalities.

The ideal solution: A free-trade agreement

Québec is demanding to be excluded from potential Canadian wood import quotas and is supporting a free-trade agreement as Québec-based lumber companies don’t benefit from the same advantages as US businesses. This brewing lumber trade war is a major issue for Québec, which also revised its forestry regime in 2013 to stay competitive and adapt to the US system.

According to André Tremblay, President of the Conseil de l’industrie forestière du Québec, the current status “limits Canadian lumber exports to the US,” either by quotas or export charges (15% to 25%, which substantially limits the industry’s expansion. The Conseil de l’industrie forestière du Québec is therefore also hoping for a free-trade agreement.

An agreement has yet to be signed; however, negotiations did move forward after a meeting between Justin Trudeau and Barack Obama last June. It was purported that a framework could be established to exclude certain regions or companies—if properly justified. This would open the door for Québec’s forestry industry should the framework become a reality.

Potential risks

If all parties don’t reach an agreement, a legal battle in front of the OMC may occur. According to Luc Bouthillier, Professor at the Université Laval, Canada would have a good chance in winning because “the fee system in Québec is closer to free trade. It would be difficult for the US to denounce industry subsidies by provincial governments as disloyal.” However, such legal proceedings could take years before a resolution is found and would require that both the Canadian and Québec government come to the financial aid of companies in the forestry sector.

To date, no decision has been made and both parties are still under negotiations. Québec has actually appointed Raymond Chrétien, former Canadian ambassador to the US (1994 to 2000) as its main negotiator.

Sources

Normand, François. Bois d’œuvre : le contexte électoral aux États-Unis désavantage l’industrie canadienne. Les affaires. http://www.lesaffaires.com/secteurs-d-activite/ressources-naturelles/bois-d-oeuvre--le-contexte-electoral-aux-etats-unis-desavantage-l-industrie-canadienne/589563. September 3, 2016.

Bouvier-Auclair, Raphaël. Pas d’entente sur le bois d’œuvre, mais une percée pour le Québec. Radio Canada. http://ici.radio-canada.ca/nouvelles/politique/2016/06/30/005-bois-oeuvre-obama-trudeau-quebec-colombie-britannique-quota-libre-echange.shtml. June 30, 2016.

Noël, Christian. Les producteurs de bois d’œuvre du Québec réclament un coussin financier de Québec et d’Ottawa. Radio-Canada. http://ici.radio-canada.ca/nouvelles/economie/2016/06/27/003-bois-oeuvre-quebec-ontario-conflit-canada-etats-unis.shtml. June 27, 2016.

La Presse canadienne. Bois d’œuvre: Québec fait appel à Raymond Chrétien. Le Devoir. http://www.ledevoir.com/economie/actualites-economiques/482492/bois-d-oeuvre-quebec-choisit-raymond-chretien-comme-negociateur. October 18, 2016.

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