In the days of magical thinking

According to a report at World Trade Online from Jenny Leonard, IWP News, last Wednesday’s meeting in Toronto between U.S. Trade Representative Michael Froman & Canadian Minister of International Trade Chrystia Freeland “did not yield sufficient progress”. Some takeaways from the report:

  • Multiple sources expect the U.S. lumber coalition to file a petition on Oct. 13 – the first day after the deadline expires – but they also note that the preliminary determinations won’t be announced by the U.S. Commerce Department until February or March, which gives both sides more time to talk.
  • One source said it is “very common timing” to get a deal done before duties attach and noted the two sides could still “engage in negotiations parallel to a case.”
  • The talks with the Obama administration can last only another seven weeks – leading some to doubt whether there is enough time to discuss all the outstanding details of the deal before a new administration’s team is put in place.
  • So far there has been no meaningful engagement on those details – including the target number for U.S. market share, an exit strategy for Canadian provinces to get out of the deal if they can prove their lumber is not subsidized, and the exclusion of certain provinces that were not part of the old softwood lumber deal.
  • Canada wants the new deal to reflect its provinces’ different demands – an approach referred to as “optionality” that was central to the framework of the expired deal.
  • The U.S. is holding on to its demand for a quota-only approach, which it says would limit Canadian lumber in the U.S. with certainty.
  • According to multiple sources, Froman emphasized during the meeting that the Canadians are better off reaching an agreement with the Obama administration by the end of this year – and noted that because of the transition period in which a new USTR must be nominated and confirmed, it could be months before the U.S. can come back to the table to discuss lumber trade.
  • While both sides have not yet ruled out the possibility of a deal being reached before duties are applied, one Canadian source said “we are now in the days of magical thinking. There is too much ground to be covered,” the source said. “The two sides have been talking past each other for more than a year.”

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