U.S. appeals softwood lumber ruling to very WTO body it's accused of 'sabotaging'

Canadian softwood lumber is now ensnared in a logjam intentionally created by the United States at the World Trade Organization.

The U.S. today announced it will appeal a recent WTO decision in Canada's favour in the long-running lumber dispute. Trade-watchers call what the U.S. is doing appealing into the void — turning over the case to an institution that doesn't actually work.

And the U.S. knows the WTO's appeals body doesn't work because it intentionally broke the panel by blocking the appointment of judges. This has deprived the top court of world trade of the ability to issue rulings, which critics say amounts to sabotage. 

In a response to the U.S. announcement that it would appeal the softwood lumber decision, the Canadian government said it was surprised by the U.S.'s seemingly contradictory message that the WTO appeals body should be in charge of this case — and that it also is illegitimate.

"Canada is deeply concerned by the United States' actions which frustrate the proper functioning of the dispute settlement system," said a Canadian submission to the WTO.

"The United States' behaviour significantly reduces the security and predictability that we collectively value in international trade."

American administrations have for decades accused the appellate body, created in 1995, of overstepping its intended purpose, taking too long to consider cases, applying sweeping jurisprudence, and setting precedents like a domestic court system.

But the Trump administration has gone one step further and basically stalled it.

There are supposed to be seven judges on the panel, but their ranks have dwindled because the U.S. has blocked new appointments to protest the way the WTO does business. The body needs a minimum of three judges to function, but the terms of two of the last three judges ended in December 2019.

U.S. President Donald Trump and his top trade negotiator, Robert Lighthizer, are especially vociferous critics of the WTO. They argue the trade organization constrains America's ability to counter unfair trading practices by China and other countries.

Lighthizer has made clear he'd be perfectly fine with the WTO appeals body being gone forever, and favours a return to the pre-1995 system where disputes were dealt with on a case-by-case basis and through arbitration.

U.S. wants reforms at WTO 

It's just one of several changes he wants at the WTO.

Lighthizer has called for several sweeping reforms — reduced tariffs in developing countries; limits on trade deals between countries that don't share a border; a crackdown on Chinese state-funded capitalism; and less powerful dispute mechanisms.

He notes that for all the complaints about U.S. protectionism, American tariffs are among the lowest in the world and he wants a more even playing field.

Some of Lighthizer's domestic critics question whether he actually wants to fix anything or is simply trying to blow up the current system.

"He's sort of identified the problems," said Chad Bown, a former Obama White House trade official, and now a senior fellow at the Washington-based Peterson Institute, who has gotten into an exchange of essays with Lighthizer in Foreign Affairs magazine.

"All we have seen from the Trump administration is sabotaging parts of the WTO, and blowing things up, and not constructively fixing things," Bown said in an interview with CBC News.

"[It's] highly disruptive, really unclear as to what the end game would look like."

Appeal delays lumber dispute remedy

The cross-border trade dispute over lumber has raged between Canada and the U.S. for nearly 40 years. Canadian exports fill a critical role in the U.S., where demand for lumber significantly outstrips domestically available supply.

U.S. producers have long argued that Canada's system of provincially regulating stumpage fees, which are paid to the Crown in exchange for the right to harvest timber, unfairly subsidizes an industry that is privately owned and operated in the U.S., with pricing set by the competitive marketplace. 

As a result, the U.S. argues, imports of Canadian lumber should be subject to countervailing duties.

The Canadian government estimates that the U.S. has unfairly collected nearly $3 billion US in duties since the latest softwood dispute began in 2017. 

Today's appeal could delay a remedy for an undetermined period of time.