Canada Optimistic About Resolving Lumber Dispute With U.S.

Canadian Foreign Minister Chrystia Freeland voiced confidence Wednesday about the ability of Washington and Ottawa to strike a new deal on softwood lumber and put a quick end to the latest flare-up in the decades-old trade row.

"A negotiated deal is achievable and there is a deal to be had," Ms. Freeland told reporters in Canada during a conference call. "We have made progress in our conversations, but we are not there yet."

Her optimism builds on a statement released Tuesday night by the office of Canadian Prime Minister Justin Trudeau which summarized a phone call between the Canadian leader and President Donald Trump. In the phone call, according to a statement from Mr. Trudeau's office released late Tuesday, the prime minister and Mr. Trump agreed on the need for a separate, bilateral deal covering lumber trade, given the close integration of the two North American economies.

This week, the Commerce Department unveiled a 20% countervailing tariff on imports of Canadian softwood lumber, after a probe determined Canadian imports were harming U.S. lumber producers. The U.S. industry has long complained Canadian governments unfairly subsidize their domestic producers.

Ms. Freeland said Wednesday she spoke at length with U.S. Commerce Secretary Wilbur Ross earlier this week, adding conversations have often been "detailed and substantive" on lumber. During her talks, she relayed to Mr. Ross that the best outcome for both economies is a negotiated settlement as soon as possible. "Middle-class Americans who want to buy a house need Canadian lumber do that. And the U.S. industry does not produce enough lumber to meet U.S. needs," she said.

The National Association of Home Builders estimates higher lumber prices this year have added about $3,000 to the cost of construction for a typical single-family home. The new tariff threatens to push the cost of housing further upward, Ms. Freeland warned.

The duties on Canadian lumber were largely expected after a previous agreement expired and Mr. Trump's administration didn't resolve the dispute through negotiations.

"What we had tried to do was to clear the air and get this dispute out of the way before the big" talks regarding the North American Free Trade Agreement started, Mr. Ross said. "That was not possible to achieve."

The softwood tariff marked an escalation in rhetoric from the White House over Canada's unfair trade practices when it comes to lumber and dairy. Until recently, most of Mr. Trump's criticism over Nafta has focused on Mexico, which runs a large trade surplus with the U.S. In contrast, the U.S. trade deficit with Canada is relatively small, and economists at BMO Capital Markets note the U.S. runs a trade surplus with Canada if energy is excluded.

Mr. Trudeau told Mr. Trump he "refuted the baseless allegations" that underpinned the Commerce Department's decision to impose new tariffs, according to the summary of the phone call released by his office.

Further tariffs on Canadian lumber remain a possibility as the department continues another, separate investigation on allegations Canadian producers sold products into the U.S. below cost. A decision on that probe is due in June.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

April 26, 2017 10:25 ET (14:25 GMT)