Canadian Victory in Softwood Lumber Trade Arbitration

In the most recent and significant claim brought under the 2006 US-Canada Softwood Lumber Agreement, British Columbia described the decision by an international tribunal rejecting the United States’ request for $500 million in additional export taxes against Compass Lexecon’s client as a “total victory.” Under the 2006 Softwood Lumber Agreement, Canada, as part of a temporary resolution to a nearly 30-year trade dispute, agreed to restrictions on provincial timber management and pricing policies. The U.S. claimed that British Columbia misgraded its timber, while B.C. contended that the observed outcomes were a result of the unprecedented, global-warming-induced mountain pine beetle infestation. Joseph Kalt, as Canada’s lead economic expert, demonstrated the consistency of the observed market outcomes with the spread of the beetle attack and disproved the U.S. claims that actions of the B.C. Ministry of Forests were responsible for the observed changes. Professor Kalt was supported by a Compass Lexecon team led by David Reishus, with Andrew Lemon, Chris Cavanaugh, and Cathy Barron playing significant roles in developing the analyses and reports. Hughes Hubbard Reed, led by John Townsend and Joanne Osendarp, conducted the arbitration on behalf of the Canadian government, in consultation with numerous contributors within the Canadian and B.C. governments, the affected industries, and their outside counsels.