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Globalization, NAFTA And Its Effect On Canada

The softwood lumber sector is one of Canada's primary exports to the United States accounting for $11 billion of our GDP. Over the past years anti-dumping duties were created in prevention of lay-offs and job losses in the United States. The Americans argued that since the majority of the Canadian forests were government owned lumber prices were subsidized, therefore selling below the market price while American private companies were suffering. The cost of Canadian softwood lumber was now around 32 percent higher than before after it a tariff was placed by Americans, making their lumber prices look more favourable. This tariff can mean devastating effects on some provinces such as British Columbia where 70% of Canada's softwood is exported to the United States and accounts for 9% of its economy. This dispute has caused nearly 18,000 job losses, and company losses of 1.5 billion. In 1995 the highest amount of net transfers for unemployment insurance was paid out the forestry industry. Canfor Corp a Canadian lumber company had to pay $107.6 million in taxes based on the imposed duties. NAFTA has stimulated this trade war between Canada and the United States since the idea of free trade meant losses in the U.S lumber industry so tariffs were imposed that went against the objective of the trade agreement. Later on an agreement was reached which gives Canada 31.5 percent of the U.S market; this is a decrease from the original 34 percent. This eventually would result in $1 Billion lost with exports per annum and numerous lay offs. If exports exceed standard amounts then duties would be charged. The softwood lumber dispute was one of the major trade disasters which emerged from the start of the free trade era where nations protected themselves from economic losses rather than working together towards the NAFTA objective. Similarly this case can contrast the export of petroleum one of Canada's non-renewable resources to the United States where no tariff was placed on it since the United States lacks in petroleum.


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