February 18, 1998 No. 31

$87 MILLION IN SOFTWOOD FEES TO BE DISTRIBUTED TO FOUR PROVINCES

International Trade Minister Sergio Marchi announced that the Federal government will distribute $87 million in export fees collected under the softwood lumber agreement to the provinces of Ontario, Quebec, British Columbia, and Alberta. Mr. Marchi made this announcement to provincial and industry members during the National Softwood Lumber Advisory Committee meeting on

February 17.

"Distributing this money honours the commitment we made to the provinces in 1996 when we signed the softwood lumber agreement," said Minister Marchi.

Under the Canada-U.S. Agreement on Softwood Lumber, export fees are levied on Canadian companies exporting softwood lumber above their fee-free allocations. The fees distributed to the four provinces today represent fees collected during the first year of the agreement. Approximately $9.8 million dollars will be returned to Ontario; $35.5 million to Quebec; $36.3 million to British Columbia; and $5.4 million to Alberta.

"We continue to work closely with the provinces and industry associations on the ongoing implementation of the softwood lumber agreement. This is an excellent example of the constructive

co-operation that exists between the provinces and the federal government," said the Minister.

The Canada-U.S. Agreement on Softwood Lumber provides Canadian companies with secure access to the U.S. market at a minimal cost. The value of softwood lumber exports to the U.S. covered under the agreement have increased from $7 billion in 1995 to 8.6 billion in 1996, to 9.4 billion between January and November 1997.

- 30 -

A Backgrounder is attached.

For further information, media representatives may contact:

Leslie Swartman

Office of the Minister for International Trade

(613) 992-7332

Media Relations Office

Department of Foreign Affairs and International Trade

(613) 995-1874

This document is also available on the Department's Internet site: http://www.dfait-maeci.gc.ca

Backgrounder

Softwood Lumber Agreement

Softwood lumber has been an area of trade friction between Canada and the United States for over 15 years. After lengthy negotiations, Canada and the United States finalized the Agreement on Softwood Lumber in April 1996.

Benefits

The Agreement provides Canadian exporters with a guarantee against U.S. trade actions for five years. It includes an unprecedented U.S. government commitment to dismiss any new petitions for trade action.

The Agreement has enabled Canada's lumber industry to avoid substantial tariffs, which the U.S. government had been threatening to impose on Canadian exports of softwood lumber. Those tariffs would have been paid directly to the U.S. government rather than being retained in Canada.

Export Fees

In return for the U.S. guarantee against trade actions, Canada agreed that softwood lumber exports to the United States originating from Ontario, Quebec, British Columbia, and Alberta would be charged an export fee when these lumber shipments exceeded specific levels. The agreement states that exports exceeding 14.7 billion board feet a year will be subject to a

US$50 per thousand board feet border fee for the first 650 million board feet; and that a US$100 per thousand board feet would be charged for quantities greater than 650 million board feet.

In 1996-1997, export fees applied to softwood lumber products accounted for just over 1 billion board feet, or 6.3 percent of the total 15.8 billion board feet exported to the U.S. under the agreement.

The revenue collected by the Government of Canada through this export fee is then contributed to the provincial governments of the provinces from which the fees were collected after adjustments for certain expenses.

Lumber originating from the Maritime provinces, Newfoundland, Manitoba, Saskatchewan, and the Territories are exempt from the Agreement. A separate Agreement was reached between Canada and the United States on shipments from the Maritime provinces and Newfoundland, which preserves their traditional exemption from U.S. trade cases.

Export Fees during the First Year

Initial figures for the first year of the Agreement

(April 1, 1996 to March 31, 1997) indicate that $87 million in collected fees will be distributed to the provinces approximately as follows: $9.8 million to Ontario; $35.5 million to Quebec; $36.3 million to B.C.; and $5.4 million to Alberta.

Before the fees can be distributed, the federal government and provinces must sign contribution agreements. These fees cannot be transferred by the provinces to individuals or to firms in the softwood lumber industry.