Peace in Our Time (Softwood Lumber)

Today's NYT reports a settlement of the U.S.-Canada lumber dispute.  To say that this dispute has generated a lot of litigation is an understatement.   And I suppose that the fact that the parties were willing to pay for all this litigation suggests that it had an effect on the outcome, at least at the margins.  There are at least two interesting features of the settlement. 

First, the U.S. will refund $4 billion of the $5 billion wrongfully collected.  Half of the remaining billion goes to the U.S. softwood lumber industry.  That should just about cover the litigation costs . . . .

Second, if Canadian export prices fall below a "threshold determined through a complex formula, Canadian provinces will have to impose export controls, export taxes or a combination of the two. Unlike the tariffs, those taxes will be retained by the Canadian provinces."  As I understand it, the goal is to limit Canadian producers to about one-third of the U.S. market, which is what they presently have. 

So, a payoff to the U.S. industry (presumably under the grandfather provisions of Byrd Amendment repeal), and a move to managed trade.  I guess you could say that hard cases make bad economics.