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IBUS 430

Group Number 2 Mack, Dione, Justin, Kawah, Huy

[INTERNATIONAL ISSUES WITH NORTH AMERICA]
A not all inclusive research paper covering North American Trade Disputes, Trade Policies, Trade Regulations, Trade Trends, and Import/Export management, marketing, and finance issues.

Both sides agreed to return to the previous regime of “managed trade. Canada places restrictive regulations on lumber companies with regard to the use of timberland and the sharing of infrastructure costs. Canadian share of the U. on the contrary. the fees do not provide competitive advantage to Canadian producers. Even the smallest cost per unit cost differential advantage by Canadian producers results in a substantial cost advantage over U.” In part.S. Third.Trade Disputes: Trade dispute between USA and Canada Summary: As it stands. Beginning in the 1840s. Although resolutions of limited durations had been sought out.S. uses an auction in a market-based system of bidding. stumpage fees in Canada are adjusted regularly to reflect any change in market conditions. and meets the test of “adequate remuneration” set out in U. This article analyzes the long ongoing dispute between the countries of USA and Canada involving the softwood lumber industry. auction system. currency of $7.S. Throughout the many years this dispute had been reoccurring where both sides seem to disagree on pricing strategies. is that lumber produced in the United States public timberland. which are charges Canadian lumber producers have to pay to provincial governments for the right to lumber production. both CVD’s and ADD’s. The following reflects on the main arguments from both the U.S. and return $4 billion of the $5 billion already collected in . countervailing laws. which are 95 percent owned by the provincial government. Accordingly. Canada argues the difference both countries forest softwood production and marketing systems differ which invalidates the “benchmark” use for a free-market system.S. With the WTO’s issue on Canadian stumpage fees. Lastly. trade barriers. thereafter the adverse effects to which each country endures. This price mechanism used by Canada goes against market conditions therefore the stumpage fees decided by provincial governments give a favorable advantage to pricing in Canadian lumber. locks up prices for many years with no room for changes to accommodate market fluctuations. Canada: The following points can summarize arguments presented by the Canadian side. softwood lumber is one of Canada’s largest exports to the United States. Latest Agreement: In April 2006. producers.S. As such. As a reference to statistics.S. lumber producers base their arguments against Canada on five main issues which begin with the determination of the stumpage fees. it is not a “price. this dispute had arisen in the U. Second. Canadian Prime Minister. Canada’s provinces shipped a monumental 21. United States: The U. reached an agreement with U. President George Bush Jr. Canada limits timber auctions. The U.5 board feet of lumber valued at U.S. using price-mechanism analysis is not deemed applicable. over imported Canadian wood. In reference to stumpage fees.4 billion dollars.S. primarily in the form of U. to suspend dispute for seven years. economic impacts. relatively 5 percent of total timberland. the United States would drop tariffs.S. regulation. the United States and Canada are one another’s largest trading partner. market for softwood has been rising and currently accounts for a considerable 34 percent. Lastly. and the impact of unintended consequences. Fourth. countervailing duty (CVD) and anti-dumping (ADD) tariffs resulted to a monthly $100 million a month imposition. In comparison. Stephen Harper. Canada will not allow a non-Canadian company to acquire Canadian logs harvest in Canadian public timberlands thus does not allow non-Canadian companies to export Canadian logs. and Canada.” It resembles a “tax” imposed by the government on the “tenure holder” in return for the right to harvest government-owned natural resources of timberland. in 2005 alone. Currently. refers to land ownership in Canada.

Canada agreed to impose an export tax and limit its shipments of lumber if prices in the United States were to fall below their current levels.S.S. Canada retaliated with considering placing duties on shipments such as energy products like electricity. the implementation of tariffs must be used. Analysis: After reading the article. with an ongoing threat of new suppliers of lumber producing countries such as Scandinavia. Considering that the United States continues to contract with Canada for such an overwhelming portion of their lumber market share. Disputes over the new agreement would then be submitted to a panel of non-North American commercial arbitrators. and Chile. Reports show that since the tariffs were imposed in 2002. I agree with the critics from this article who doubt a lasting resolution on the basis of three factors. the price of building materials has been rising at double-digit rates. Lastly.S. Although softwood makes up for less than 5 percent of total trade between the United States and Canada. government eliminate the tariffs completely. The three main obstacles include a disregard for agreement. Lastly.000-$7.000 to the cost of building an average sized home. government decided to defy NAFTA’s panel ruling on August 2005. I believe that the countries are leading towards managing their disagreement. both countries will continue to dispute. and a pattern of managed trade interim solutions. Most importantly. The announcement came one day before Brazil was to begin imposing up to $830 million in sanctions with authorization . Also a possible solution to help domestic producers would give tax credits and encourage domestic companies to purchase U. and Brazil Reach Agreement on Cotton Dispute Summary: The United States and Brazil have reached an agreement aimed at settling a long-standing trade dispute over American subsidies to cotton growers.S. U. Additionally.000 moderateincome Americans ineligible for home ownership mortgages.S.S. In 2013. half of which would be disbursed to members of the Coalition of Fair Lumber Imports who initiated litigations against Canada. land-ownership structure versus strategy of acquisition. New Zealand. Disruption of the U. Canada agreed to cap its share of US market at 34 percent. I believe Canada will be forced to work with the U. New Zealand. building industry and home owners would be negatively affected. I think it would be fair for the United States to implement subsidies for domestic producers in the lumber industry.S. I feel that the U. After the U. Inflation of material costs have resulted in tariffs and limited supplies.tariffs. Threats from suppliers in other countries including Scandinavia. quadruple the rate of inflation. Since most U. have gained a small share of the growing market. The National Association of Home Builders (NAHB) went on record demanding that the U. Also.S. when negotiations resume it is imperative for both parties to continue to resolve the lumber issue and minimize any collateral damage. the trade relationship both sustain to gain from one another has felt the negative impacts from this dispute. and Chile. lumber industry will continue to suffer financially from the outsourcing. in order to maintain its highest purchaser. the U. the largest bilateral trade relationship in the world estimates at a astronomical $1 billion a day between the two.S. goods such lumber.S. which ships 70 percent of its lumber production. These increases could add $5. If history repeats itself and negotiations are based on interestbased principles rather than collaborative solutions. The remaining one billion would be kept by the U. In order. Impact of the Dispute: The U. would dismiss any petition for CVD’s and ADD’s on Canadian softwood exports. and natural gas to the USA.S. and have made 300. market can be catastrophic for Canada’s softwood industry. oil.. companies already prefer Canadian lumber for its higher quality. to control the balance in both domestic goods and exported goods.

Within the past few years negotiations have been largely focused on establishing a free-trade zone among key members called the Trans-Pacific Partnership (TPP). The Brazilian sanctions added up to $591 million in higher tariffs on a wide array of goods. medical equipment. This year the members of the forum agreed to cut duties on technologies that promote economic growth while maintaining the integrity of the environment. 2012). including the North American countries of Canada. Canada and Mexico. APEC also targeted technologies created for environmental monitoring for reduced duty (REUTERS. With the increase awareness of the importance of environmental research. TPP will be the largest free-trade pact since NAFTA was finalized in 1994 (REUTERS. the United States agreed to evaluate whether the Brazil commodity of fresh beef could be imported from Brazil while preventing the introduction of foot-and-mouth disease. a state in Southern Brazil. windmills and bio mass technology. The WTO had ruled that American subsidies to cotton growers had violated global trade rules. cotton imports had a competitive advantage in the country. The U. This represents the value of the retaliation the WTO had authorized for American payments to cotton producers under a marketing loan program and countercyclical loan program. If the alliance is confirmed. pharmaceuticals. textiles and wheat. The 54 identified technologies included power generating equipment from renewable energy sources such as solar technology.S.S. the APEC forum seeks to promote the trade of Green Technology among its member nations. would also need to set up a technical assistance fund of $147. which began in 2004. Analysis: Avoiding the immediate harmful economic effects from any trade retaliation is best for both countries.from the World Trade Organization. Currently 13 APEC members are included in the TPP negotiations. Besides working to establish the TPP. including the United States. including autos.3 million a year. The WTO’s ruling was fair in its proceedings and further serves as a standard for appropriate trade guidelines worldwide. Also included are technologies aimed at treating water waste and repurposing recyclables. cotton industry may be impacted with the loss of subsidies whereas the Brazilian will continue to improve with funds from the resolution. Lastly. Broader issues in contention would be deferred until Congress takes up the next farm bill. which put domestic production at a disadvantage.S. Mexico and the United States. The U. The goals of the TPP are to further increase trade volume among TPP member nations by decreasing trade barriers. . 2012). I agree with the resolution because of the violation of trade agreements the United States broke. are expected to be majority completed by 2013. Trade Trends: Decrease in Trade Barriers and Heightened Green Trade Initiatives The 21 member Asia-Pacific Economic Cooperation Forum (APEC) has consistently sought to promote free trade and economic cooperation throughout the Asia-Pacific region. The U. Impact of Dispute: Under a preliminary deal. as free of the disease. The plan moves to recognize Santa Catarina. electronics. the reduced duty goes into effect in 2015. Brazil would hold off on retaliation in exchange for American concessions includes the modification of an export loan program as well as a temporary assistance fund for the Brazilian cotton industry. Specifically the group identified 54 green technologies that will carry a duty of less than 5% when traded among APEC members. The TPP negotiations.

S. The formation of the Trans-Pacific Partnership (TPP) will further open global markets and encourage trade among participating members. Because of these restrictions trade between Canada and the U.S. Canada’s trend towards independence from the U. At the peak of their reliance.S. Several factors have directly contributed to the decline in Canadian exports to the U. First. and Canada will remain significant and stable trade partners.S. Also. purchases has developed in the last decade between Canada and China.S. the U. Canada has slowly been moving away from their dependence on the U. heavy competition for U. Due in part to the overall impact of NAFTA.S.S. the decision to reduce tariffs on green technology carries with it fears from many U. exports. Australia and Chile. market (Derek Burleton. the impact of the U. Also. dollar has made Canadian goods less competitive in the U. the appreciation of the Canadian dollar against the U. and Mexico. 2012). As a result of their effort. capitalizing on opportunity.S.The unanimous decision to reduce duty fees on the trade of green technologies addresses two important goals of the APEC forum: promoting the growth of the green technology sector and liberalizing trade between member nations. it is projected that the U. However. job growth in the future. recession has shown a decrease in the United States’ demand for foreign goods. Vietnam. this agreement may negatively impact other non-participating countries since they will not likely be able to compete with the projected free-trade pact. market. will account for only two thirds of Canada's total exports (Derek Burleton. purchased 85% percent of Canada’s total exports. Within the next decade. the U. since the global economic crisis. The overall impact of APEC’s focus should prove to be positive for the global economy as well as the green sector. which includes the U. such as China.S. In 2003. Canada Moving Away from Dependence on U.S. This partnership is an alternative trade alliance group involving nations along the Pacific Rim. 2012). Furthermore.S.S. in 2002. Canada has broadened its horizons to establish trade partnerships with a greater variety of countries including Europe and China and as a result have shifted a great deal of their trade focus away from the U. Once the negotiations are finalized. Another factor has included tightened border restriction between the two bordering countries as a result of the 9/11 terrorist attacks. China beat out Canada to become the top supplier of U. will increase the number of Canadian exports significantly and help bolster the guarded Canadian economy.S. imports market. is set to continue.S.S. and most significantly. In addition to incentive. First. However. Relationships outside of the NAFTA alliance. corporations will have a greater incentive to produce and market green technology. however. Canada’s shifted focus will likely benefit the country greatly. Canada stands to increase trade relations with Countries like China. competition between member nations will drastically increase and low-cost producing countries. Market For years Canada has relied heavily upon its trade relationship with the United States. nations that the deal will negatively impact U. will be able to sell their products at a lower price and gain an inherent advantage to competing countries with higher production costs.S.S. . However. Lastly. has become more time consuming and costly. increased global competition as a result of decreased duties should cause more rapid technological advancements amongst participating nations. Canada has recently joined in the negotiations of the projected Trans-Pacific partnership.

Inc can use it in marketing its rice.S. this means a greater cushion from unforeseen foreign disasters. economic trends and thus their markets should become more independently stabilized. Importers who obtain its Indian’s Basmati rice have to face a serious issue of how to promote its commodity. in which it gives a severe disadvantage toward other importers and exporters of this industry to promote Basmati rice within the U. are basic needs that regardless of the competitive market it must be beneficial for the society and competitors to satisfy the demand. Canada will have to become more price competitive in order to compete within a larger market. must continue to focus on increasing their own GDP rather than remaining a primary source of income for other countries. and thus disrupt the competition on the demand of this product. This kind of . such as the US. with the TRIPS will disrupt the “harmony” and “healthy” competition within any marketplace. such as rice.S market. So the term “ Basmati” is not allowed to use in marketing its rice. by the U. in which it defines the high quality of this rice-type.As an outcome of Canada’s increase independence from the United States. product differentiation. like Indian exporter. because commodities. the diversification of the Canadian market should carry little impact since the U. creating restriction in its marketing on this product. Crespi (2011) This academic journal talks about a controversy over patent rights on three new strains of Basmati rice to RiceTec. long grain rice called Basmati rice is hard to grow for commercial purposes.S. such as those witnessed on 9/11. On the flip side. and in 1996 this rice company was granted with a patent on basis of 20 claims made of “cross-bred” rice lines and grain developed that eventually harm different foreign exporter. Marketing. Plus.S.S patent and trademark Office. such as India and Pakistan. A high quality. I personally disagree with the granting of patenting rights on this kind of commodity. since this company has claims some entitled of the term for protection of its own product. The controversy of the TRIPS agreement makes it favorable for developed countries. For the producers of Canada’s GDP. but only from the RiceTec. Inc. (RiceTec) is a Texas development company that produces and exports a Basmati-type rice called “Texmati”. have been affected in their exports and productions by this patenting right. to determine dominance or control on the industry within its own domestic market. As far as the United States is concerned. Moving into the future the U. has already diversified its own market. Import/Export Management. Inc. without using the term “ Basmati”. therefore RiceTec decided to obtain benefit from the Trade Related Intellectual Property Rights Agreement (TRIPS) to have a patent titled of “Basmati rice lines and grains”. the Canadian economy will be less tied to U. So the Basmati rice industry in other countries. Besides. TRIPS as it is now based may provide little help to developing countries trying to protect their traditional goods and practices. Financial Issues: Geographical Indications and The Trade Related Intellectual Property Rights Agreement (TRIPS): A Case Study of Basmati Rice Exports – Kranti Mulik and M. RiceTec.

a closely related industry. The U.S market. but competitors will have to promote this product line as with other differentiations. it does export autos to other developing countries. has been increasing in demand overall. law that allowed the Commerce Department to impose CVD (countervailing duties) on exports from non-market economies retroactively. Besides. The opportunities of this patent right may go only with RiceTec that can expand a whole product line with the Basmati rice-type. therefore the term should be used equally for other competitors. those industries who have not used this intellectual property right to protect its product and market may consider using it now.T. 2012). claims that over the course of two years China has provided approximately 1 Billion Dollars in parts and fully complete automobiles. The United States recently took action in the WTO against China policies in the automotive sector claiming that China unfairly subsidized exports of fully complete autos and automotive parts. The future of Basmati rice from other exporters rather than RiceTec. and the timing is coincidental” (Inside US Trade. which violates the W. an unfair subsidy would give Chinese automobiles an unfair advantage in the developing country against U. move.S. US Automotive Sector: Import/Export analysis The automotive sector has recently been the topic of choice between the United States and China. The same day that the U.S. Although China does not export fully complete automobiles to the United States.S. Therefore.S. The impact of granting the property rights of the Basmati rice to RiceTec will make importers with a disadvantage of losing its distinct image in certain segmented markets. consultation over a U. to participate in a formal W. In light of this accusation Chinese officials have “denied in general that they subsidize exports” (Keith Bradsher. may rely largely on how effectively RiceTec performs.O. Rolled .S. Importers have to find a way to market its rice and preserve the distinct image of Basmati rice without able to use the term “Basmati”. This kind of law creates an uncertain legal environment for Chinese exporters. importers must seek different methods of market its product to reach the adequate market segmentation for its product. Officials in Beijing say the “decision was made independent of the U. The threats may go to the rest of agriculture industries that cannot use any terms of other producers producing similar products from exploiting the reputation built. A. Aluminum. perhaps to generate a competitive advantage. especially within the agriculture industry. The meaning of the TRIPS agreement may be considered as a risk for those importers who seek different products from around the world to compete in the U. 2012). Aluminum is one of the United States strongest exports and according to industry leaders is the main factor that helped “the domestic industry weather the global storms that have slowed European and Chinese markets” (staff. the Chinese have asked the U. Inc. 2012) The automotive industry has not been the only sector in the news. Hence.’s transparency obligations. whereas domestic companies like RiceTec can make some allegations to protect its market and industry. The Basmati rice is known as high quality rice.S.product is well known as generic product since it has a long history of the usage if the term “Basmati” rice.T.O. they may promote its product with high quality and long grain rice that is characterized. Projected growth estimates put that aluminum exports will increase by a drastic 57%. vehicles. Most of that growth has been attributed directly to China’s growing industry. took this action.

This in turn will allow China. a clear advantage in the automotive industry. This correlation is not merely a coincidence and I believe that we will indeed see a continued increase in exports to China of rolled aluminum as they increase their automotive production. automotive companies’ exports in developing countries.S.aluminum is one of the chief of these exports and has multiple uses including use in the construction of automobiles. A. This is something the United States obviously has a concern about.O. economy. This will happen because even though aluminum is increasing in demand the price for aluminum has stayed relatively low (staff. 2012) A low per unit price will keep overall automotive construction costs low. may just be a stopgap measure and the real problem may be in trying to grow our raw material exports while keeping our produced goods at an export amount level and a price level that is beneficial to the U. however the real question is are they realizing that appealing to the W. if it is indeed subsidizing its automotive exports.S.T. Couple a low price of aluminum with additional funding from a Chinese government and the cost of production could reach a minimum that would push out and endanger U. .

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