Canada provided Can$867 million (US$642 million) in aid and loans Thursday to its beleaguered forestry industry following surprise US tariffs imposed in April.
The funds are to be made available over three years to help forestry companies weather the trade flap over softwood exports and diversify their markets, as well as help retrain affected workers.
"Our government strongly disagrees with the US Department of Commerce decision to impose an unfair and punitive duty," Foreign Affairs Minister Chrystia Freeland told a press conference.
"The accusations are baseless and unfounded. We will strongly oppose them and vigorously defend our industry," she said, while holding out hope for a negotiated settlement to the longstanding row.
Softwood trade has long been an irritant between the two nations and was expected to flare up again after a deal that limited Canada's share of the US market expired in 2015.
Still, US President Donald Trump's move in April to levy tariffs of up to 24 percent on Canadian softwood lumber appeared to have surprised Canada.
This is the fifth trade row in more than three decades between the two nations over softwood, which refers to lumber from trees such as pine, fir and spruce.
Independent trade panels have sided with Canada in all four of the previous cases, and Freeland said she was "confident" of another win.
But in the interim, Ottawa is concerned the tariffs will force job cuts at mills in a sector that employs more than 200,000 Canadians in more than 170 rural communities.
Over the years, Ottawa has pressed its forestry firms to diversify their markets and look for new overseas buyers.
But despite a recent tripling of softwood exports to China totaling Can$1 billion — making China the second-largest importer of Canadian softwood — the vast majority of Canada's softwood exports continue to go to the United States for its housing construction.
According to government figures, the forestry sector accounted for Can$22 billion of Canada's gross domestic product (GDP) last year, or 14 percent of its economy.
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