Bloggers miss the point on softwood

Most people who have commented on recent US reaction to the NAFTA softwood panel seem to have misunderstood the basic principles of world trade. (If you are going to Brock's blog, read this comment as the most apparent misunderstanding of the system.)

I wish I had the time to go into detail about various reasons why it is wrong to think that the United States is cheating. However, I only have time for a short post. (And experience has shown that the audience of this blog is not really interested in my posting long essays about free trade.)

Anyway, any good lawyer would tell a client to breach a contract if it is in the clients interest to breach. There are obviously penalties to breaching, but sometimes the best option must still be breaching.

An FTA is not much different. The United States can ignore panel rulings all it wants. (I'm talking about WTO panels here.) There are consequences, but it can do so. EU (EC) has refused to comply to the WTO ruling on Beef hormons for oh.. about a 15000 years now.

Now, this case specifically:

First, the United States is NOT ignoring the panel ruling. It is simply stating the obvious that this panel ruling was in response to a appeal on a ruling that was made under an older scheme. Now we all know that the new shceme and the old scheme are not all that different, but this is a fine point. Japan (on Apples I believe) causes three seperate panels. (And those were WTO/GATT panels that took much much longer than NAFTA panels.)

Second, Jim Peterson is a freaking moron. I can just imagine Busch/Purgeous crowd wanting to pull their hair out when they read this:

"This is a binding decision that clearly eliminates the basis for the U.S. imposing duties on our softwood lumber. This is a key win for Canadians but let me be very frank with you, we are not out of the woods yet," Canadian Trade Minister Jim Peterson said.

"I'm not going to speculate on what the U.S. may or may not do, but we know in the past that they have been extremely litigious," Peterson said.

Memo to Jim Peterson: Stop being a jacakss and stop grand standing. This case should have gone away about 20 minutes after it started if you were willing to negotiate.

Third, the fact that this case has not gone away yet is because the US knows that Canada is not willing to make the sacrifices needed to make it go away. On the other hand, the US cannot lose this fight over stumpage fees. If it does, then what will it do when China, now a WTO member, starts giving away iron or cole away for free? Will the US just tell its manufacturing sector to move? It's kindda hard to move a smelting plant! And it's even harder to move the city of Pittsburgh!

I think Canada made a big mistake by going to the WTO with this once. The audience cost on this to the US is now huge.