Take softwood lumber, for instance. A century ago, Canadian and American lumber producers were haggling over softwood lumber tariffs. Today, Canadian and American lumber producers are haggling over softwood lumber tariffs. Sorry, anti-dumping duties. Make that “export taxes.”

Wait — didn’t we just settle the darned thing?

Indeed. Shortly after taking office, the Conservative government announced an end to “Lumber IV,” signalling an end to more than four years years of negotiation and litigation by an army of lawyers representing Canada, each of its softwood lumber exporting provinces — did’ya know even Saskatchewan exports lumber? — and industry.

On Sept. 12, the United States and Canada signed the formal ceasefire, a month later, the Government of Canada passed it. The lumber war, which had cost Canadian industry more than US$5.2- billion in duties, was over, and Canadian exporters would get back about 80% of the bucks they had paid to the U.S. government since 2002.

By Oct. 30, some of the cheques were in the mail. And the army of lawyers that had been collecting some US$10-million in legal fees annually from industry, the provinces and Ottawa suddenly had nothing to do.

Well, not quite.

“The international trade lawyers who have been so busy over the past four years dealing with the duty regime will continue to be busy as the details of the softwood lumber agreement get worked out,” says Larry Hughes, a partner with the Vancouver office of Lang Michener.

“Even though the deal is done, there are still a lot of disputes and details to work out.”

Forestry folks like litigating. In fact, the closer the United States and Canadian economies come — signing first the Free Trade Agreement, then the North American Free Trade Agreement, the more ferocious the lumber wars become.

The predecessors to the Lumber IV were all shorter: Lumber I (October, 1982-May, 1983), II (May, 1986-October, 1986), and III (September, 1991-August, 1994). They were also less prolific.

At its peak, the softwood lumber dispute had 27 separate litigation tracks before the binational panels mandated by Chapter 19 of the NAFTA, before the World Trade Organization (WTO), and before the U.S. Court of International Trade (CIT).

There was also the sideshow in which the U.S. lumber industry was proactively suing its own government to declare Chapter 19 [NAFTA’s dispute resolution chapter] unconstitutional. Not to be outdone, some Canadian producers launched claims against the U.S. government under NAFTA’s Chapter 11 [the investors’ rights and protections chapter].

“Certainly in the string of legal successes that Canada had, we achieved important clarifications of U.S. and international trading rules that will benefit not only the Canadian lumber industry and all Canadian traders,” says Keith Mitchell, managing partner of Farris, the Vancouver law firm that co-ordinated British Columbia’s interests in the lumber wars over the last 10 years.

Not all of the litigation has gone Canada’s way: The way the U.S. lumber lobby spins it, hardly any. But the “this WTO decision cancels out that NAFTA decision” debate is temporarily irrelevant, and Canadian forestry companies are about to get a collective injection of US$4.4-billion.

“There is going to be a capital infusion into the province,” says Mr. Mancell. (That’s lawyer talk for “woo hoo! Clients with cash!”)

So, what are they going to do with it?

The obvious answer should be buy, buy, buy. Mr. Mitchell concedes that boards and management of most forestry companies probably are analyzing acquisitions. But will that analysis turn into a buying spree?

“It’s a possibility, of course, but a key question is where are those acquisitions going to happen?” asks Mr. Mancell. “In terms of most of the interior players, if they try to expand further, they will face serious Competition Act problems.”

When forests came alive with a flurry of M&A activity in 2005, competition concerns — most leading to post-merger divestiture — were already a stumbling block.

“The big players in Canada are either quite weak or they will come up against the Competition Bureau,” agrees Mr. Hughes. “We’ve all come up against the competition bureau before. It is fair to say that the majors will be looking south. And even at non-North American sources.”

Going global, huh? Not a bad idea. Perhaps the most effective way of staving off Lumber V is to buy out the competition.

Washington-headquartered Weyerhaeuser fought the lumber war on Canada’s side, because its Canadian operations meant it, too, was getting clobbered with tariffs and duties [On Oct. 31, it got US$344- million of those back, or 82% of what it paid. Woo hoo!].

Barring massive cross-border mergers and integration, expect Lumber V … when?

The government is promoting the settlement as a long-term, seven- year [maybe even nine, there is a possibility of a two-year extension] solution. Those who know the industry are less sanguine.

“There can’t be a Lumber V for at least two years,” says Mr. Mitchell. “The current agreement stipulates that.”

Spend those billions while you can.

(Copyright National Post 2006)