The timber industry.

What is perhaps the most contentious trade dispute in modem history has been ongoing between the United States and Canada since the early 1980s over the dumping of government-subsidized Canadian timber into the U.S. market. The matter was already a crisis before NAFTA, but turned into a scandal that uniquely highlighted the trade agreement's destruction of national sovereignty after NAFTA took effect in 1994.

Beginning as early as 1982, U.S. timber producers charged that Canadian lumber was trading at artificially low prices in the U.S. market because Canadian timber is mostly owned by provincial governments that set stumpage prices at artificially low levels resulting, essentially, in a subsidy to the Canadian timber industry. To offset the subsidy, the U.S. assessed tariffs against Canadian lumber.

In 1991 a review of U.S. tariffs was conducted by a panel convened under the authority of the Canada-U.S. Free Trade Agreement (the precursor to NAFTA). That panel found against the United States, as would NAFTA courts convened under Chapter 19 of the later agreement. The Commerce Department finally settled on a tariff of 10.8 percent in 2005. But in March of 2006, the NAFTA panel again found in Canada's favor, stating that Canadian subsidies were too small to be of any consequence, even though, according to the Coalition for Fair Lumber Imports, "Canada's lumber subsidies are destroying the U.S. lumber industry, threatening its workers with mounting unemployment, and denying many tree farmers a market for their timber crops."

The NAFTA rulings forced the United States to agree to a new Softwood Lumber Agreement (SLA) with Canada that will result in a massive refund totaling $4.3 billion for duties collected on lumber imports from Canada. In exchange, Canadian lumber exporters will pay an "export charge" collected by Canada on exports to the United States whenever the price of softwood lumber in the United States falls below certain specified amounts per 1,000 board feet.

Despite the agreement, NAFTA is probably not finished wreaking havoc on U.S. timber producers. Critics charge that some Canadian provinces are not respecting the terms of the SLA. According to a March 5 Reuters report, "on Capitol Hill, Senators pressed USTR [U.S. Trade Representative] head Susan Schwab on the deal in a hearing last month. Last week, Sen. Larry Craig, an Idaho Republican, asked Schwab to begin steps for consultations. 'I am very concerned that this agreement is about to come apart at the seams,' Craig said," according to the report. It will come apart even faster if NAFTA is transformed into a North American Union.