The WTO`s dispute resolution body said the U.S. Department of Commerce and the U.S. International Trade Commission erred in 2017 in imposing countervailing duties on Canadian conifer timber exports after concluding that Canada`s regulated forest industry was an unfair subsidy to Canadian producers. Like the aluminum sector, Canadian exports play a crucial role in the United States, where demand for wood is significantly higher than domestic supply. 15. When a party wishes to classify information to be used in arbitration as confidential, the court, in consultation with the parties, establishes procedures for the designation and protection of confidential information. Procedures provide, where appropriate, for the exchange of confidential information for the purposes of the arbitration process with consultants to representatives of the softwood industry or with representatives of the provincial or regional government. The second phase, Lumber II, began in 1986, when an American timber industry group, the U.S. Coalition for Fair Lumber Imports, launched a petition to the Department of Commerce.  The USITC again concluded that Canadian exports have unfairly influenced U.S. producers. This time, the DoC found Canada`s forest programs questionable and imposed a 15% interim obligation. Prior to the imposition of the subsidy, the United States and Canada approved a declaration of intent introducing a progressive tariff.
One of the conditions of the agreement was that Canada levy an export tax on timber going to the United States. The provinces concerned had the opportunity to reduce this tax when they took steps to offset their subsidies. British Columbia abolished the tax in 1987, while Quebec partially cancelled it in 1988.  In 1996, the United States and Canada entered into a five-year trade agreement, the Softwood Lumber Agreement, which Lumber III officially terminated. Under its terms, Canadian timber exports to the United States were limited to 14.7 billion board feet (34.7 million cubic metres) per year. However, when the agreement expired on 2 April 2001, the two countries failed to reach a replacement agreement.  The conifer industry is vital to the Canadian economy and employs thousands of people. The forestry industry has helped create direct jobs for about 232,700 people.  Indirectly, 289,000 people were recruited to work in other areas that depend on Canada`s forests. These include engineering, transportation and construction. Such an advantage of this industry can be taken into account in the GDP of the country, which added $21.2 billion in 2014.
 This represented about 1.3% of GDP by volume.  Canada has the largest trade surplus relative to forest products ($21.7 billion in 2015).  As the largest market, the United States is heavily dependent on Canadian timber.