The resolution of an obscure trade dispute involving imports of Canadian lumber to the United States could result in a $480 million slush fund for the White House, according to a lawyer familiar with the case.
For years, the United States has been in contentious litigation with Canada over tariffs imposed on Canadian lumber imports. Canada maintained that tariffs imposed on lumber imports to the United States violated the rules of NAFTA and the WTO. Pending the resolution of the litigation, the Department of the Treasury held these tariffs in an account which now contains five billion dollars.
The United States lost virtually every major aspect of the litigation for the last five years, and as a result, a settlement seem elusive. Then, last April, the United States and Canada reached a surprise agreement. Here’s what we know about the deal from public sources:
— $4 billion dollars from the account will be returned to Canada. $1 billion will be returned to the United States. Of the $1 billion dollars that will remain in the United States, half is designated to the U.S. lumber industry.
— The remaining $500 million is to be split between “a joint initiative benefiting the North American lumber market” and “meritorious initiatives in the United States” such as “Katrina reconstruction.” (The New York Times reported that it is “not clear what will happen” with the money slated for this purpose.)
— The deal was struck after direct communication between President Bush and Prime Minister Stephen Harper, who are political allies and personal friends.
ThinkProgress spoke with a lawyer familiar with the case, who said the following about the agreement:
— The United States is requesting $480 million for “meritorious initiatives” and just $20 million of the joint initiative benefiting the North American Lumber market.
— The agreement contains a complicated escrow system that may allow the $480 million to be funneled from the Treasury Department to the White House.
— It is the position of U.S. negotiators that Congress does not need to have any involvement in the deal.
ThinkProgress contacted the U.S. Office of the Trade Representative. A spokesman said that he didn’t know if the White House would be involved in dispersing the funds or if Congress would be consulted, and was doubtful he would “be able to discern” this information in the future.
The fact that hundreds of millions of dollars may be headed to the White House with no oversight raises the possibility of abuse — especially five months before a federal election. This is a significant amount of money and the administration should explain exactly how it will be spent and who will be overseeing the process.