Up in Smoke

by James Menzies

VANCOUVER, B.C. – A softwood lumber deal with the U.S., which some industry reps said would return Canada’s lumber industry to profitability overnight, was quashed just weeks after being hammered out in mid-December. The proposed five-year agreement would remove the punishing duties on Canadian lumber, however it also capped Canada’s exports to the U.S. at 31.5 per cent of the U.S. market. Canada’s current share is 34 per cent. Stiff penalties would be applied to shipments surpassing that cap.

Also, 52 per cent of the $1.6 billion in duties already collected from Canadian companies would be returned under the agreement. U.S. companies supporting the deal would get $770 million of the duties.

But immediately after details of the agreement were announced, a tsunami of concerns and complaints from Canadian lumber producers washed away any hope of a quick resolution. Many producers warned Canada should not agree to an imposed quota, and even those that did support the plan couldn’t agree on how to best divide the pie.

The original plan was to divide the allowable softwood exports to the U.S. based on export volumes achieved by companies between Apr. 1, 2001 and Sept. 30, 2003. Companies would then be able to buy and sell additional quota amongst each other.

That plan drew the ire of Eastern forestry companies, since B.C. exports surged 17 per cent during that time period (in an effort to increase production therefore reducing unit costs) while softwood exports from Quebec dropped 20 per cent. Exports from the Maritimes also dropped during that time frame, prompting Nova Scotia NDP MP, Peter Stoffer to call upon Ottawa to wait for further World Trade Organization (WTO) rulings.

Critics of the agreement said almost all of the quota would be allocated to large, western-based forestry companies with the resources to ramp up production during the dispute.

“They could not possibly allocate quota in a worse manner,” Russ Cameron, of the B.C.-based Independent Lumber Remanufacturers Association told local media. Also critical of the deal was Tom Jones of J.S. Jones Timber – a company that recently invested $30 million in a new sawmill, but would have no access to the quota under the plan.

“This makes it just about impossible to run the mill,” Jones told local media. “This deal penalizes new investment, and that’s absurd.”

But it wasn’t only the little guys who were complaining. Quebec-based Domtar – one of Canada’s largest forestry companies – also voiced its displeasure over the deal, saying the agreement goes against the nature of the North American Free Trade Agreement (NAFTA).

Not surprisingly, large B.C. exporters such as Slocan Forest Products, Weyerhaeuser and Interfor were in favour of the deal.

“The reality is, we are not going to get from where we are today to unfettered free trade in one step,” said Duncan Davies, president of Interfor.

On a radio talk show shortly after the announcement, B.C. Premier Gordon Campbell said “The first… hurdle of agreement is an agreement between Canada and the United States. The second hurdle of an agreement is an agreement within Canada.”

But despite the fact the agreement would see an increase in trucks carrying softwood lumber across the U.S. border, that agreement within Canada simply couldn’t be reached. The final nail in the coffin came Jan. 8 during a conference call between softwood-producing provinces, during which no common ground was reached. Unfortunately for lumber haulers caught in the middle of the dispute, it appears it’s back to square one. The U.S. Coalition for Fair Lumber Imports has said the proposed deal was a final offer.

“There’s no more negotiations, this is a take-it-or-leave-it deal,” Richard Bennett, spokesman for the Coalition recently announced.

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