Softwood Lumber Trade Update

On April 13, the British Columbia Lumber Trade Council (BCLTC) filed a submission with the United States Trade Representative associated with the US-Canada Softwood Lumber Agreement (SLA), which is set to expire March 31, 2001. The Council, claiming to represent ninety five percent of the provincial lumber industry in BC, is urging government-to-government discussions based on an industry consensus.

The discussions with the US, according to the Council, should involve the provincial and federal governments. The exploratory discussions would aim to "determine what policy explanations or modifications would be necessary to guarantee unencumbered access" to the US market. The submission argues that an expanding North American lumber market based on free trade represents the best bilateral solution for the long term.

Ignoring regional differences, the Council is suggesting that no Canadian lumber-producing region should receive an advantage in the US market. Timber pricing based on market principles must ensure the public treasury gets a fair return for its resource.

The Council is urging the federal and provincial governments, as well as other industry representatives to support their view. A stakeholders meeting May 16 in Toronto should make it clear that there is no consensus within the industry or amongst the governments in Canada.

The splintered Canadian position is well reflected in the views of Jake Kerr, co-chair of the BC Lumber Trade Council, who recently argued publicly that a majority of Canadian lumber producers have benefited from the SLA, and done well under it. Even though 'free trade' is the Council's goal, Kerr thinks managed trade agreements are necessary until US producers find the will to accept free trade Canadian style.

BC's coastal timber producers are poised to enter labour negotiations when contracts expire in June. The Industrial Wood and Allied Workers of Canada are seeking a three-year contract, two years longer than sought normally. Employers, on the other hand, want a one-year contract rather than the usual three years they request. In other words, industry and labour in the principal export base foresee turmoil ahead.

The US Coalition for Fair Lumber Imports also filed with USTR on April 13. The Coalition filing included a detailed report documenting what it regards as unfair, trade distorting Canadian subsidy practices. The Coalition urges USTR to press the provinces to commit to move to competitive lumber sales practices when the SLA expires. Competitive lumber sales, of course, can only occur after USTR flattens "massive subsidies" granted to the Canadian industry, including provincial stumpage.

Significantly, the Coalition signaled its willingness in principle to support phasing out existing provincial stumpage regimes.

In early April, US Ambassador to Canada Gordon Giffin indicated he did not see a consensus on either side of the border for a further agreement modeled on the 1996 SLA. Sustaining the Coalition view, the Ambassador noted that 95% of Canadian timber is harvested on government owned lands, where the government sets the price. In contrast, about 90% of US timber is cut on privately owned land, for which the market determines the price.

While the Coalition keeps direct pressure on provincial stumpage, other interests are weighing in. Unlike previous routs, the Canadians face a growing amalgam of forces making the case for sustainable forestry practices:

1. Centex Corporation, and Kaufman and Broad Home Corporation, two of the largest homebuilders in the US, have decided in principle to stop buying lumber sourced from old growth and endangered forests. The sustainable standards and certification movement, typified by FSC, could act as a barrier to future Canadian sales. Neither company has announced a phase-in timetable, but both have acknowledged they are developing new purchasing policies;
2. Recognising that environmentally and socially responsible timber harvesting strengthen their own arsenal, two Canadian native delegations appealed to USTR to block any move toward complete free trade. The Quebec Cree and a group of BC tribes pressed the case in Washington that unregulated free trade will lead to excessive logging, and invite large Canadian corporations to run roughshod over native land rights.

This could eventually have a bearing on the Maritime side agreement. For example, it is estimated that only 10% of Newfoundland's old growth forests remain standing. Corner Brook Pulp and Paper Ltd. has announced plans to begin clear-cutting 1,500 hectares or about 2.5% of the total extant old growth in the province. The question is whether activist businesses will buy it.

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