American lumber producers told an audience of Canadians Thursday that they want tighter restrictions on this country’s lumber exports to the United States or they will seek trade sanctions under U.S. law.
Either negotiate a new agreement to replace the current 2006 Softwood Lumber Agreement that expires October 12 or face the imposition of U.S. duties, said two leaders of the lobby group U.S. Lumber Coalition.
Zoltan van Heyningen, executive director of the coalition, and Steve Swanson, former chairman of the coalition, made their remarks at the International Wood Markets Group conference in Vancouver on global lumber markets.
Under the agreement, both countries have committed to a one-year standstill period, which would likely mean the Americans could not impose duties until October 2016.
The coalition’s position for the last 35 years has been that Canadian lumber is subsidized by the provinces, which own the timber and charge companies stumpage fees to harvest it. That has not changed, and the two countries have fought four lumber wars over the issue.
Swanson laid out the subsidy argument, saying that when lumber prices go up, stumpage in B.C. does not follow suit, as happens in the U.S. where the land is privately owned.
As long as both countries operate under different land ownership systems, van Heyningen said the Americans are going to insist that trade in lumber be managed.
But the fight, while cloaked in the language of the different forest management regimes in both countries, has always, at its heart, been about market share. The Americans want to reduce Canada’s share of their market, and as long as Canada plays a major role in the U.S. housing market, American producers are going to want to manage that flow of lumber to affect prices.
“The present agreement as structured, from the coalition’s perspective, is not a viable way of moving forward,” van Heyningen said. “A key factor in this is that Canada is going to continue playing a major role in the U.S. market.”
Issues for the Americans include their concerns that forecasts for a strong U.S. housing market may not materialize and that British Columbia’s newfound market for its wood in China could dry up. If that happens, U.S. demand will be less yet more Canadian wood will be available to cross the border.
It’s a risk the American producers don’t want to take, van Heyningen said.
He added that the Americans are not happy over how they faired through a mutually agreed-upon dispute resolution process that is part of the current agreement. They challenged Canadian producers three times but won only once. They want stricter enforcement against Canada.
They also want stronger measures in Canada to establish a more market-based timber pricing system.
Van Heyningen said the U.S. government has indicated to the coalition that it is prepared to negotiate a new agreement but has received no response from Canada.
The Canadian representative at the session, Martin Moen, director general for North America at the federal Department of Foreign Affairs, Trade and Development, defended the Canadian side. He said Canada has presented a clear position to the U.S. government: extend the current agreement, which already represents a significant Canadian compromise. The forest industry, the provinces and the federal government are united on that point, Moen said.
The current agreement, he said, is both a compromise and a pragmatic solution to the conflict.
“This pragmatic compromise is something we have communicated to the U.S. government,” Moen said. “We put this forward not as an ultimatum but as a compromise offer. We would like to have free trade, but we recognize that there is a long history to this issue.”
He added that Canada has received no formal response yet from the U.S.
Moen also addressed the stumpage issue, saying that statistics on log prices and lumber prices in Canada, if taken on their face value, could be used “to suggest something funny is going on.”
“But if you take a look more deeply into the very complex systems that the different provinces have, and the various requirements associated with access to Crown timber, and you do the calculations properly, it’s our view – and has been all along – that there is no subsidy occurring. The key is to ensure that we are comparing apples to apples.”
Moen said that the coalition’s opinions may reflect some of the views of the U.S. industry, but, in the end, the softwood issue has to be resolved through government-to-government discussion.
