Softwood Negotiations

By Russ Cameron, Independent Wood Processors Association (IWPA)
Submitted Editorial
March 6, 2019
Category: Business & Politics
Region: Canada, Canada West

I was reading the latest criticism leveled against the BC Government for not having reached a new Softwood Lumber Agreement (SLA).  I forgive any politician that doesn’t know how it works, provided that they actually don’t know, and aren’t just figuring they can get away with it because they think BC Public doesn’t know how it works.

Here are five things you need to know.

  1. This is a commercial dispute between the US companies that buy their logs on the open market and the Canadian companies that have exclusive renewable rights to public timber that is priced using various formulas. Given that 95% of Canada’s forests are under Provincial jurisdiction, the Federal Government is only involved in this commercial dispute because it crosses a border.
  2. Under US law, US industry has the right to Petition the US Government for Subsidy and Dumping investigations. Therefore, no new SLA can be concluded without the US Coalition members signing a letter that they will not bring a new Petition during the term of a new SLA.  They are currently not willing to do that.
  3. We had over $5 billion in deposits sitting in the USA prior to the SLA 2006 being concluded. It was common knowledge that the US Court of International Trade had awarded Canada a complete victory with 100% refunds, plus interest, in 2006. The night before the US CIT announcement, Canada signed the SLA 2006 whereby Canada would apply a 15% Border Tax to our shipments to the USA and voluntarily give the USA $1 billion of our deposits. $500,000,000 of that was given to the members of the US Coalition.  With that kind of return on investment, if I was a Coalition member, why, pray tell, would I want to negotiate a deal right now?  I would insist on a share of the ‘pot’ this time too, so I would sit back and enjoy the benefits of the current duties while the ‘pot’, and my share, grew.
  4. The purpose of Duties and Border Taxes is to raise the price of US imports, which then allows the domestic US industry to raise their prices. Therefore, BC companies that produce lumber on both sides of the border, pay duty on their BC production but raise the price on their US production, thereby negating the duty.  BC’s Major Licensees have purchased over 50 US sawmills since 2000.
  5. The US Coalition made it very clear prior to expiry of SLA 2006, that they had no interest in negotiating another Border Tax based Agreement. They said they had so many problems with the last one that they were only willing to negotiate a Quota based Agreement.  For the reason in point 4, BC’s big public forest companies insisted, through the BC Government, that it be a Border Tax based Agreement.  Hence, negotiations never got past what to negotiate.

With that opportunity missed, and duties now in place, we currently have no choice but to litigate remedies at NAFTA and WTO while we wait for the US Coalition to feel an incentive to talk.  When will that be?  I think it depends on three things:  how long it takes for the US land owners to raise the price of logs enough to suck all the duty related profits out of the US sawmills; how long it takes the ‘pot’ to get big enough for the Coalition members to want to start negotiating their share; and how long it takes for Canada to get NAFTA and WTO rulings that make the Coalition think they may ultimately lose again.  But for now, I am sure the US Coalition is thinking, just let it ride for a while.

Russ Cameron

Independent Wood Processors Association (IWPA)  

 

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