Sen. Baucus continues to parrot the vested interests of the U.S. lumber producers. Any objective analysis would lead him to conclude that what the American companies really seek is protection for an inefficient softwood industry in that country, and a flawed U.S. timber pricing system.

The first fact that Sen. Baucus conveniently ignores is that independently selected panels struck under NAFTA rules have consistently concluded that lumber producers in Canada are not subsidized. Bullying tactics by the United States have resulted in these objective assessments being repeatedly ignored.

The other myth he perpetuates is that forest management practices in Canada lag behind those in the United States. Such is not the case. While forest management practices in both Canada and the United States are indeed in a continuous state of needed improvement, Canada is an acknowledged world leader in forest stewardship. Our industry is second to none in silviculture, harvesting and reforestation practices

When the American producers argue that the price Canadian producers pay for their timber is too low, it is obviously in comparison with what U.S. producers pay for their raw material. Very few ask the questions: "Do the American sawmills pay too much for their timber?" or "What, indeed, is a fair price?" The latter question is difficult, perhaps impossible, to answer.

There is, however, much evidence to suggest that the price U.S. producers pay is often excessive. Lands taken out of active forestry production, particularly in U.S. states such as Washington and Oregon, because of environmental pressures (e.g. to protect species such as the spotted owl), have resulted in an imbalance in the supply/demand for timber (too many loggers chasing too little wood!). Auction prices have been driven sky-high and out of line with economic realities. When futures contracts mature, loggers are often faced with prices for timber that would leave them devastated. It is widely acknowledged that the White House has intervened on a few occasions to release logging companies from their auctioned price commitments for timber located on U.S. Forest Service lands. Is this how the market fairly sets prices? I guess not -- when prices bid are not honoured.

One matter that Sen. Baucus did get right is that the Canada-U.S. softwood wars have been, and are, about the softwood lumber market share held by Canadian producers in the U.S. market. Anything over 30% market share (it is now around 34%) causes the United States to launch its countervail duty system which is stacked in favour of its own producers. The U.S. countervail process, for example, does not allow Canada to attack U.S. subsidies to their own lumber producers -- those that are well known by the industry to occur at the state and local government and federal level. These subsidies include cheap industrial land, sales tax abatements, property tax holidays, co-generation agreements, etc.

 

 

What is at stake here is Canada's sovereign ability to establish our own forest policy -- at the provincial and national level. The American position essentially argues that because our timber resources are owned primarily by the Crown through the provincial governments, and not primarily privately owned as they are in the United States, our prices are wrong and theirs are right. This is an absurdity. Let me give you an example. The U.S. producers argue that Canada's ban (or virtual ban) on the export of raw logs constitutes a subsidy. They contend that the ban results in more logs finding their way into the domestic market -- thereby depressing prices! Can you think of a more convoluted argument? More importantly, it attacks our ability to set our own forest policy. Exporting raw logs robs us of our ability to "add value" here in Canada. This policy has nothing to do with subsidies -- it has everything to do with our federal and provincial policies designed to move us up the commodity product ladder into higher value-added products -- policies supported by the vast majority of Canadians.

Sen. Baucus also sidesteps certain realities of the U.S. marketplace. Surveys in the United States show that construction workers there prefer Canadian softwood lumber over U.S. southern pine. They say it handles better, has less warp and wane, nails easier, etc. In a North American commodity market, this translates into greater demand for Canadian lumber. Builders and consumers in the United States also argue, often to deaf ears, that restricting lumber imports increases the price of a typical home in the United States by about US$1,000, and maybe as much as US$1,500. Isn't it ironic that consumers and builders would be denied their product of choice in a country that prides itself on the wisdom of the free markets.

Regrettably, Canada finds itself in yet another round of lumber wars. The U.S. producers have yet to convince anyone, apart perhaps from Sen. Baucus, of the merits of their argument. Because of the strength of the U.S. lumber producer lobby, however, and the way the rules are stacked against Canada, they have succeeded in the past in their quest to reduce the volume of Canada's export of softwood lumber into the U.S. market, through volume quotas, tariffs and export taxes. They are trying again.

Let's hope that sanity prevails before consumers and producers on both sides of the border suffer -- and lawyers and lobbyists in Washington D.C. strike it rich again.