If it’s not the American way it must be wrong….

The North American Free Trade Agreement has been in existence for nearly 20 years.  One of the major items left out of the original agreement due to lack of consensus was softwood lumber.  I am not clear on how the American system works, but the Canadian one works like this: The forestry company leases the land from the government on long term leases of 50 or 100 years.  They are responsible for everything including replanting and forest research (disease, etc.).  Stumpage fees are also paid to the government for every tree cut even if it’s a replanted tree some 30 years down the road.  These fees tend to be low because the Government only provides oversight while the companies are left to manage the forest for the long-term.  (I am in the Oil Patch here so please correct any of my errors.)

The U.S. forestry lobby really hates this system and I am unclear as to why.  This news link gives some history on this issue:

Canada’s protracted dispute with the United States over softwood lumber is estimated to have cost lumber producers up to $1.5 billion and thousands of jobs.

Although an agreement-in-principle was reached in December 2003 to end the dispute, one analyst says it may come at the expense of thousands of lumber-related jobs in Canada.

The deal eliminates the 27 per cent U.S. tariff on Canadian lumber, but reduces the amount of lumber Canadian companies can export to the U.S. without penalty. This means Canadian production will have to drop to equal 31.5 per cent of the U.S. market or face a tariff of $200 US for each additional thousand board feet. As it stands, Canadian lumber accounts for 33 per cent of the U.S. lumber market. The deal also calls for:

  • The return of just over half (52 per cent) of the $1.6 billion US in duties Canadian firms have paid, with U.S. companies keeping the rest.
  • More market access to companies in provinces that change the way they allocate cutting rights to be more like the U.S. model after three years, provided the U.S. government approves the changes.
  • A requirement for Canada to drop its complaints to trade tribunals, where it has won decisions against the U.S. duties.

The dispute is centred around stumpage fees – set amounts charged to companies that harvest timber on public land. Many in the U.S. see Canadian stumpage fees as being too low, making them de facto subsidies. A U.S. coalition of lumber producers wants the provincial governments to follow the American system and auction off timber rights at market prices.

The U.S. responded by levying tariffs on incoming Canadian lumber.

This dispute has gone in front of the WTO and the NAFTA panel at least 8 times over the last two decades with the U.S. tariffs and penalties losing every time. The NAFTA commission recently ruled against the 27% tariffs the U.S. government put on softwood imports several years ago.  In the wake of this loss Montana Senator Mac Baucus came up with a plan that may be introduced as early as today where U.S. companies will just get to keep the money, NAFTA panel be damned.

This issue actually hurts the little people; workers in the forest industry in Canada and consumers in the U.S.  Does just keeping $4 billion dollars you have collected, when the judges have ruled you are wrong, not seem like theft to the average American?  Why shouldn’t the U.S. forestry industry change its ways to be more competitive?  Is free trade only allowed if American companies benefit?

8 thoughts on “If it’s not the American way it must be wrong….

  1. Let him keep the money.  Then levy a 27% tariff on energy exports to the US.  If they won’t play by the rules why should we?  Every time I see that NAFTA or the WTO has ruled in our favour I want to scream because I know someone south of the 49th is going to whine and we get to do this stupid dance all over again.

  2. Lordklegg,

    Where in the oil patch are you?  I grew up in Fort Mac….  As for soft-wood, I think there’s more issues than trade, namely that soft wood lumbering often encroaches on irreplacable forests.  However, that’s neither here nor now, so I’ll let the issue drop.

  3. Calgary now, but I spent 15yrs on the road across Western Canada and the territories.

    OK please define irreplaceable, are the trees suddenly going to stop growing?  Poor management.  Petrochemical plants make plastic so we don’t have to use renewable trees, so we don’t manage the trees correctly because there’s more profit in Oil.  the old growth forests will be back long after we are dead.

  4. Huh, that’s a coincidence.  I currently live in Calgary as well….  By irreplacable I’m not referring to the trees, they are being replaced.  I’m talking more general bio-diversity.  As the trees get cut down other species of flora and fauna get chased out, or otherwise removed from the area.  That’s what’s irreplacable.  Over time some of the diversity returns, but it takes a very-very long time for the forests to return to the way they were prior to the cutting.  So while in the very long run (from decades to centuries depending on the particular spot) the forest comes back, it takes a very long time and it requires that a fair amount of forest that is left untouched (if there isn’t some source of diversity nearby there’ll never be a return to the original conditions).  That’s what I mean by irreplacable.

  5. Is free trade only allowed if American companies benefit?

    Yes.  Free trade is only allowed if American companies benefit.  That’s what “free trade” means!  Silly question…

  6. Okay, General bio-diversity. Aren’t we messing with the natural forest cylce by always fighting and containing forest fires?  Shouldn’t something be said for clearing the forest and allowing more small growth berry bushes etc to feed small and grazing animals. I don’t see how it’s any different from a forest fire.  I have been chased out of more than one cut-block by bears feeding on the berries.
      I freely admit cut-blocks aren’t pretty to look at when they are new, however it’s not like we are rolling up the forest in a wave.  Buffer zones are left around creeks and streams, with erosion prevention techniques on steep slopes. These companies have the long term in mind given the grow time.  They also farm the same locations repeatedly as opposed to all new locations so that the rotation saves on road construction costs in the future.
        On the Eastern slope of the rockies the companies all post signs along Hwy 40 stating the year of recut, replant, spacing etc. to help educate the public on the process. Efforts are being made to maintain a healthy eco-system and maintain a vital industry.
      One note, why should American taxpayers fund another level of Beauracracy to replant the forest? Shouldn’t the companies be responsible for forest management with only government oversight? 
        I admit I have no experience with the cutting of the old growth on the west coast and so won’t speak to that.

  7. I’m not arguing that no effort is being made.  Indeed, I think that the logging companies and the forestry service do a great job in minimizing the impact of logging.  Also I think logging in some areas, like the coniferous forests of Alberta has less impact than in other places (such as the coastal forests of B.C.).  I’m just somewhat concerned that with the worries about trade people might forget other issues to do with logging, like the issues in Coastal B.C.  where logging might indeed have a severe and permanent (well very long term at least) impact on the habitat of species that are already threatened.

  8. Agree with the premise that Americans only believe the rules are fair if they win – if they lose, the other guy must have cheated. Americans should keep in mind that their economic well being is dependant on good relations with others. Other countries may choose not to do business with the US, epecially if America gets a reputation as a poor trader.
    Time to play hardball – stop ALL lumber shipments and see how long before their housing and construction industries last. American lumber companies do not have the capacity to serve their market. Or, charge $3.4 billion in extra tax on energy to the US and transfer the funds to the Canadian lumber companies. If America does not want to pay the price for oil and gas, see if they can buy it elsewhere.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.