Finding solutions to U.S. bullying in softwood lumber

Author(s): 
August 1, 2001

Once again this summer, forest companies and forestry workers in BC are facing uncertainty. First, pulp mills around the province were shut down due to low pulp prices. Then, last week, came the countervailing duty decision by the U.S. Department of Commerce that applies a 19.3% levy on Canadian lumber exports to the U.S.

The BC government's response to date--moving towards a market-based stumpage system--to the softwood lumber dispute may have all kinds of unintended and unacceptable consequences. The details have not been announced but it could be a move in exactly the wrong direction. Larger forest companies (including ones based outside Canada like Weyerhaeuser) may have the ability to outbid smaller, locally-based companies for cutting rights. The result will likely be further consolidation of the forest industry in the hands of large multi-nationals.

There is little reason to believe market-based stumpage will resolve the ongoing dispute. The Coast Forest and Lumber Association, among others, is predicting that a market-based system will lead to a decline in government revenues from the forest industry--at least once the major players force the competition out. How could lower stumpage revenue in BC possibly lead to a resolution of the softwood lumber dispute, when US companies are already claiming BC stumpage is too low? The answer is that American lumber producers will be able to move in and buy cutting rights in BC's market-based stumpage system.

This is the reality of the softwood lumber saga. U.S. companies will stop their bullying only when they have unhindered access to BC wood, either through outright privatization of Crown land or through market-based stumpage. This has been made clear by the fact that exports from privately owned forests in Atlantic Canada have been exempted from the duty.

There is, however, a way for BC to mitigate the closures of both pulp mills and sawmills: produce more value-added wood products with our forest resources. This would create more jobs and make BC less vulnerable to commodity price swings such as that of market pulp. It would also take away U.S. lumber producers' concerns that Canada is increasing its market share south of the border in lumber. The higher up the value chain we go, the less softwood lumber disputes will be an issue.

This latest dispute actually opens the door for the provincial government to do something innovative. The provincial and federal governments could negotiate an across-the-board export tax on all Canadian lumber, in exchange for the U.S. dropping the countervailing duty. The BC government could then use the revenue to move the forest industry towards more diversity and stability.

One way to do this is to make the revenue from the export tax available to any company operating in BC that is willing to meet certain objectives. These should include manufacturing more value-added forest products, and investing in areas where BC's forest industry has been lacking, such as conducting more research and development and increasing productivity. Social and environmental goals, such as worker training and stringent ecological certification, should also be included as objectives.

Each forest company would have to undergo an independent audit to determine if their operations met the objectives. If they did, a portion of their investments in these areas could be returned to them.

While we're at it, BC could really play the U.S. game and impose a tax on all energy exports as well. The revenue could be used for investments in renewable energy production, including wind, geothermal, solar and tidal energy. It could also be used to increase funding to public transit and fund energy efficiency projects for residences, businesses, and industry.

There are all kinds of solutions available to a provincial government focused on maximizing the economic, social, and environmental benefits of our shared natural resources. Let's try some of them.

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