ITC decision on Canadian softwood lumber duties is pure theatre

By Jim Stirling

It’s been a frustrating few months for those with an eye on Canada’s lumber marketing file. It was, after all, only a couple of years ago that the North American Free Trade Agreement (NAFTA) appeared on a firm footing. Since then, new free trade treaties have been optimistically pursued with Europe, the Asia-Pacific region and then, later, even with China.

Now, in 2018, NAFTA is in a shambles, the European deal survives at least on paper, the Trans Pacific Partnership dissolved into disagreements and acrimony and China told Canada to go home and mind its own business.

In December 2017, and to the surprise of no one, the U.S. International Trade Commission (ITC) ruled with an admirably straight face that subsidized Canadian softwood lumber imports were materially hurting U.S. lumber companies. The ITC’s members somehow failed to notice that the U.S. lumber companies they represent were—and still are—reaping in profits which are, according to some observers, unmatched in more than three decades of earlier lumber war battles between the two countries.

“The ITC finding of ‘injuring’, despite the record-setting profitability of the U.S. lumber industry, makes it very clear that this was not an objective evaluation of the facts,” responded Susan Yurkovich, president of the B.C. Lumber Trade Council, to the ITC ruling. On Canadian softwood lumber exports to the U.S.: “The fact is, there is no injury to U.S. producers and we are fully prepared to fight this egregious decision. We will initiate appeals as soon as possible and working with both federal and provincial governments, we are confident that the ITC decision will be overturned,” she continued.

The whole ITC exercise is pure theatre. It has all the elements of a farce. Except it is anything but. There are only negative impacts of the ITC’s ruling for the small lumber-dependent communities across B.C. and the rest of Canada as the U.S. continues to grab the duty and anti-dumping tariffs sanctioned by its kangaroo court. Moodys Investor Service reckons duties could cost Canadian forest companies $1.2 billion in 2018

The ITC ruling appeal process follows an equally familiar route through NAFTA and the World Trade Organization.

And right now, it’s back in the NAFTA quicksand. Chapter 19, the NAFTA dispute settlement process, has been fairer than the ITC process where the U.S. rules strictly on U.S. interests. As a result, Canada has fared well under Chapter 19 in past disputes. The Americans would prefer to see it scrapped. The dispute mechanism is—in the view of some observers—one of the motivating reasons for President Donald Trump to imprint his America-first mandate through the NAFTA process.

So far, too many of the tri-lateral NAFTA meetings have been characterized by confrontation and fueled by demands, rather than any real attempt at negotiation. The process was set to continue until March 2018, with the next session set for Montreal in late January.

Meanwhile, the whole climate surrounding NAFTA has the forest industry and Canadian exporters generally in an understandably twitchy mood. The uncertainty was reflected by the numbers in a recent Export Development Canada (EDC) poll. The federal agency reported almost a quarter of the companies surveyed felt negatively influenced by what was—or was not—happening with the NAFTA re-negotiation process. The EDC poll revealed the concerned companies are examining options and developing scenarios depending on the ultimate re-negotiation outcome. These options ranged from moving to the U.S. or diversifying from that market. Other poll respondents indicated they would likely be delaying investment and hiring.

There are other observers who believe the U.S. might abandon its participation in a re-negotiated NAFTA altogether, especially if the Americans don’t get their own way on key bargaining issues, and the process drags on closer to its deadline.

But for every opinion, there’s a counter suggestion. One observer with contrary opinions shared them recently with the audience of a real estate conference in Vancouver. David Frum is a senior editor of the Atlantic magazine and a former presidential speech writer. He believes the 23-year old NAFTA will survive this attempt on its life.

“I think NAFTA is much safer than conventional view has it,” declared Frum. He told his audience President Trump’s power base would be in jeopardy if he were to act capriciously and put NAFTA on a six month life support. There’s also the matter of the trillion dollar economy in the land mass between Alaska and Guatemala. Frum said Texas alone has about 400,000 jobs directly dependent upon NAFTA, while other states including Pennsylvania, Wisconsin, Michigan and Arkansas are heavily reliant on the continental trade supply chain. And not coincidentally, those states are critical to President Trump maintaining his support base.

Frum recommends Canada react only to concrete proposals on NAFTA and sidestep responding to every presidential outburst. “The Canadian mission is to develop coalitions with partners in governors’ mansions across the states, especially Republican governors’ mansions, for a go-slow approach.”

B.C. has already adopted a similar approach to gathering support against the imposition of duties. American consumer and construction groups are paying considerably more than they need for their lumber because of the duties imposed on Canadian softwood imports. The murmurs of discontent are growing louder. If the trend continues, which appears entirely possible, there could develop the type of backlash President Trump might otherwise approve: something made in and by U.S. policy.

Logging and Sawmilling Journal
February 2018

On the Cover:
Successful sawmill owners are always seeking ways to improve their operations and make them run more efficiently. If an upgrade in one area of the mill contributes a positive ripple benefit elsewhere in the process, that’s so much the better. That’s exactly what happened with the installation of the first Brunette Machinery Retract-To-Load (RTL) log singulator unit at Carrier Lumber’s Tabor mill operation near Prince George, B.C. (Photo courtesy of Carrier Lumber).

Goin’ south—with PinkWood
Calgary’s PinkWood, which sets itself apart by producing a fire-resistant I-joist line, was initially set up to serve the market in Western Canada, but is now making big inroads into the U.S. market—which is good news for the mills that supply it with lumber and OSB.

Logging Win all the way ‘round
The Snuneymuxw First Nations and Vancouver Island logging contractor A&K Timber are part of a successful venture that is seeing work and revenue being generated for the band, logging work for A&K Timber, and timber being harvested for mill operations on Vancouver Island.

What will sawmills of the future look like?
Will the sawmills of the future be run entirely from an I-Phone or I-Pad? Logging and Sawmilling Journal looks at what might be in store for future sawmills with UBC wood science assistant professor Julie Cool.

Hauer Bros. mill has a lot of history
The mid-sized Hauer Bros. Sawmill in B.C.’s Robson Valley has a long history in the area, and these days finds its market niche producing mostly timber for regional markets in the B.C. Interior.

Advance look at the COFI Conference
Logging and Sawmilling Journal takes a look at the issues—from the softwood lumber dispute to dealing with wildfire-damaged timber in the sawmill—that will be under discussion at the upcoming COFI conference, being held April 4-6 in Prince George, B.C.

New singulator unit increases mill efficiency—and more
New sawmilling technology, in the form of the first Brunette Machinery Retract-To-Load (RTL) log singulator unit, is helping to make operations run more efficiently—and reducing maintenance downtime—at Carrier Lumber’s Tabor sawmill in Prince George, B.C

The Edge
Included in this edition of The Edge, Canada’s leading publication on research in the forest industry, are stories from the Canadian Wood Fibre Centre, Alberta Innovates and Alberta Agriculture.

The Last Word
The ITC decision on Canadian softwood lumber duties is pure theatre, says Jim Stirling.

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