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Free Access to US Markets Guarantees Our Future

Since 1996, Quebec's lumber industry, like that of the three other main lumber producing provinces-BC, Alberta and Ontario-has found its attempts to access the American market handcuffed by a quota system. This situation is justifiably seen as an aberration of the North column2.jpg (1244 bytes)American Free Trade Agreement and is but another flagrant show of American protectionism. It is somewhat paradoxical that this situation followed on the heels of a series of legal battles in which Canada emerged as the big winner. In an environment clouded with political and diplomatic considerations, the Canadian lumber industry saw itself with no recourse except to hold consultations with its American counterpart. These consultations rapidly gave way to negotiations, which have resulted in the current system. At first glance, provided that each producer's lumber quotas were sufficiently large, this system had price advantages in the American market, especially when demand was growing. However, it is worth remembering that demand is the main price regulator in the lumber industry and should demand drop, the positive effects stemming from quotas have increasingly less impact. Finally, this system has meant several adverse effects for all producers. To start, quotas have led to a decrease in prices and a glut of wood products on the domestic market, particularly where lower quality lumber is concerned.

Differences in price of as much as $115 per thousand board feet have been noted between the American and Canadian markets. Furthermore, quotas have had a discriminatory effect on producers themselves and on the provinces not included in the agreement. This situation has been exacerbated by the harmful effects of the quota allocation system, which has caused its share of dissatisfaction due to a lack of transparency and the imbalance it has brought about in normal business dealings. This illustrates that the quota system is-once again-a self-serving tactic used by the Americans to create divisions among Canadian producers. As for the American market, an overheated economy combined with an artificial rise in prices due to the restrictions stemming from quotas have enabled substitution products to grab a greater share of the market at the expense of softwood lumber. Moreover, an ever-increasing number of producers who are not subjected to the quota system are cornering the increase in demand. It is obvious that such a system offers an incentive to try and increase the export of products not covered by quotas, which in turn makes Americans want to restrict access to their market even more.

The economic prospects on the American side of the border seem to indicate sustained growth in terms of medium and long-term demand. The lumber industry should rightfully be able to benefit from this growth under regulations that do not penalize it, while favouring substitution products or other producers. The Canadian lumber industry must be able to count on free access to markets so it can continue to develop, specifically when it comes to secondary manufactured products. Quebec Lumber Manufacturers' Association members understand this perfectly well and this is why they have unanimously mandated the association to work towards the return of free access to the American market. This decision is based on the realization that, in the medium and long term, the disadvantages of such a system, taken as a whole, largely outweigh all the benefits that might be derived. From the perspective of market globalization, how can we put ourselves in a situation that is to our disadvantage in relation to our most important market? There is unanimous agreement within the Canadian industry on this mater, as was clearly expressed during the recent Vancouver and Quebec City meetings. Although American protectionism is certainly not on the downswing, we must nevertheless recognize that the situation on the American side has changed, to a great extent, in our favour. First of all, quotas have had an effect on the American consumer, and we now find supporters on the other side of the boarder that we did not have before.

Various Canadian producers have understood these new developments and, under the auspices of the Free Trade Lumber Council, important steps have been taken in the United States in an effort to coordinate the activities of support groups defending our position. Also, we now have a number of more important recourse possibilities at our disposal to ensure that our rights are respected, whether under the terms of the free trade agreement or under the rules of the World Trade Organization (WTO). We tend to forget that a binational panel accorded Canada an unequivocal victory under the terms of the free trade agreement when the last inquiry was carried out by the US. Although the United States has amended its trade law, the WTO's international regulations are now clearer and will enable us to successfully contest American allegations and practices against Canada. Unfortunately, we have noted that certain Canadian producers still hesitate to promote the legitimacy of their case. The Canadian industry will never regain free access to the American market if it cannot-right away and with one voice-send the Americans a clear signal on its intentions and its determination to go all the way in order to deal with this matter. At the last industry meeting in Quebec City, members reiterated their commitment to the objective of returning to a free market system, while recognizing the need to act immediately. In the year 2000, the industry must demonstrate maturity by putting aside individual interests and agreeing upon an action plan.

The proposed return to a free market system with the United States is not without its pitfalls. However, the Canadian industry has never before been in such a favourable situation, nor has it had so many tools and such support to enable it to reach its objective. We must take advantage of these favourable circumstances and not voluntarily weaken our own position.

Jacques Robitaille is President and Executive Director of the Quebec Lumber Manufacturers' Association.

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