By JAMES RONALD SKAINS

The U.S. Canadian Softwood Agreement which limits the amount of subsidized Canadian lumber that can be brought into the United States is set to expire at the end of this month.

Steve Rountree with the Southeastern Lumber Manufacturers Association based in Atlanta told the Piney Woods Journal:

``Canada now has a little more than 35% of the U.S. lumber market.

As soon as the softwood Agreement expires on March 31, the Canadians can immediately pick up 40 per cent of the market. Hopefully, the Canadians will only be able to increase their share of the U.S. lumber market in small increments after that until we can get some relief from the Federal Trade Commission.''

Buck Vandersteen, the Executive Director of the Louisiana Forestry Association was not quite as optimistic. ``Without the Softwood Agreement the Canadians may pick up as much as 70 per cent of the U.S. lumber market with their cheap subsidized lumber. Congress' hands are tied at this time. There is nothing Congress can do at this time to extend the Softwood Agreement.''

Rountree of the SLMA also told the Journal, ``This is a very complex issue for Congress because one line of thought is that imported lumber from Canada is covered under the North American Free Trade Agreement (NAFTA) while others believe that the Canadian lumber is subsidized by the government and adversely affects the lumber manufacturers in the U.S.''

Vandersteen in his conversation with the Journal explained the details of how the Canadian lumber industry works. ``The Government of Canada owns 95 per cent of the timber land in Canada. The lumber manufacturing segment of their economy is very large so the Government of Canada charges lumber manufacturers very little money for the timber, so that the mills can continue operating, keeping people employed.''

``The Louisiana forest industry certainly supports free trade, but fair trade,'' Vandersteen added. ``But we do not support free subsidized trade with Canada that will put many of our lumber manufacturers out of business. All we want is a level playing field.''

Both Rountree and Vandersteen pointed out that if the Agreement expires without an extension, or agreement to renegotiate the pact, the Coalition for Fair Lumber Imports, which represents U.S. forest product manufacturers, is already preparing an anti-dumping and countervailing duty case against Canada.

Vandersteen elaborated. ``The lawsuit against Canada would establish the unfairness to U.S. lumber manufacturers of Canada's subsidized lumber business. There is plenty of evidence to establish this fact as numerous sawmills around the country have already gone out of business.''

``The trade lawsuit would go before the Federal Trade Commission which would make a ruling,'' Vandersteen continued. ``If the Trade Commission ruled that Canadian lumber had injured U.S. manufacturers, the imported lumber issue would go to Congress to negotiate a new Softwood Agreement with Canada. However, if the situation deteriorates to the point that the only recourse we have is the countervailing duty lawsuit, we are looking at several months of unlimited Canadian imports which will devastate the U.S. lumber industry, especially here in Louisiana.''

Bob Odom, Commissioner of Agriculture and Forestry for Louisiana told the Journal, ``For the last couple of weeks I've been very busy on a national level trying to help put together a new farm bill that will help save our farmers this year. I've attended meetings in Las Cruces, New Mexico, and Houston, but there does not seem to be much interest on the national level to extend the Softwood Agreement with Canada. If it expires, it will devastate our timber industry in Louisiana.''

The Journal has learned that under the existing system, Canadian timber is allocated to the Canadian manufacturers who pay an administered price for it as they cut it. The administered price is established by the provincial (similar to U.S. states) governments and is based on a complex formula meant to ensure full employment by keeping the manufacturers competitive in the global market.

The result of this system is some documented sales of timber for zero dollars\f3 C\f0 meaning literally that the Canadian manufacturer paid nothing for the logs. On the average, the difference between Canada'a administered prices and the U.S. competitive prices is enormous.

About 5 per cent of the timberland in Canada is privately owned, most in the Canadian Maritime provinces on the east coast. The lumber producers in Maritime provinces in which most timber is privately owned and priced at market rates also condemn the subsidized lumber policies for mainland Canada which puts them at a disadvantage.

Canada is considered to be governed by a government with leanings toward Socialism in many of their economic and governmental policies.

In 1994 and 1995, Canada dramatically increased their exports of lumber to the United States at prices much below that of U.S. lumber producers. A threat of a countervailing and anti-dumping duties in 1995 on Canadian softwood lumber resulted in the current Agreement that is set to expire on March 31.

Under the current Agreement--which uses quotas and export taxes to limit the U.S. softwood imports from the Canadian provinces of British Columbia, Alberta, Ontario, and Quebec--shipments into the U.S. above 14.7 billion board feet (bbf) per year are taxed $53.94 per thousand board feet (mbf). When volumes reach 15.35 bbf per year, the tax rises to $107.88 per mbf.

In the year 2000, 18 billion board feet (bbf) of Canadian lumber was brought into the United States. This was nearly four billion board feet that was subject to additional taxes under the Agreement. The amount of extra ``tax duties'' collected was approximately $400 million dollars, which ironically went to the Canadian government under the terms of the Softwood Agreement negotiated by U.S. Trade representatives.

During the first week of February, President Bush and Canadian Prime Minister Jean Chretien met in Washington, DC to discuss among other things, the soon to expire Softwood Agreement. Chretien told his Parliament after his meeting with President Bush, ``We explained to the American president, vice-president, as well as the trade representative, that we do have a free trade agreement with the United States, and that the logical position then in such circumstances is that there should be free trade, not only in energy and natural gas, but also in lumber.''

Prime Minister Chretien also added, ``And we said quite clearly that in Canada we respect all the rules, and that Canadian lumber should enter the United States without any restrictions.''

Chretien said later that Canada will defend its right to export lumber to the United States under the North America Free Trade Agreement (NAFTA) and predicted that Canada would win any `counter duty prevailing' lawsuit case brought in that venue.

Sources report that the exchange between Bush and Chretien also included the following: ``Chretien told Bush that Canada firmly believes that lumber exports into the U.S. were covered under the terms of NAFTA which did not restrict lumber exports to the U.S. in any shape, form or fashion. Chretien also told Bush that the economy in Canada as in the U.S. is beginning to lag considerably and that it was very important to keep the lumber mills in Canada operating at full capacity or Canada would suffer severe economic times. Bush agreed with Chretien not to pursue the renewing, extension, or renegotiation of the U.S.-Canada Softwood trade agreement.''

The political implications of the Agreement for President Bush are also enormous. Some of President Bush's most ardent supporters in the year 2000 are solidly opposed to the renewing or renegotiating the existing U.S.-Canada Softwood Agreement.

The Manufactured Housing Association for Regulatory Reform (MHARR), which represents 40-plus small and medium producers of manufactured homes throughout the United states, has joined the American Consumers for Affordable Homes (ACAH), an ad-hoc alliance of 15 consumer groups, trade organizations and companies that represent more than 95 percent of softwood lumber consumption in the U.S.

Both MHARR and ACAH supports an end to the U.S.-Canada Softwood Agreement of 1996 (SLA) which expires March 31. Danny D. Ghorbani, president and CEO of MHARR said, ``This misguided agreement has done damage to producers and increased cost to consumers of manufactured housing.''

Other members of the ACAH that opposes renewing the Softwood Agreement with Canada include: Abitibi Consolidated Sales Corporation, CHEP USA, Citizens for a Sound Economy, Consumers for World Trade, Free Trade Lumber Council, Home Depot, International Mass Retailers Association, Leggett & Platt, Inc., Manufactured Housing Institute, National Association of Home Builders, National Black Chamber of Commerce, National Lumber and Building Material Dealers Association, National Retail Federation, National Retail Federation, and the United States Hispanic Association.

Both the ACAH and MHARR and their individual members are very active in federal level political campaigns through their PACS (Political Action Committees).

A few U.S. Senators such as Lincoln and Hutchinson of Arkansas, Lott of Mississippi, along with Congressmen Turner and Sandlin of Texas, and Ross of Arkansas have been very vocal in their support of renewing the U.S.-Canada Softwood Agreement. However, nearly 150 Congressmen including both U.S. Senators from Oklahoma have gone on record as opposing the renewing or extending the Agreement.

Congressman Jim Turner of Lufkin who represents the large forest industry in East Texas and who has been working diligently to renew the Agreement told the Journal through his spokesman Trent Ashby, ``We are trying to get the Canadians to come to the negotiating table but they are not interested at this time. Its a difficult situation for the U.S. lumber industry.''

``We are trying to do two things right now,'' Ashby also said. ``One is to hold a Congressional hearing on the matter and second, we are trying to arrange a meeting with Robert Zoellick, the U.S. Trade Representative to discuss the Canadian lumber agreement in detail. The Trade Commissioner has not yet set a date for the meeting. If we can not get something worked out, it is going to be a bitter pill for our forest industry in the south.''

At his Senate confirmation hearings to be U.S. Trade Representative around the first of February, Zoellick, a former U.S. Ambassador noted, ``There is substantial unhappiness on both sides of the border with the current pact, so it appears that we are going to have to try to see whether we can come up with something different.''

In researching this article, this writer submitted a written request to both Louisiana U.S. Senators, Landrieu and Breaux for comment and input but both failed to respond. Also, receiving written requests for comment about the status and future of the Softwood Agreement were Louisiana Congressmen Jim McCrery, who represents the 4th District of northwest Louisiana, and John Cooksey who represents the 5th District of Louisiana that includes Jackson, Lincoln, and Winn.

Neither Louisiana Congressman replied to our request although Congressman Cooksey, who serves on the House Forestry sub-committee was also contacted by phone for comment on the Agreement.

Back to Headlines
Home