By JAMES RONALD SKAIN
Journal Correspon

An appeals panel of the World Trade Organization (WTO) ruled on January 19 that if Canada subsidizes its wood products industry, then America could impose duties on below-market-price Canadian lumber which may hurt U.S. manufacturers when it enters the country, says the American Logging Council.

The ALC quoted Richard Mills, spokesman for the U.S. trade representative, "the nation is committed to finding a durable solution in this 20-year dispute, but will continue to use our trade laws to ensure a level playing field."

The WTO Appellate Body confirmed that Canadian private timber prices are depressed by government sales, as ruled earlier by a North American Free Trade Agreement (NAFTA) panel.\par }{\plain On January 16, a different WTO dispute panel reportedly confirmed U.S. government findings that Canadian lumber producers are dumping lumber in the United States at unfair prices.

"These are historic victories for U.S. sawmills and saw mill workers, U.S. landowners and Canadian taxpayers," said Coalition for Fair Lumber Imports Chairman W. J. "Rusty" Wood who owns and operates mills in Georgia. "This should be the beginning of the end for provincial timber policies that give timber to Canadian mills at a fraction of its value and artificially encourage production. These subsidies and the dumping of Canadian lumber are decimating the U.S. lumber industry."

According to Coalition Chairman Rusty Wood, "the U.S. lumber industry proposes nothing more than open and competitive provincial timber pricing. We have expressed our support for compromise settlement terms that would lead to competitive pricing over a phase-in period with interim measures against unfair trade. Unless and until the two countries finalize a settlement, U.S. law requires a full offset of the subsidies and dumping through import duties. For now, duties are being collected at a rate of approximately $3 million ($US) a day. These WTO rulings almost certainly will result in an increased finding. By reinforcing the U.S. position on these unfair practices, the WTO rulings should bring us much closer to fair trade and the end to the trade dispute."

Most U.S timber is harvested from private land at market prices, while in Canada the government owns 90 percent of timberlands and charges fees - called stumpage - for logging. The fee is based on the cost of maintaining and restoring the forest in Canada. In 2002, the United States imported nearly $6 billion of softwood lumber from Canada - about a third of the American market. Softwood lumber, from pine, spruce and other trees, is a key product in home construction.

The National Home Builders Association has sided with the Canadians in this trade dispute, launching a nationwide advertising and public relations campaign stating that if U.S. lumber interests prevail in this softwood lumber dispute with Canada, the cost of building houses will increase dramatically. Home Depot and Lowe's, major national retailers of lumber products, have also strongly sided with the Canadians on this lumber trade dispute. Many U.S. forest based corporations that have extensive operations in Canada have remained neutral or offered their own proposals for a new trade agreement in the long running U.S.-Canadian softwood Lumber dispute.

On January 9, 2004, PAPERLOOP Newsletter reported that a U.S. proposal on the lumber dispute, generated by the Commerce Department and the U.S. lumber industry, offers to end punitive U.S. duties on Canadian softwood lumber if Canada agrees to cap duty-free shipments at 31.5 percent of the U.S. market. But a Canadian industry source told Reuters News service that there were strong objections to two parts of the deal: export allocations for individual Canadian provinces and a large portion of the money related to duties already collected by Washington (approximately $1 billion) would not all be returned to Canada.\par }{\plain Travis Taylor, President of the Louisiana Logging Council and a board member of the Louisiana Forestry Association told the Piney Woods Journal, "Its really all political rhetoric and the logging industry gets the short end of the stick again. Sure, the WTO ruled that the Canadian lumber is subsidized and said that the U.S. and Canada should work out a new trade Agreement." \par }{\plain "However, the U.S. politicians turn around and propose that the Canadians can have nearly one-third of the U.S. lumber market without any import duties," Taylor the Winn parish based logger explained. "If they send in more lumber than what amounts to one-third of the U.S. market, then they will have to pay a duty on their lumber. That is certainly no big deal for the Canadians to have to pay extra money on another 10 to 15 percent of the U.S. lumber market."\par }{\plain "If you look at the Canadians with at least one-third of the U.S. lumber market, and then another 20 percent to Germany, Austria, and other European countries plus what is coming in from South America, you will see that much isn't left of the U.S. lumber market for U.S. producers and loggers," Taylor said. "Right now, about 55% percent of the U.S. lumber and plywood market is imported lumber. With all this political wheeling and dealing in Washington, I think that we will see another 10 percent of our market share disappear."

"Another factor facing loggers and timber land owners is that China is now the `big dog' on the paper industry porch," Taylor added. "The biggest paper mill in the world is scheduled to go on line in China in the very near future. In addition, China is now importing in large quantities used paper from the United States for their recycling paper mills. In turn, the Chinese are flooding the U.S. paper market with paper products made from used U.S. paper."

In a related development in the Canadian lumber dispute, the U.S. Commerce on January 12, 2004 stated that it had recalculated countervailing duties on Canadian softwood lumber, a move that could lower the rate to 13.23% from its current rate of 18.79% duty. This reduction in the duty rate must be reviewed by a NAFTA panel before taking affect. The current 8.38% anti-dumping duty on Canadian lumber will remain in effect without any changes.

Steve Hannington, President of the American Logging Council and a longtime logging contractor based in Macwahoc, Maine, in an article titled "Caught in the Middle further details some of the problems facing U.S. loggers in particular and the forest industry in general. Hannington writes:
"The work stoppage by several independent logging contractors in northern Maine has caught the attention of the industry across the United States. The action, much like that demonstrated in Minnesota last year, alerted loggers, log truckers and the forest industry that the logging industry is in trouble. Perhaps the most revealing article was written by Mitch Lansky and published in the Bangor Daily News titled `Test Your Logging Labor IQ.'"

Hannington points out in his article, "The most glaring statistic that Mr. Lansky points to is that over the last two decades, real (inflation adjusted) wages have fallen. According to a Department of Labor study, since the 1970's, logger productivity increased 74%, landowner profits went up 169 percent, but the inflation-adjusted wages for loggers declined by 32 percent."

The bottom line, Hannington says is this, "there are three sectors to the forest industry products industry, the loggers, the family forest land owners and the manufacturers (mills). In order for the forest industry to survive, all three sectors must remain economically healthy. Because of the availability of timber in the global marketplace, and the reduced restrictions and regulations on how to manage, harvest and produce wood and paper products in third world countries, our industry is going to continue to suffer unless all three sectors come to the table and share the burden of these costs, as well as to amend current regulations that add tremendous costs into our industry."

Hannington says in conclusion, "As hard as this is to swallow, unless we see improved markets, logging capacity will continue to decline here in the United states."

There appears not to be a clear cut path or plan of action to follow from this point in either governmental circles or in the forest industry to solve either the Canadian lumber dispute or stop the further erosion of U.S. lumber and paper markets. For sure there is no plan of action on the horizon that will put any of the dozens of mills that have gone out of business in the last few years or put any of the hundreds of loggers who have gone out of business back to cutting and hauling logs.

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