British Columbia backs Ottawas trade war with U.S.

The Vancouver Sun | Thursday, February 10, 2005 | Scott Simpson, Gordon Hamilton and Peter O'Neil

[concrete is my business]

Does Paul Martin want a trade war with the USA now? Possibly. The Liberals could be headed into an election soon and they will use this issue to deflect voter disgust off themselves and onto...surprise!... the USA.

[MikefromOhio]

The People's republic of Canadia strikes again...

Canadian FReepers, whats up up there?

[international american]

Canadian Freepers are euphoric! They have Fox News now:)

[Alberta's Child]

What's up "up there" is that Canada is on the right side of this issue. The United States has lost this dispute every time it has come up before an international trade board (NAFTA, GATT, WTO, etc.), and yet the tariff remains.

What's ironic here is that the Canadians most affected by this tariff are folks in Alberta and rural British Columbia who tend to strong conservatives.

[Trueredstater]

This is potentially a bid issue.

The US has consistantly flaunted trade rulings that go against American policy. The first case was the infamous Mexian trucks case, now Canadian lunber.

The US needs to play by the rules it helped to establish.

[Alberta's Child]

Canada could end this dispute tomorrow by imposing a $10/barrel export tariff on all oil shipments to the U.S.

Oh, wait -- that would be a violation of NAFTA, GATT, and any number of "free trade" agreements. /sarcasm off/

[Gunslingr3]

Does Paul Martin want a trade war with the USA now? Possibly.

Why does the U.S. impose duties on Canadian lumber? The Canadians are seeking to have the duty removed, if the U.S. continues with trade restrictions, Canada will institute trade restrictions. Protectionism begets protectionism. Why does the U.S. government make U.S. citizens pay more for lumber?

[concrete is my business]

Canada has never disputed the fact that British Columbia lumber is heavily subsidized. I think the rulings against the USA in the World Court have only been about by how much this distorts the softwood lumber market. Liberals get tons of political mileage by promoting these so called "wins" in the WTO.

I think this could have been settled long ago by the agreement to a log auction to determine the ACTUAL MARKET price and Ottawa refused.

The argument is Canadian softwood is underpriced. Why is it to BCs benefit to get less for their logs? It isn't. But try to tell that to the Ministry of Forests in BC.

[concrete is my business]

A tariff on Canadian oil would disrupt the oil fields and the lumber industry. It could penalize Albertans twice.

[hoot2]

"Products to be targeted could include everything from live pigs and dried beans to yachts and perfume. At the extreme end of the scale, luxury yachts like Jimmy Pattison's $20 million US Nova Spirit could double in price to $40 million US. "

Just don't sell them any beef.
Let them continue eating their very own Canadian Pride "madcow products".
It seems to be helping their politics, but not their hockey.

[Alberta's Child]

Here's some irony for you . . .

What most of these articles never mention is that the softwood lumber tariff has had a devastating impact on U.S. lumber producers.

The tariff had a serious impact on Canadian mills for a while, but these producers were able to overcome much of the cost of the tariff by ramping up their production so they could produce more lumber out of the same facilities. They also managed to get concessions from their labor unions to make them more competitive. As a result, they were able to gain efficiencies of scale that enabled them to sell the lumber in the U.S. competitively even with the tariff in place.

But to meet the same consumer demand while producing more wood, the lumber industry (particular those giant producers like Boise-Cascade and Weyerhauser that own subsidiaries on both sides of the border) had to shut some of their facilities down. And you guessed it -- whenever possible, they've shut the U.S. facilities down.

Ironically, this resulted in other unforeseen circumstances -- To produce more lumber they had to cut more trees, and since they were cutting more trees they also ramped up their production of other wood products such as paper. And so the U.S. paper industry has been devastated by reduced profit margins, too.

To top it all off, there's the impact of the tariff and the subsequent changes in Canada's mill operations on global lumber trade. In addition to maintaining their competitive edge with the U.S., these operational improvements have allowed Canadian producers to kick their U.S. competitors from one end of North America to the other when it comes to selling to overseas markets where the tariff has no impact. This is why shut-downs of U.S. lumber mills have actually accelerated since the tariff was imposed.

This was all summed up in a conversation I had last September with a friend of mine who works in the lumber industry up there. When I asked how he was faring under the tariff, he said:

"Tariff? We don't give a sh!t about that tariff anymore. I haven't shipped a piece of wood south of the border yet this year . . . everything I produce is sold in Japan and Korea for more money than I used to get from buyers in the U.S.!"

[muleskinner]

I'm a lumberjack and I'm OK,
I sleep all night and I work all day.

I cut down trees, I eat my lunch,
I go to the lavatory.
On Wednesdays I go shopping,
And have buttered scones for tea.


I cut down trees, I skip and jump,
I like to press wild flowers,
I put on women's clothing,
And hang around in bars.

I cut down trees, I wear high heels,
Suspenders and a bra,
I wish I were a girlie,
Just like my dear papa.

[PeterFinn]

Crap. I have to cancel *another* vacation in Victoria?

Sheesh. Last year my firm cancelled a conference in Vancouver that I was really looking forward to due to Canuckistanian policies and the antics of Carolyn Parrish. Estimated loss to the Vancouver-Victoria economies was about CDN$4.5 million.

This year it's Vegas (baby!) for the conference.

As for me and mine it looks like this'll be our year to visit Wash., D.C.

[beaver fever]

"Canada has never disputed the fact that British Columbia lumber is heavily subsidized."

This is simply not true. Canada has consistently argued that Canadian softwood is not subsidized and the WTO, GATT and the NAFTA dispute panel have consistently ruled in Canada's favour.

Under the stumpage fee system producers pay a cutting fee per log when the logs are harvested. This reduces inventory costs when markets are soft.

Under the auction system producers have to purchase logs outright regardless of how the market will effect their sales six months or a year down the road.

The US auction system actually penalizes producers by converting log costs from a variable cost, to a fixed cost of production and leads to higher inventory costs in soft markets.

If anything the US should adopt the Canadian system of stumpage fees for logs on Federal lands because that would increase the bottom line for US forest companies.

It's also important to note that private land owners in Canada can sell logs to sawmills without paying any fees.

The irony is that the $US $4.2 Billion in penalties that have been charged to Canadian producers has not found it's way into the pockets of US consumers who are paying more for lumber because this dispute.

The US lumber lobby has also argued that Canadian producers are subsidized because Canadian sawmills are less efficient and therefore less competitive compared with American mills. This is also untrue. Canadian mills are 20 years ahead of US operators in terms of technology.

[concrete is my business]

Yep thats true about Korea and Japan. They buy the cream off the top of the huge softwood industry, which is basically 2X4's and 2X6's. I USED to work in the lumber industry (pre- NAFTA) when lumber was about the ONLY product that was duty free to the USA.

British Columbia, because of government regulations, still cannot even sell its lumber to Eastern Canada! So it has actively courted the Pacific Rim. This does not change the fact that the USA is obviously a great market for B.C. softwood lumber. Unfortunately lumber was left off of NAFTA (mostly because of the difficulty in reconciling the BC Ministry of Forests with anything resembling free trade) and it is now little more than a blunt force political tool.

[beaver fever]

Thanks for your post Alberta Child for adding market information I was not aware of.

Are you in the industry?

My brother is the GM of the Slocan mill in Mackenzie so most of my information is on the production side.

[Zeroisanumber]

Bah! Canada and the US are always in some kind of pissing match over trade. Last time I went up to fish it was potatoes, this time it's lumber.

[Alberta's Child]

I'm not in the industry, but I've got a friend who runs a skidding oepration in the bush for the Weldwood pulp and sawmill east of Jasper.

[Alberta's Child]

Here's the most disgraceful aspect of this:

If the government of British Columbia were subsidizing an operation that shipped truckloads of Mexicans across the border, the Bush Administration would be up there kissing their @sses from dawn to dusk every day for a year.

[beaver fever]

"Bah! Canada and the US are always in some kind of pissing match over trade."

That's what the NAFTA "free" trade agreement was supposed to do, prevent trade disputes. The reason it isn't working is because the Commerce Dept and industry lobbyists have decided to go for the Cadillac version of NAFTA, "free" trade WITH tariffs. Oh sorry that's "trade penalties" not tariffs because as everybody knows tariffs are strictly prohibited under NAFTA.

In terms of NAFTA it's a case of the US saying. "Free trade when we feel like it."

The irony is there was a lot of resistance to NAFTA in Canada and a lot of pressure from the US government to push it through. Brian Mulroney the leader of the Conservative party fought and won an election on the issue of signing NAFTA. Reagan and Mulroney held the post election "Shamrock Summit" celebrate the singing of the agreement heralding a new era of US Canadian cooperation on trade. Those words seem a little hollow now.