Despite talk of diversification and the paradigm shift from goods to services, the forest industry remains a mainstay of British Columbia’s economy. It contributes about $12 billion to gross domestic products and 140 communities depend on it for their livelihood. One out of four jobs in manufacturing is in the forest industry. Nearly a quarter of all rail traffic in B.C. is forest products.
Forest products, principally lumber and pulp and paper, account for 35 per cent of all exports from B.C. Our province represents half of Canada’s softwood lumber production. And roughly half of B.C. softwood lumber exports are destined for the United States.
So this week’s action by the U.S. Department of Commerce to slap countervailing duties averaging 20 per cent on Canadian lumber exports on the dubious charge that they are subsidized is a serious matter that demands quick resolution. Unfortunately, the resolution process through the World Trade Organization, the North American Free Trade Agreement settlement mechanism and/or litigation is anything but quick.
A one-year standstill following the expiry of the last softwood lumber agreement was intended to give the parties time to work out a new deal. But softwood lumber was not high on the agenda of outgoing U.S. president Barack Obama and talks stalled.
This is an expensive and unnecessary trade dispute that has strained Canada-U. S. relations for more than 30 years. Although Canada has won most of the battles over softwood lumber, companies must pay the duties until the matter makes it way through international tribunals. Last time around, the duties amounted to $5 billion US and, although most was repaid after Canada’s victory, U.S. companies kept $1 billion. While Canada’s sunny ways prime minister, Justin Trudeau, takes the soft diplomacy approach and says it’s important to have a “constructive working relationship” with the U.S., B.C.’s Liberal Leader is playing bad cop, threatening to ban exports of U.S. thermal coal through B.C. ports.
If may be coincidental that the latest lumber dispute is underway just as Canada, Mexico and the U.S. are preparing to re-negotiate NAFTA. But perhaps this is an opportunity to end the 10-year cycle of lumber wars. Lumber is currently not part of NAFTA. Negotiators on both sides of the border should seek to include it in a revised free-trade agreement for the benefit of Canadian forestry workers and U.S. consumers.