Ottawa announces $867M in financial assistance for softwood lumber industry

June 5, 2017

By: CBC News

The Canadian government today announced it will make $867 million in loans available to the forestry industry, workers and communities impacted by softwood lumber tariffs recently imposed by the United States. 

The deal includes a series of loans and loan guarantees that will work in concert with provincial efforts to support the industry. 

“We believe that this group of measures across the sector in both the near term and long term is the appropriate response and one that we think will stand the test of scrutiny,” said Natural Resources Minister Jim Carr at a news conference in Ottawa.

Carr said Ottawa is working with the provinces to speak with one voice on the issue. He also said he is not worried about further criticism from the U.S. that Canada is subsidizing the industry with this financial support, because the loans are at market rates. 

The U.S. Lumber Coalition, however, was quick to respond with a view that differs sharply from Carr’s.

“Today’s announcement of a new government subsidy for Canadian softwood lumber producers only further tilts the trade scale in Canada’s favour, threatening more than 350,000 jobs in communities across the Unites States,” said coalition spokesperson Zoltan van Heyningen.

“We need a level playing field and must limit the flow of unfairly subsidized softwood shipments from flooding the U.S. market, driving American lumber manufacturers out of business.”

U.S. duties were introduced on Canadian softwood exports a month ago following an investigation by the U.S. Commerce Department.

The Ontario and Quebec governments asked the federal government to set up a program to help companies offset the tariffs, which range from three per cent to 24 per cent for five major exporters, with all other companies facing countervailing duties of 19.88 per cent.

Countervailing duties are used to level the playing field when a country believes that another country’s product is unfairly subsidized. U.S. lumber companies claim Canadian companies have an unfair advantage with preferential access to Crown-owned lands that charge lower stumpage fees.

Derek Nighbor, the CEO of the Forest Products Association of Canada, welcomed the assistance offered to the industry Thursday but warned the government must not be seen to be subsidizing the industry. 

“The government needs to be careful on the issue of loan guarantees because, remember, this whole U.S. trade action is about subsidies, so anything the government does is going to be closely watched by the U.S.,” Nighbour told CBC News. 

“So the importance of doing this at commercial terms and running it through organizations like [Export Development Canada] and [Business Development Bank of Canada] is very important. So a sensitive issue for government to manage, but we think this is important and a good first step.”

A broad aid package

The $500 million in the form of loans and loan guarantees will “assist viable forestry companies,” a government statement said. 

The Business Development Bank of Canada will look to help “eligible forestry companies in in the short and medium term.” The government also said it may consider further loan guarantees down the track, depending on market conditions. 

Other funding includes more than $260 million to:

  • Support efforts to expand overseas markets.
  • Help Indigenous communities improve their forestry sectors.
  • Temporarily extend of the maximum period for work-sharing agreements from 38 to 76 to reduce layoffs.
  • Help affected workers upgrade their skills and transition to new opportunities.

Engaging with the U.S. 

Canadian Foreign Affairs Minister Chrystia Freeland, who was also at the news conference, said she is confident an agreement on softwood lumber can be reached that is a “win win” for both countries. She said the U.S. needs the softwood that Canada has to sell to build houses and decks during the summer construction season. 

But Freeland could not give a deadline for when such an agreement would be reached, saying only that Canada was not at a stage when one could even be considered close. 

“I would like an agreement tomorrow, but wanting something doesn’t mean that you are going to get it.”

She went out of her way several times to thank U.S. Secretary of Commerce Wilbur Ross and Secretary of State Rex Tillerson for remaining engaged with Canada to find a resolution to the dispute. 

The government statement said that in recent weeks, cabinet ministers have visited the U.K., Europe and Asia, including China, to promote Canadian softwood, and Carr will travel to China with a delegation of Canadian forest industry representatives in early June to build on those efforts. 

Job losses

The federal aid package comes as the Conference Board of Canada released a new report this week, predicting fewer jobs and slower profits for the lumber industry in 2018.

“The end result is in 2018 we see about 2,200 fewer jobs in the wood products industry as a result of the tariff and about $700 million less in exports,” Michael Burt, the director of industrial trends, said in his report.

Burt he said the key difference from the last time the U.S. imposed tariffs is the overall strength of the industry. He points to five years of solid growth, stronger markets in Asia, and better productivity. He also said there are fewer, but much larger, companies operating, many of which are already diversifying their product range.

“The softwood lumber duties really only apply to softwood lumber. So there are a lot of other things the industry does. Everything from flooring, to the frames for doors and windows, those sorts of things,” Burt said.

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