By: Business Vancouver
In the wake of Canadian Prime Minister Justin Trudeau and U.S. President Barack Obama yesterday placing a priority on renegotiating a softwood lumber agreement, the B.C. government is expressing appreciation.
After all, the U.S. is B.C.’s largest market for softwood lumber products and, within Canada, more than 50% of Canada’s softwood lumber exports to the U.S. originate from B.C.
More than 140 B.C. communities rely on forestry as a key economic driver as the sector supplies about 65,000 direct jobs.
“I am heartened to see that both Prime Minister Trudeau and President Obama have committed to maintain an intensive pace of engagement with a view to exploring approaches to achieve a mutually acceptable agreement by this fall,” said Forests, Lands and Natural Resource Operations Minister Steve Thomson.
“The two leaders have also recognized the need for regional provisions and flexibility in any negotiated agreement. We remain hopeful that an equitable agreement will be reached that will provide stability and business certainty for lumber producers on both sides of the border.”
Thomson stressed that a managed trade agreement is preferable to U.S. trade action, which he said would be disruptive and costly for lumber producers, both federal and provincial governments, and ultimately harm U.S. consumers by pushing up prices.
“If a reasonable negotiated settlement cannot be reached, B.C. is confident that, working with the federal government, it will successfully defend its market-based forest policies against any U.S. trade action brought by the U.S. against Canada, as it has done in the past.”
Trudeau and Obama released a statement yesterday that said that given the great importance of the softwood lumber industry to the economies of the two countries, they have instructed the U.S. trade representative and Canada’s minister of international trade to intensively explore all options and report back.
Since the leaders first issued that instruction in March, the teams have been meeting and the results have been “challenging but productive,” according to the leaders’ June 29 statement.
The end of the most recent Canada-U.S. softwood lumber agreement in October meant that the U.S. stopped charging export tariffs on shipments of B.C. lumber.
In the short term that’s good news for B.C. producers and has helped drive sales because, without tariffs, prices are lower, explained wood products consultant and president of Woodbridge Associates Peter Woodbridge to Business in Vancouver earlier this month.
The original softwood lumber agreement required both sides to wait at least one year before enacting new tariffs following the agreement’s expiry. Therefore, starting in October, the U.S. could institute new tariffs.
They could come in the form of U.S. Customs and Border Protection requiring bonds from B.C. companies to get lumber shipments across the border.
In 2001, according to Woodbridge, U.S. customs required a payment worth 28.2% of each shipment’s value. Almost all of that was kept when a new SLA came into effect in 2006.
“It’s like a one-time tax,” he said, “and companies are unlikely to get much of it back.”
BIV’s most recent list of B.C.’s top 100 public companies, ranked by revenue, showed that 2015 was a banner year for the sector with every forestry or pulp and paper company on the list seeing a rise in revenue.