Well, they did it. The United States slapped a 29 per cent duty on Canadian softwood, essentially shutting our lumber producers out of the biggest market in the free world.
American forestry companies set the wheels in motion for this over a year ago because they said they could no longer compete against Canadian timber prices, which they believe are artificially low because of government subsidies.
Industry analysts believe this move will cost 10,000 jobs in the province, many of them in rural town already hit hard by mill closures, slowdowns, and other fallout from the depressed world market.
Canadian companies argue that they’re not subsidized, that Canada just has a different land tenure system than the U.S. – we log publicly held crown land, they log private land, but otherwise things are not that different.
The proof, they say, is in the numbers – if things are so unfair, why aren’t Canadian companies only scraping by, losing money or falling short of projections three years out of four?
Like it or not, the Americans do have a point. Last year some logging companies in B.C. were caught cheating the province out of stumpage fees. They would drag only poor quality wood out of a cutblock to the side of the road, which a forest ministry official would set a lower stumpage price for. The company then would log all the choice wood in that block for a far lower stumpage fee than it would fetch in the marketplace. In some cases, companies were paying 25 cents per cubic metre for wood that’s valued up to $40 per cubic metre.
In other cases, the government would knowingly reduce stumpage fees to make logging operations more profitable for the companies, which have to compete on the world market.
The provincial government put an end to the scam, but the lasting impression is that forestry is subsidized industry within Canada.
When the 29 per cent duty became official, enraged union leaders suggested boycotting other American products in retribution, cutting off power sales to the U.S. because it’s publicly owned, and by the American definition that means power is subsidized, too.
It’s not an "us verses them" issue, however. This isn’t the gold medal game at the Olympics, and it has nothing to do with the rocky relationship between our Prime Minister and their president.
A large number of Americans also oppose the duty on the grounds that it will drive the price of lumber higher in the U.S., significantly raising the price of homes and other commodities. They’re fighting the duty alongside our own trade ministers.
The truth is, this kind of trade war is inevitable between countries when you compete with one another on the world market. Wars have been started for less.
In reality, nobody is winning because nobody is making a decent profit. Not the Canadians, not the Americans, not the Mexicans, not the Russians, not the African countries that are clearcutting the jungles, or the South Americans that are cutting down the rain forest. The competition within the forestry industry is killing the forestry industry.
Rather than fight one another, great things could be accomplished if they could learn to work together.
In the oil business, there’s a little organization called OPEC (Organization of Petroleum Exporting Countries) that represents 11 countries, the world’s top oil exporters, from four continents. They trade as a block, keeping the price of oil low enough that’s it’s affordable, yet high enough that the oil companies are profitable. Without OPEC, the price of gas would be significantly lower as countries low-balled one another at the sales table.
We’d burn more oil as a result, and would probably run out of it a lot faster. The employees of the companies would make far less in terms of wages, environmental standards would go out the window because they always do in a crunch, and the next thing you know countries have to subsidize the industry just to keep it afloat.
Sound familiar?
I propose that the timber industry organize itself like OPEC, setting prices and quotas that keep the industry profitable and environmentally responsible.
One of the conditions for OPEC countries is that they refine the bulk of the oil within their own countries, thereby allowing each country to protect its petroleum industry, and to a degree keep prices lower within the country.
For logging companies, that means no more mill closures, and more value-added wood products – if you cut and mill wood in one place, it makes sense to build furniture and fittings and so forth in the same place as well.
Right now the world market is in a recession, which means fewer people are buying wood and wood products. Yet companies are compelled to keep cutting to continue to get their share of their market, event if they’re not getting full value. In B.C., if companies are compelled to fulfil their annual allowable cut, knowing that they’re flooding the market, because they worry that their AAC will be lowered the following year.
An OPEC-like organization would recognize the lull and slow production to keep the high for our wood producers. It would recognize the tenure of forestry companies, and ensure those companies get the full market value for those tenures.
Although I understand the oil and forestry industries are very different (and a lot more complex) than I made them out to be, both are essential commodities, both are traded globally, both are relatively expensive to process, and both are limited in terms of supply. If OPEC worked for oil, I don’t see why an organization like OPEC couldn’t work for forestry. In any case, the forestry industry doesn’t have a lot of options left at this point and could hardly be married to the existing market system.
As things stand now, forestry isn’t working for anybody. Especially B.C.
