Softwood—Myths, lies and empty threats in election 2006

As the federal election heats up,Paul Martin, Stephen Harper and Jack Layton have all been talking tough aboutsoftwood lumber.

The rhetoric is thick, but more reminiscent of a fairy talethan a policy debate. If you believe the politicians -and the media and industryspokespeople-the softwood story goes like this.

Oneupon a time there was a beautiful country which believed in beauty, honour andfair play. This country was full of good hearted people that made their livingsas hewers of wood, sewers of crops and sellers of energy. Their major customerswere primarily located in the neighboring country to the south, which was thebiggest consumer of the wood, grains, vegetables and energy produced by theirnorthern neighbor.

Fordecades everyone was happy, until one day about twenty odd years ago when, accordingto their northern neighbor, the southerners got greedy. This started a tradedispute that has lasted decades and left both sides angry.  

Insteadof appreciating the northerners as good neighbors, the southerners slappedpesky tariffs on the products shipped south, arguing that the government in thenorth subsidized its companies by charging too little for raw materials likelogs.

Thenortherners cried foul, claiming that the southerners were bullies and wereimposing tariffs to protect their own producers. After a few veiled attempts atnegotiation, the northerners appealed to various trade bodies and the yearspassed.

Variousrulings came down mostly supporting the northerners (but the southerners won afew key rulings) yet the southerners refused to comply. The northerners huffed,and they puffed, and they threatened once, and they threatened twice. And whenthat didn’t work they threatened again, but little changed.

Like most fairy tales, themythology of softwood lumber described above has some basis in fact. But aswith most stories that have grown to legendary proportions much importantdetail is missing and/or has been distorted.

Let’s start with identifying thetruths.

  1. The U.S. is a trade bully.
  2. The U.S. is trying to protect its domestic producers.
  3. Canada has won most-but not all-of the trade panel rulings.

The biggest distortion is the Canadianclaim that trade panels have confirmed that Canadadoes not subsidize its forest products. The opposite is true and this partiallyexplains why the US is sticking to its position-saying that major reforms areneeded in Canada before it will withdraw tariffs.

In fact, virtually all tradepanels have ruled that the Canadian stumpage system (the way the Crown chargesloggers for Crown-owned timber) does confer a subsidy; they just disagree withthe US method for calculating the subsidy or have determined that the competingUS timber industry has not been “injured”.

Canada and BC subsidize logging througha variety of circuitous policies that offset the true costs of logging. But themain subsidy results from charging way too little for trees logged on Crownland.

The governments own data prove thispoint: in BC logging companies’ paid only 25 cents a cubic metre for over 36%of the trees logged from Crown lands. On Haida Gwaii-which is world renownedfor its huge spruce and cedar-companies paid only 25 cents a cubicmetre for over 51% of the magnificent trees they logged in 2004. 

Would you allow someone to log atree the size of the average Canadian telephone pole from your backyard andonly pay you a quarter?

I doubt it.

While most of us trying to makesense of the softwood dispute get lost in the maze of almost incomprehensibletrade laws and seemingly contradictory WTO and NAFTA rulings, to the heart ofthe matter we only need to focus on the low prices (stumpage) logging companiesare paying for our publicly owned wood to cut.

A direct comparison of prices paidfor logs, on both sides of the border, also highlights the below-market value(subsidized) prices paid in stumpage. An independent study which corrected fordifferences in the way each country scales (determined by the grade and size ofa log), has shown that “log prices forcedar and hemlock species are substantially lower in BC than in Washington andOregon.

In fact, BC charged only 41% to 53%of US prices (from 1996-2001) for Cedar I Grade logs. The analysis was carried outcomparing the selected comparable grades of Cedar, Douglas Fir andHemlock logs. BC’s prices for these grades were substantially less than theequivalent US grade in every comparison.

Canadasubsidizes logging. The sooner we acknowledge this and force our politicians tochange the stumpage system and other forest policies, the sooner we can solvethe softwood dispute and remove incentives that promote unsustainable loggingthroughout the country.

No trade panel can do this. It isup to us as concerned Canadians to hold our politicians accountable and to solvethe softwood dispute while we’re at it.

Once the stumpage system is changedto capture the true value of logs from public forests, the underpinnings forthe softwood dispute will disappear and the U.S.-tradebullies that they are-will have little chance of imposing tariffs. 

Despite the rhetoric frompoliticians and pundits, there are only two realistic options for solving thesoftwood dispute for the long term.

  1. A negotiated agreement that imposes quotas or a Canadian fee on exports, or
  2. Revising Canadian forestry laws to get rid of subsidies and ensure the true value of publicly owned timber is captured.

As a Canadian, I much prefer thelatter. Yet, have you noticed that our politicians have seldom mentioned it as a possiblesolution. 

I guess our politicians wouldrather blame the other guy, believing in fairy tales and the like.

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