B.C.’s government and forest industry are disappointed but not surprised at the latest trade action launched last Friday by the U.S. lumber industry.
The U.S. industry has been free to launch new trade actions against Canada since October – which marked the end of the one-year standstill period after the last softwood lumber agreement expired.
Minister Thomson received the news as he began his annual forest products trade mission to Japan last Friday.
“We are disappointed that the U.S. lumber industry has petitioned its government to launch trade litigation,” Thomson said. “We encourage the U.S. government to review previous cases and determine that the U.S. industry allegations against Canada are unfounded.”
Steve Zika, Chief Executive Officer of Hampton Affiliates – company that owns Babine Forest Products and Decker Lake Forest Products -, was also in Japan with minister Thomson’s trade delegation when he heard the news.
“If tariffs are established next spring, it will definitely have a negative effect on our Babine and Decker Lake operations,” he said. “The nature of the effect cannot be determined until we know what duties are imposed and other factors such as the strength of the U.S. housing market, currency exchange rates and the state of the Asian lumber markets.”
“In previous softwood trade battles, Canada has prevailed in world courts and dispute resolution bodies so it is unclear what the ultimate resolution will be,” he continued. “We hope that when the U.S. better understands the market reforms put in place in British Columbia, there will still be an option to negotiate a settlement that is fair to both countries.”
“I don’t think anyone was surprised that the U.S. [Lumber] Coalition filed the trade petition, but it is unfortunate that a negotiated solution has not yet come to pass,” he added.
The U.S. remains B.C.’s largest lumber customer, although Japan, China, India and other markets have improved in recent years.
Susan Yurkovich, president of the B.C. Lumber Trade Council, is also on the Asia trade mission, aimed at reducing B.C.’s dependence on the U.S., which still buys half of B.C.’s export lumber.
She said the industry will “vigorously defend” against the latest trade action, and agreed with Thomson that a new “managed trade” agreement with restrictions on Canadian lumber exports is the most likely compromise.
“Similar claims were made in the prior round of trade litigation and were ultimately rejected by independent NAFTA panels, which concluded that Canadian lumber is not subsidized and did not cause injury to the U.S. industry,” Yurkovich said.
The U.S. Lumber Coalition alleges that Canadian provincial governments provide standing trees to Canadian producers for an administered fee that is far below the market value of the timber, as well as a number of other subsidies. In addition, the coalition alleges that Canadian lumber is being sold for less than fair value in the United States.
The U.S. Department of Commerce is responsible for conducting trade litigation, and is expected to decide by mid-December which industry allegations it will investigate. New tariffs can’t be imposed until six months after a formal complaint is filed.
– With files from Tom Fletcher