U.S. trade rep to join fray over cheap Canadian softwood

Posted Oct. 08, 2010, at 9:44 p.m.

The federal government’s foreign trade watchdog announced Friday that it will intervene in a softwood timber industry conflict over boards from western Canada selling for less in New England than timber sawed in Maine.

In Maine, a truckload of softwood trees might cost a mill, such as Moose River Lumber in Jackman, approximately $2,700. In British Columbia, that same load might be as cheap as $15 — or possibly even free.

According to members of Maine’s congressional delegation, that’s a violation of a 2006 agreement between the U.S. and Canada that is supposed to level the playing field between the government-subsidized system in Canada and the free market here.

“We call it ‘crown timber,’” said Steve Banahan, sales manager for Moose River Lumber, which employs 75 people in a region of Maine that is starved for jobs. “The way the Canadians are pricing those logs is creating an unfair advantage.”

In the past two years, Moose River Lumber’s market has shrunk — and not just because of the U.S. recession. As retailers along the eastern seaboard purchased more and more British Columbia lumber, the Jackman company was forced to abandon some of its Southern accounts and pull back to New England.

“It’s just forced us back into our corner,” said Jeff Desjardins, Moose River’s general manager. “Raw material is our No. 1 cost.”

U.S. Trade Representative Ronald Kirk announced Friday that he has started a dispute settlement process that is laid out in the 2006 Softwood Lumber Agreement, a document that defines that industry’s trade relationship between the U.S. and Canada. If an initial 40-day round of talks doesn’t resolve the problem, it will be settled in an impartial court of arbitration in London.

Informal talks between the two countries in recent months were unsuccessful, said Sen. Olympia Snowe, R-Maine, who said she has been pressing Kirk to intervene since he was appointed in 2009.

“We cannot allow the Canadians to make this kind of incursion into the lumber industry,” Snowe said. “It’s very important from a credibility standpoint that our government demonstrates that it has the capacity to uphold these agreements.”

British Columbia Forests and Range Minister Pat Bell said Friday in a press release that he was “disappointed that the U.S. is initiating arbitration.

“British Columbia has always honored and continues to honor its commitments under the 2006 Softwood Lumber Agreement,” Bell said. “The continuing protectionism from U.S. lumber producers reveals the importance of developing new markets for B.C. wood products, such as we are doing in China.”

According to Snowe, Kirk and others, British Columbia timber manufacturers are buying cheap Grade-4 logs — the grade usually reserved for products like wood pellets and paper pulp — and using it to produce dimensional lumber. Because most of the land they harvest from is owned by the British Columbia government, the cheap prices are in essence a subsidy that gives the Canadians an unfair advantage over U.S. states and even other Canadian provinces, said Snowe. The British Columbia mills then ship the lumber south and east on railroads that are also government-subsidized, driving the price further below what other mills can compete with.

“The British Columbia government is effectively funneling back hundreds of millions of dollars in collected export fees to B.C. producers,” said Steve Swanson, chairman of the Washington D.C.-based Coalition for Fair Lumber Imports, in a press release. “British Columbia’s stumpage practices depress already weak lumber markets at a cost of U.S. jobs in communities that can least afford such losses.”

Jeff Easterling, president of the Maine-based Northeast Lumber Manufacturers Association, said industry officials throughout New England agree that British Columbia is violating the Softwood Lumber Agreement.

“Hopefully these negotiations will have an impact on those who are breaking the rules so everyone can compete on a level playing field, which is all the industry here wants,” he said. “We don’t mind competition.”

British Columbia loggers have been harvesting softwoods as fast as they can — and not just to increase profits. The region is fighting an infestation of the mountain pine beetle, which threatens to decimate several species of pine trees — causing mills to increase production when the demand for lumber is slumping along with the U.S. housing market.

“It makes the price of their product much lower,” Easterling said. “That sounds good to the consumer, but what that does is drive out all of the U.S. industry so it’d eventually be a Canadian monopoly. When you have British Columbian lumber being sold in Boston cheaper than it can be coming from Maine, something’s wrong.”

Snowe said she hoped the dispute resolution process started by Kirk will determine “the extent of the injury” to U.S. interests and force the Canadians to repay it.

“That’s very good news,” said Luke Brochu, president of Pleasant River Lumber in Dover-Foxcroft, which employs about 85 people. “We’ve been having to deal with unfair competition from Canada and the western province of British Columbia for a long time.”

U.S. Rep. Mike Michaud of Maine applauded Friday’s announcement.

“This is an overdue, positive first step,” the 2nd District Democrat said in a press release. “For mills in Maine, enforcement of this treaty is literally a matter of keeping their doors open or not.”

Snowe said lumber is one of several industries that suffer because of differences between the U.S. and Canadian governments. Another notable example in Maine is the fishing industry, which she said abides by far stricter environmental standards than the Canadians do and competes against government-subsidized fleets and processors. Snowe said she’s bringing a measure to Congress in the next session that will ease those disparities.

“These two industries represent the lifeblood of so many communities in our state,” Snowe said. “It’s absolutely pivotal that we do everything possible to sustain them.”

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