Sunday, April 11, 2010

Discriminatory Softwood Lumber Taxes

Business sections of BC newspapers were reporting economic recovery for the forest sector and rising lumber prices. An added bonus is the reduction of the tax on softwood lumber headed for USA from 15% down to 10%. BC Minister of Forests is hoping that prices will rise even further prompting a further drop of the tax to 5%.

The forests of USA were heavily and in some cases wastefully exploited for a few decades around 1900. This example was one of the main reasons why a 1909 BC Commission on Forests recommended that BC keep its forests in public ownership and have them managed by a professional Forest Service. Forests in USA recovered toward the end of the 20th Century. American lumber producers had a home grown wood supply and wanted protection against Canadian imports.

Protectionism provides the motive for the tax, but we should not blame the Americans entirely. Protectionism is frowned upon and usually cannot be implemented unless you can prove that there is some unfair advantage being exercised. USA points to BC`s non market allocation of Crown or Public timber to a few forest companies as the unfair advantage. We are stuck with these discriminatory taxes because of our own questionable arrangements for managing and selling timber from our forests. While international protocol characterises the dispute between USA and Canada, the dispute is mainly between USA and BC. BC is the largest exporter of lumber to USA.

The Montreal Process, an international agreement on sustainable forest management recognises that discriminatory export taxes are a major impediment. Forest dependent communities and the public are supposed to be the beneficiaries of the public forest. The beneficiaries loose as a result of the export taxes. The beneficiaries also loose on the lenient non market arrangements between the BC Government and a few forest corporations.

A change in the arrangements for managing BC Public Forests with open competitive markets for public timber could revitalize our forest sector and free our wood exports from discriminatory taxes. Our forests and trade prospects are suffering under the present arrangements, and change is long overdue

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