Wednesday, January 25, 2012

USA - Canada Softwood Lumber Agreement

The contentious USA- Canada softwood lumber agreement will be extended to October 2015. Meanwhile USA is claiming damages of $499 million before the London Court of International Arbitration under the agreement. This trade problem will continue until the underlying problem is fixed.

Forests in USA have recovered from previous exploitation and US lumber producers have supplies of timber. Canadian provincial governments allocate timber from Crown or public forests to forest companies at administered prices. A lack of open markets for Crown or public timber, makes Canadian softwood lumber exports vulnerable to claims that timber is sold at below market prices and constitutes a government subsidy. The $499 million claim focuses on BC's salvage prices for pine killed by the mountain pine beetle. BC accounts for approximately 60% of softwood exports to USA, so the lumber agreement is really a USA- BC deal looked after by the federal Canadian government because international trade is the Canadian Government's job under the constitution.

US lumber producers think that the BC system is unfair to them. Actually, the people that get dinged the most under the present system are the public of British Columbia. We paid the bill for decades of fire fighting in the interior of BC to save pine from fire. Meanwhile forest companies did not harvest enough pine so huge areas of pine got old. Mountain pine beetles like old pine and they went through about $100 Billion dollars worth of our timber.  The BC Government reduced prices for dead and dying pine as an incentive to save a small percentage of timber from waste. If USA gets its $499 million, it just adds another half a billion to the waste. Only another one half percent of what has already been wasted.

The BC public, the owners of BC's Crown forest, should view the softwood lumber agreement as an arrangement for discriminatory tariffs on BC lumber exports. The Montreal Process, the international agreement on sustainable forest management points out that the economic framework should promote non discriminatory trade in forest products. BC's economic framework turns our public forests into a non market timber supply barrel for forest companies. Therefore our forest products are vulnerable to discriminatory trade tariffs and taxes.

The real fix for this trade problem is to get forest corporations out of our public forests and return them to independent professional management with timber being sold on an open market. Public forests were intended to encourage a competitive vibrant wood manufacturing industry by ensuring that all entrepreneurs had access to public timber on an open market. Instead public timber is controlled by an oligopoly of forest companies.

Probably the best business model for returning BC public forests to independent professional management is to devolve their stewardship to Local Forest Trusts. These trusts would have a locally elected board and professional forest resource managers. A trust would operate on a large area of local forest landscape as a business and sell wood in the form of manufactured logs on an open market. It would provide independent business like management for the public shareholders. The system is democratic. It would be better for the people of BC and Americans could find no complaint with such a market based democratic system. There would be no need for any softwood lumber agreement.

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