Softwood lumber, Canadian Establishment and Cuba
By Peter Ewart
Once again, the US Lumber Coalition, in league with the US government, is bullying Canada over softwood lumber trade. The Coalition has filed a petition requesting that the US Department of Commerce investigate Canada’s lumber exports to the US with a view to imposing steep new duties, as has happened in previous years.
At the core of the dispute is that Canada is subsidizing its forest industry by ‘giving away timber” to Canadian-based forest companies through low stumpage fees and other means.
However, the US government and Lumber Coalition face a major problem. Time and again, over many decades, the World Trade Organization, FTA and NAFTA review panels have ruled that the Americans have no case, that Canada has not been subsidizing its lumber industry.
The reality is that Canada and the US have two very different forms of forest land ownership. As a result of our British colonial legacy, most forest lands in Canada are owned by the Crown. In the US, the majority of forest land is privately owned, of which about 67 million acres are owned by forest product companies.
Forest companies in Canada pay a small royalty or stumpage fee to provincial governments for the right to harvest timber. In the US, royalties are paid, mainly through auction, to private interests in the form of a ground rent or absorbed into the final cost of lumber (if the timber is owned by the forestry company that processes it).
Generally speaking, Canadian forest companies and provincial governments have historically not found it in their interests to have forest lands owned privately. One of the problems for corporations is that privately-owned forest land ties up capital for long periods of time and can lower return on investment.
Under the Crown-owned land system in Canada, capital is freed up and more flexible, whereas in the US added value is sucked away in ground rent to landowners or, alternatively, forest company capital is tied up for decades. These factors are one of the reasons why US mills in the past have often lagged behind Canadian operations in productivity and technological development, and, as a result, have been less competitive.
For their part, Canadian provincial governments have preferred the Crown-owned systems because it gives them access to the added value created from forestry operations, which they can use for various purposes. In the US, this added value ends up in the pockets of landowners (often with no other connection to forestry production) in the form of ground rent.
So one thing is clear: Canada and the US have two different systems of forest land ownership and royalty collection, which is their right as sovereign countries. Yes, in Canada we have our own disputes about the way logs are priced, access to timber, tenure, domination of major licensees, and so on. But it is our sovereign right to work these things out ourselves, not some foreign country.
However, in their arrogance, US negotiators and lumber lobby insist that Canada must give up its forestry system to conform with the more backward US system. This constitutes a blatant interference in the internal affairs of our country. Following that logic, we could demand, in turn, that the Americans give up their system of private ownership and nationalize their forest land to more correspond with Canada’s. After all, their system of strangling industry with private ground rent seems to be much less efficient and competitive than Canada’s.
The American lumber lobby position is like claiming in trade negotiations that the medicare system in Canada constitutes a so-called government “subsidy” to companies and that we should conform to the abomination in the US known as Obamacare.
The irony is that, no matter what concessions and reforms Canada has made in the past as a result of US pressure, the American lumber lobby always demands more punitive tariffs once the price of lumber dips below a certain point. Indeed, it wouldn’t matter if we changed our log pricing and land ownership system to be exactly like the US one. The American Lumber lobby would always find some excuse to complain and impose tariffs and quotas against a more efficient Canadian industry.
Unfortunately, the US, as an imperial power, often makes such demands of other countries backed up by punitive duties, trade sanctions, blockades and other forms of bullying.
The problem in Canada has not been our stumpage pricing system or forest land ownership as some weak-kneed commentators claim and who, despite the WTO, FTA, and NAFTA panel rulings, insist on swallowing the line that Canada is dumping lumber into the US. Rather, our problem has always been whether or not our government negotiators will stand up for the interests of Canadian workers, communities, First Nations, and Canadian-based companies against the bullying and extortion of the Americans.
Unfortunately, the record of Canadian governments standing up to the Americans on softwood lumber has not been good. This is despite the fact that we have leverage because US companies cannot normally meet the huge US demand, i.e. US construction, housing and real estate interests desperately need lower-priced, high quality Canadian lumber.
Furthermore, we have some leverage in that we have other vital resources and products that American industry needs, along with political and military arrangements which can be terminated, a possibility to which President elect Trump himself has opened up the door with his critical comments on NATO and NAFTA during the recent US election campaign.
In that regard, it was unfortunate to see last week the spurious attacks of Canadian politicians and the Establishment media against Fidel Castro and Cuba. Since its revolution in 1959, Cuba has been a symbol of a country that has stood up to the US and its neo-liberal globalist agenda.
Just as the US demands to interfere in our internal affairs as a country over stumpage and forest land ownership, it has demanded that Cuba conform to the US dictate in political and economic affairs. Yet Cuba has never capitulated and has always stood proud. It is that feature of defiance that has irked the Americans the most and is at the root of all their slanders, blockades, and assassination attempts against Cuba and Castro.
John Diefenbaker, to his credit, was the Canadian prime minister in the early 1960s who refused to break off diplomatic relations with Cuba despite all sorts of threats and bullying from US president John Kennedy. Since then, our ongoing relationship with Cuba has been one of the few vestiges left of any form of Canadian independence by our politicians.
So it is disturbing to see that current Establishment media outlets and political leaders in Canada are so craven and eager to attack Castro and Cuba and thus prostrate themselves before the Americans. Is this prostration an indication of things to come in the upcoming trade negotiations with the US regarding NAFTA and Softwood Lumber?
In an unfolding world of Trump administration and “America First” hardball, Canadian politicians could well benefit from more Castro “grit” in the upcoming softwood lumber and NAFTA negotiations. They will need it.
Peter Ewart is a columnist and writer based in Prince George, British Columbia. He can be reached at: peter.ewart@shaw.ca
Comments
What utter twaddle! The ‘problem’ is that NO modern, industrialised country can BUY and FULLY PAY FOR all its own production from the amount of incomes distributed to its citizens in the course of making that production.
While it would be very foolish indeed for us to believe we could ever consume internally all the lumber we cut, or wheat we grow, minerals we mine, oil we pump, etc., which we clearly could not, if we are then trading all the surplus production of these goods we can’t consume here for alternate goods we can’t produce here, ones that we need and want, then we should be able to buy all THOSE goods from the incomes we’ve earned collectively producing these export surpluses. Without ever having to go deeper and deeper into debt, both collectively and individually. CAN WE? COULD WE EVER?
We blame the Americans for trying to protect their softwood lumber industry. Which, indeed, does normally incur a shortfall in filling US softwood lumber demand. A shortfall we are the most fortunately placed to make up. But that’s not good enough for us. We have to try to capture more and more of their market. What do we really accomplish doing this? We enslave the falling number of people who are still employed in our forest industry, we diminish our resource faster than it can be replaced, and by displacing American workers from cutting lumber they’d normally sell into their own market, we impoverish the very people we’re hoping to sell our products to. For what? To try to make a stupid, outdated financial system seem as if it works, when it can NEVER work! Lets look at the REAL issues here ~ ones we can solve. Not try endlessly to find a solution where there never will be one.
How does that “enslave” the people working for the forest industry? Last time I looked mill workers were very well compensated. You’re not going to be able to replace that income working at Tim Hortons….
It ‘enslaves’ them mostly in the sense that prices continue to advance far faster than incomes, Mercenary. Canadians, on average, are now $ 1.69 in hock for every $1.00 of disposable income they have left after taxes. Not because we’re all profligate spenders, but because, in many cases now, more and more of us are borrowing just to live.
It also ‘enslaves’ them in that each time the mill worker or logger gets a raise in pay our governments take a larger percentage of it in taxes. This, supposedly, is to try to subsidise those whose jobs have been displaced by advancing technology and automation, and are forced to try to make ends meet working at Tim Horton’s. Which we do in a variety of ways, none of them very well. And to keep those who aren’t even employable there, or other minimum waged jobs.
Bull-twaddle, Socredible, people who are that far in debt are there primarily because they live beyond their means. I’ve known quite a few of them. They love to spend, spend, spend on things like lattes, new wardrobes, tats, holidays to Mexico, pleasure craft, snow cats, new vehicles etc. They buy a house that is way fancier and bigger than they by mortgaging to the max. They aren’t frugal like previous generations. There’s no way a logger making $400 per day can be described as enslaved.
Sure, there are indeed the ‘profligate spenders’ amongst us, Dirtman. But where would our economy be if there weren’t? Just look at it now, when merchants are crying impending doom and gloom unless everyone maxes out their credit cards at Christmas time, and governments predict there’ll be tough times ahead unless there’s increased consumer spending. With rising unemployment, and all the rest of it. And then they knock themselves out trying to find some inflationary mega-project they can dig into, to distribute more dough to consumers before, well before, hopefully, the bills come due.
In testimony before a parliamentary committee very few years ago the then head of the Certified General Accountants Association said that people were no longer borrowing just to have the big ticket items, more and more were borrowing just to be able to afford to live! Does such an individual know nothing?
“There’s no way a logger making $400 per day can be described as enslaved.”
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What happens when he’s NOT making $ 400 a day? First of all, at that rate of pay, what he grosses is going to be a far cry from what he nets. And what he nets has simply allowed him to go further into debt. We can say he’s not ‘frugal’, which he probably isn’t. But what if he were? How long would it take him to save up enough dough to buy the things he’d like to have? Prices rise. And they rise, of necessity, at a faster rate overall than earned incomes do. When I started working in the forest industry at age 19, the wage for an entry level position pulling lumber on a green chain was $ 2.25 an hour. When I left that mill three years later to go into business for myself, I’d done most of the jobs in a sawmill and was making
$ 3.44 an hour running a debarker. Out of the wages I’d made, I’d lived and saved enough to buy and pay for a small house on two acres of land. $ 3,500 that cost. A nice sized house in town could be had for around $ 7,000 ~ $ 10,000. Try to do something like that now!
The price of housing and land has skyrocketed due to the law of supply and demand as well as a whole lot more regulations governing building. On top of that, new houses are ridiculously and unnecessarily large and loaded with options that simply weren’t there back in the day. But the price of most everything else has declined in constant dollars.
People are going into debt because they don’t have a frugal attitude and credit is so easy to get. 50 years ago hardly anyone could qualify for a credit card. Now even a pet dog can get one. Young people are growing up with an attitude of entitlement and are unwilling to deny themselves every little pleasure that comes along.
$400 per day still leaves you a good living after taxes. That’s what I was making when I retired. Now my income is a third of what it was and I still live very well. I didn’t spend money or go into debt for holidays to Mexico or Hawaii during break-up layoff, I didn’t go into debt for a vehicle, I bought used. My house is typical of the average worker 50 years ago, nothing fancy to say the least, but it’s all we need. When everything (including mortgage) is paid for, it’s amazing how fast the bank account builds. But young people look at the price of a house these days and get discouraged, and it’s so easy to blow the money that sometimes they do. Others, like my youngish relatives around town are more responsible and they bought houses.
Is there any subject on this planet that you CAN’T turn around into your incessant catterwalling about product vs output vs money earned vs money spent vs “how every economist in this world knows nothing about economies and they should ALL listen to you”. blah blah blah. Very very old.
Probably are a lot of them, Bent. As for the economists, well, they make a lot of predictions. Just like the weatherman. Only he’s probably right more often than they are. Maybe the problem with economists is that they’ve never studied accounting. Not most of them, anyways. And it’s the ‘figures’ of the accountants, not those of the economists, that are going to determine what’s going to be done.
It’s one thing to bash the stuffing out of our ” out dated financial system ” . It’s quite another thing to have a solution . What are your solutions ? In these times of worldwide disruptions of almost every industry , a few solutions would be more helpful than incessant complaining . The biggest welfare bums on the plant net $10,000,000 dollars U.S. Every minute of every day from all of us ( IMF number ) . Solution : end all subsities for all energy producers and let pricing win the day . Corporate welfare has to end .
Are you suggesting that subsidies for Electric Vehicles be stopped? And Solar/Wind subsidies as well?
I’m all for that!
You complain about “oil and gas industry” subsidies. Perhaps you should read this:
“IMF’s imagined $34-billion: Silly stats are behind claims that Canada subsidizes oil industry”
“The energy industry receives a small fraction of the $34-billion in subsidies it supposedly receives, and even that is vanishing”
ht tp://business.financialpost.com/fp-comment/imfs-imagined-34-billion-silly-stats-are-behind-claims-that-canada-subsidizes-oil-industry
Well, Ataloss, having a ‘solution’ to our problem first requires us to understand the problem. There is no way that we can FORCE the USA to buy more of our lumber simply because we think that’s needed to create more employment here. That’s as foolish as any manufacturer trying to tell his customers what they want simply because that’s what he wants to make. Henry Ford tried that once, with his Model T. “You can have one any color you like,” he said, “as long as it’s black.” That was almost as great a boost for Chevrolet sales as his refusal, a few years later, to have a car finance arm like GM did with GMAC.
The solution, to put it shortly, involves looking at WHY every country thinks it has to export more than it imports. Something which is a physical impossibility.
Interesting that you bring up the GMAC business model . That was the key . Musk has taken that to the next level . He gets your roof for nothing down and you get a break for a decade and a half . Nothing changes . Except the margins .
Yes , hart guy . All subsities . I don’t want any corporation putting their hand in my pocket unless I want them to . And yes I do read the IMF news releases . Do you ?
Well, you know, Ataloss, the little fellow that came up with the idea of ‘time payment’ for automobiles approached Ford first with the idea. And old Henry Ford, who had little use for ‘financiers’ anyways, practically threw him out of his office. The guy went over to GM, which was pretty small potatoes then, compared to Ford, and Alf Sloan, its CEO, recognised the opportunity instantly. Ford later had to follow suit, and Ford Motor Credit was born. But by then Henry’s outfit was already on its way to being number two, not number one anymore.
well, written. It is the truth of the matter. Don’t give away our forrest to the Americans. Companies come and go. The country, the province has a longer life span.
Let’s do a bit suffering now, and have long term gain down the road. We have the trees, they don’t. Slow the flow down to the states, their consumers will complain. Then they will need to drop the tariffs on their own accord.
They will not complain as other countries will increase their market share and it takes a while for Canada to get its market back once lost. Problem with trees is they grow back, and at twice the speed in the US. Construction does not care on the size of the tree rings
The whole argument is about a few percentage points of market share, just sign a deal already
That’s what we’ll likely end up doing, slinky. Then we’ll have to try to find a way to ‘rationalise’ what’s left of our forest industry. Which we’ll end up having to do in any case. Just as we’ve been doing for years already. The US industry runs the risk that if lumber prices get too high, substitute materials will take the “sawn lumber” share of the market. Weyerhaeuser did a study on this a number of years ago. The per capita consumption of “sawn lumber” products in the US peaked in 1900, and has been in steady decline ever since. There are a lot more Americans now than there were then, of course, but a huge number of items that used to be made from “sawn lumber” no longer are. And framing lumber could go the same way in the future if it isn’t kept competitive with other substitutes.
Trudeau and his goodie shoes need to be able to stand up to bullies.
Tree’s grow and can be logged in the Southern US after 30 or 40 years. Tree’s in Canada/BC take 80 years (more or less). So any idea that the US is going to run out of tree’s anytime soon is just hogwash.
With a measly 35 Million people in Canada we do not (as Socredible states) have a hope in hell of consuming what we produce, and we therefore MUST have trade with other Countries or we would be looking at some very serious downsizing.
Western Canada’s major lumber producers ie; Canfor, West Fraser, and Interfor, between them have 42 mills in the Northwest and South East USA.
Most of these mills were purchased in the past 10 years. So, do these companies know something that we don’t know.??? Are they hedging their bets.??
Without trade with the Americans who purchase a large percentage of what we produce we are dead in the water. We can try and increase our sales of our products to other Countries but until we do, we are basically at the beck and call of the US Market.
We’re going to be looking at some “serious downsizing” in any case, Palopu. The wood simply isn’t going to be there. Mills will continue to automate. The replacements for the two sawmills that were lost in the dust explosions will both produce considerably more BF per man per day than their predecessors, even though one of them, at least, has downsized in its overall output. We should start to think beyond the ‘job’ as our sole source of incomes. The ‘jobs’ are going to be displaced, and even if we had open access to the US lumber market, this would still be so. Far better those with a ‘conservative’ frame of mind realise this first, or we might just end up like Cuba!
For us here in the central interior of BC, the downsizing will be due to the decline in the usability of the beetle killed pine. It’s finally getting to the point where it’s not much good for anything but pulp, hogfuel and pellets.
That’s perfectly true, Dirtman. But on the Coast? The two major private forest land owners there, TimberWest and Island Timberlands are cutting their forests at an ever increasing pace. The timber being taken is smaller and smaller in diameter. And the former, if not also the latter, is like the Hawaiian sugar cane and pineapple plantation owners are nowadays. Finding there’s way more dough in being a real estate company than a tree farming one.
He spoke- Have to agree slow the flow. Its not like we have a never ending supply of fibre. We are not grain farming and can grow a new crop every year.
Our cut was ramped up to try and use as much of the dead pine as possible while it was still viable. That’s coming to and end and the BC Forest Ministry is working on just how much the allowable cut will be reduce. It will be a large drop in production.
Actually the solution is relatively straightforward. Put all timber up for competitive bid. The U.S. has repeatedly stated that this is their basic objection to Canadian limber- that stumpage is based on administrative decisions and not market forces. West Fraser, Canfor and Interfor all have more U.S. sawmills now than Canadian sawmills. About time to open up the market and get some new blood in.
That is just a side excuse, the main objection is market share
They can’t do that, Herbster. Mills up here would never be able to get financing if all timber were put up for competitive bid. We don’t have a large enough domestic market to absorb all our own lumber production, as the US does. And so we could easily be tariffed out of any foreign market we tried to ‘capture’. These need not even be ‘visible’ tariffs. Every country is quite adept at putting up ‘invisible’ trade barriers to keep out foreign products they don’t want taking too much of their home market.
That wouldn’t make any difference, herbster, the American producers would just find another reason to tariff our lumber. Like Slinky said, their real complaint is about market share, and every time the Canuck buck drops down to where it is now, we end up with more of it. Besides which, with so few forest companies in the area, who’s going to bid against Canfor? The stumpage would probably drop, and then the Yanks would really be pissed.
This softwood lumber dispute doesn’t bother me, and it shouldn’t worry anyone else, because the Conservatives have established a “mighty” softwood lumber task force, and MP’s Doherty and Zimmer are on it. ;-)
Maybe they should ask the USA to stop buying Russian softwood . Or perhaps ask China to stop buying Russian lumber and logs . And Europe as well . Did you know that our lodge pole pines are now being grown in Scotland because they are really fast growers ?
New Zealand too. And Douglas Fir in France.
They aren’t any faster growing than other trees, they’re just trees that give high quality lumber.
The British went on a major tree planting binge after World War Two, and a lot of the species planted were lodge-pole pine from Canada. They went all out in practising the latest in silvaculture, pruning, spacing, fertilising where necessary, etc. But when the trees were big enough to harvest they had so much money into them that their mills found it cheaper to import logs from the Third World. Some considerable amount of what had been planted in Scotland was exported, as logs, to Sweden of all places! Seems those ‘socialist’ inclined Scandinavian inhabitants of the one country that was supposed to do everything right had so severely overcut their own forests they couldn’t keep their mills going!
Sweden way over cut their forests and cleared the land for farming, but most of it wasn’t good farmland. So around the end of the 19th century, they instituted an intensive silvicultural program to reforest a large portion of the country with the target of getting a maximum monetary return from the forest industry. Most of the land is privately owned (I think only 30% govt. owned) and they’ve been very successful at it. Because a lot of government money went into the reforestation effort on private land, the government requires a return on their investment. Once the trees reach maturity, if they aren’t logged the land taxes go up. When it is logged, there are a minimum of two (up to 6) cuts, thinning out the stand as it grows, and clear-cutting is mandatory for the final cut. They are a major export of forest products.
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