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October 27, 2017 7:49 pm

Softwood Lumber – Trump admin to further squeeze Canadian manufacturing?

Tuesday, December 13, 2016 @ 5:45 AM

By Peter Ewart

Are the current softwood lumber trade negotiations between Canada and the US just another predictable chapter in the long history of softwood disputes?  Or is there more going on here?

Certainly, the election of Donald Trump as US president has added some new features to the dispute in which the US side claims (despite being repeatedly overruled by NAFTA and WTO panels) that Canada is subsidizing its lumber exports.

Paul Quinn, of RBC Capital Markets, early last Summer predicted that, if Hillary Clinton was elected, the Canadian softwood industry could expect to face countervailing duties of about 25%, causing at least 5 BC mills to close and curtailing production at others (1).

However, now that the Trump administration will be taking power instead of Clinton, Quinn has ramped up his prediction to 30 to 40%, duties that would hit the BC and Canadian industry extremely hard and would likely result in more mill closures, job losses and challenges for communities (2).

According to Quinn, Trump will be particularly tough with Canada on the softwood issue so as “to set the tone with other countries” and “position himself well for larger disputes with Mexico and China.”  In other words, a punishing Softwood Lumber Agreement imposed on Canada would be a trophy to be flaunted by the incoming Trump administration and its America First policy.

Of course, there is some irony in all of these claims about an “unfair” Canadian advantage in that, currently, the forest industry of the US South has the highest profit margins in North America.

Quinn believes that the dispute is not really about subsidies, but rather the value of US timberlands held by giant forestry companies like Weyerhaeuser who want to ramp us the value of these privately-owned lands by restricting Canadian imports and jacking up log prices (3).

The Wood Markets publication argues that the end game of the US lumber Coalition and US government is to “curtail Canadian sawmills and reduce Canada’s share of U.S. consumption” and to “marginalize” the Canadian forest industry, its largest competitor (4).

How could the US side achieve this?  First of all, by demanding a substantially diminished quota on Canadian exports.  Secondly, as forestry analysts Harry Nelson and Ngaio Hotte point out, by using legal challenges to block the ability of Canadian federal and provincial governments to make investments “in forest stewardship, competitiveness and innovation” on bogus grounds that this constitutes an unfair subsidy (5).

In other words, right at a time when forest science and technology is on the leading edge of developing and manufacturing a variety of new, innovative products and extracting more value from wood, the US side wants to diminish the Canadian forest industry further, limit its horizons, and strangle its innovation.

According to Nelson and Cotte, even such a program as the BC government’s current Forest Sector Strategy (6) could be a target.  As former US senator Rick Santorum revealed recently, the Trump administration plans to aggressively lure away Canadian manufacturing jobs, while reducing Canada to a supplier of raw materials (7).

If a Softwood Lumber Agreement is rammed through that is unfavorable to Canada, who will benefit?  As in previous agreements, the most powerful corporations on both sides of the border.  In that regard, the US forest companies that own vast timberlands most of all.  But in second place will likely be several giant Canadian companies, which by investing heavily in mills in the US South, have now been transformed into North American corporations.

The losers?  Small, medium and independent Canadian companies that have substantial trade with the US will be hit the hardest, making them vulnerable to being driven out of business or scooped up by the larger “North American” style corporations operating in Canada.   In addition, the US housing, construction and other industries that utilize wood will suffer from jacked up prices putting a damper on economic recovery.

In light of all these developments and possibilities, what might be a road forward for Canada?  On softwood lumber, the US has shown itself to be a fickle and unreliable trading partner, and the theory of continental integration nothing but a trap, the end result being Canada reduced to a US warehouse for raw materials.  Experience has shown that we cannot base our manufacturing strategy solely on trade with the US or under its thumb.

In the last few years, other forest product markets, especially in Asia, have been further developed which is positive.  However, we also need to think in new ways.  For example, why not the creation of a forest product marketing board that could negotiate trade and pricing with a variety of countries around the world?

That being said, we not only need diversity of markets, we especially need more diversity of product, i.e. extracting more value from our vast, rich forest resource.  Why not establish forest tenure policies that foster such advances?  Furthermore, why not hive off a portion of stumpage fees to communities for local economic and infrastructure development?

In other words, we need our own community, province and nation-building project based on natural resource processing and manufacturing.  Critical to this is advancing our own scientific, technical and research infrastructure to be a world leader in all facets of forestry and forest product development.

Thus, it is imperative, if and when, a new Softwood Lumber Agreement is signed, that Canada does not agree to any US imposed limitations on Canadian government (both federal and provincial) investment in forest stewardship, science, technology, and innovation or to changes in our system of forest ownership, management and log pricing that hurt us.  To do so will be to surrender our sovereignty as a country.

Today, more than ever, we need our own path forward.

Peter Ewart is a columnist and writer based in Prince George, British Columbia.  He can be reached at: peter.ewart@shaw.ca


  1. Quinn, Paul. “SLA trade file update confirms significant headwinds ahead.”  RBC Capital Markets.  June 30, 2016.
  2. Quinn, Paul. “Trump targets softwood lumber.”  RBC Capital Markets.  November 17, 2016.
  3. Quinn, Paul. “Softwood lumber negotiations continue.”  RBC Capital Markets.  October 14, 2016.
  4. Wood Markets. “Potential import duties in 2017 could marginalize many Canadian sawmills.”  September 22, 2016.  https://www.woodmarkets.com/potential-import-duties-2017-marginalize-many-canadian-sawmills/
  5. Nelson, Harry & Ngaio Hotte. “Two ways to settle the latest Canada-U.S. softwood lumber dispute.”  Globe & Mail.  November 9, 2016.
  6. BC Government. “Our natural advantage: Forest Sector Strategy for British Columbia.”  April 12, 2012.  https://www.for.gov.bc.ca/mof/forestsectorstrategy/Forest_Strategy_WEB.PDF
  7. Ewart, Peter. “Will the Trump administration view Canada as its 21st Century colony?”  250 News. November 21, 2016. https://www.250news.com/2016/11/21/will-the-trump-administration-view-canada-as-its-21st-century-colony/




I think Trudeau will be the far bigger threat to the BC forest industry than Trump. He will sell our industry out to get consesions in places like Atlantic Canada and Quebec, just like last time.

My thinking on this is that Trump wants out of the Middle East and the 6 trillion it has cost America since 9/11. He talks of this all the time but is silent on new tarrifs for Canada. Trump wants North American energy security so America can have full sovereignty in their foreign policy against the globalist so. He is prepping for war with the global banksters surrounding himself with big oil.

Trumps strategy needs Canadian energy as we are the source of 60% of American energy imports and critical to his strategy of North American energy independence. He appointed the head of Exxon as Secretary of State to secure his policy, and a pro Keystone guy to head the EPA.Trunp has been a loud advocate for Keystone going ahead to secure Canadian oil.

We simply need to tell him it’s a two way street and if he threatens Canadian softwood lumber imports with a tariff then we will impose an export carbon tax on energy. Simple as that. Follow the law as deliberated by previous tribunals or it’s a full blown trade war. Trump respects a well founded argument and appreciates energy security and cheep building materials for the US construction industry… Tie in some favorability in relation to his foreign policy objectives and the deal maker in him will come around.

Problem is, like Joe Biden said last week Trudeau will be the stick in Trumps foreign policy and he will relish this partisan role at our expense.

The best thing we could do as a province is reinstate the local auprentacy rules for local logs, to limit log exports from local regions… Say 200km ish. This is essential to protecting rural BC and then implement better provincial management of our forests with all Crown logs flowing through local log markets with a base price that can be budded up by any new entrants.

We need to move away from monopoly capitalism and back towards free enterprise with equal opportunity to do business by anyone willing to bid the market price for logs. Trump is anti monopoly and his view of the BC industry especially as profiting from monopolistic practices will be the Trojan horse that kills us.

Logging companies today, truckers, equipment owners, foresters… All at the beckoning whim of monopolistic forest companies that divide and contour and set policy and prices with complete disregard for the market forces of other players they subcontract from.

Build a government agency to oversee the Crown forest lands in opening up opportunity for small business contractors to bid on harvesting jobs, and then have the forest companies bid through Crown log yards for the raw logs, or bush grind, or chipping logs… And allow market forces to innovate and expand through certainty to access the natural resources to the highest bidder. This provides a degree of separation from the monopolistic forest companies and the small business harvesters, as well as leaves the door open for any new forest companies looking for access to fiber (in local market areas).

It seems like a no brainer to proceed, but with monopoly forest companies financing our government we are all held hostage to the banksters on Wall Street that own all our monopoly forest companies.

We are their puppets unless we all stand up for free enterprise in our forests.

    Both your heroes trump and Putin will be desiding our softwood fate . They will use the massive wood industry in Siberia against us . Prepare to get hammered . Any “deal ” one makes with these two fascists will leave us with very little , if anything at all .

    What does the ‘F’ in NAFTA really stand for if one particular country can slam the other two partners any time whenever convenient with punishing tariffs?

    It all sounds good, Eagle. Til it comes to the FINANCING. Show me a modern sawmill that’s going to have unfettered access to needed capital, not just to build it, but to continue to operate, WITHOUT a secure timber supply. IF we had a large enough domestic market that could absorb all or even most of our lumber output it MAY be possible. But we DON’T. Currently we HAVE TO export, and into global markets that are generally awash with the same products we’re able to dump into them available from a multitude of places. You can’t finance a mill solely on ‘open market’ bidding. No matter how innovative you try to be. Not long term. Simply will not work.

Backed to Quebec being the only important province in Canada…is it being subsidize? We have a part time drama teacher with his only take on economy that you can spending our way out of debt, a budget balances itself. Someday going down to negotiate with someone he looks down his nose at. Better have his hair all done up for this one.

“In the last few years, other forest product markets, especially in Asia, have been further developed which is positive. However, we also need to think in new ways. For example, why not the creation of a forest product marketing board that could negotiate trade and pricing with a variety of countries around the world?”
That was tried once, under the Tommy Douglas CCF/NDP government, in Saskatchewan. It led to a mass exodus of northern Saskatchewan sawmillers to British Columbia. Bob Williams, former NDP Premier Dave Barrett’s Forest Minister was poised to set up the same thing here back in the early 1970’s. It was one (of many) reasons that hapless government went down to defeat.

“That being said, we not only need diversity of markets, we especially need more diversity of product, i.e. extracting more value from our vast, rich forest resource. Why not establish forest tenure policies that foster such advances? Furthermore, why not hive off a portion of stumpage fees to communities for local economic and infrastructure development?”
Have you ever tried to ‘value add’ anything that’s already valuable, Peter? It’s the kind of notion that holds that a large, valuable gemstone, say like the Hope diamond, could be made more valuable by cleaving it into a number of smaller diamonds simply because the work and wages of the diamond cutters would be multiplied. But will the smaller stones, when they’re all faceted and finished, ever add up to the price that could’ve been had for the one big one? ‘Value adding’ has it’s best success when the raw material has little or no initial value. Then you can add some to it. If it’s high priced to start with, all you’re going to add is further cost that becomes ever more risky to recover in price.

Peter Ewart:-“For example, why not the creation of a forest product marketing board that could negotiate trade and pricing with a variety of countries around the world?”
This, as I mentioned above, was tried once in Saskatchewan. Various private schemes along the same lines have been tried in BC and elsewhere. One, Seaboard Lumber Sales, was successful for many years. It had amongst its members a variety of sized sawmills, from some of the largest majors like Canfor, to relatively small export oriented one mill only players. The ‘problem’ with this approach is that, just like when ‘marketing boards’ have been tried in agriculture, they do nothing to control a producer’s costs. Which continue to rise, often times at a faster pace than the return from his product does. Companies are hemmed in by their ‘quota’. The only way they can control those rising costs then comes down to the acquisition of MORE ‘quota’. By buying some other player’s. That’s the only way open to them to reduce their ‘unit costs’. By producing more ‘volume’. This leads to the very type of corporate concentration that we’re trying to avoid. And it often ends up as being a concentration of the inefficient, which ultimately leads to a demise of the producers.

Peter Ewart:-“Furthermore, why not hive off a portion of stumpage fees to communities for local economic and infrastructure development?”
What kind of stumpage fees is the BC government getting from beetle killed pine? Two-bits a cubic meter? Doesn’t seem like there’s too much room for any ‘hiving off’ if that’s the case.

I once listened to a speech given by a former leader of the BC Green Party, Ms. Carr. She railed that companies were getting Crown timber for that low a stumpage charge. That it was terrible. She didn’t specify what kind of wood, or why.

My company was getting timber from a local woodlot operator ~ all the blowdown that occurred every time they tried to do their small, selective harvest thing. They’d open up a little patch here, and there, all over their claim. Then the wind would come up in the winter and blow down as many trees around the edge of these openings as they’d selectively taken out. Might as well have clear cut it.

By the time they got back to harvest the blowdown the ambrosia beetles had holes in it. And when it went to the log dump, those logs were culled. No one could tell how far the beetles had gone in. So they cried to the Forest Service and got that wood for 25 cents a cubic meter.

We took it, and paid them on the actual ‘good’ lumber output tally. Most of it, the bug holes were only in the sapwood, which generally wasn’t very wide on their smaller logs. On the faster growing, larger trees, with wider sapwood, they’d gone in a long ways. A scaler wouldn’t have been able to tell, and even at that low a stumpage rate, they’d have got nothing for those logs if they’d been paid for on the scale.

There is NOT a lot of margin in the lumber business. Never was.

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