A month after a 10-year trade agreement on lumber from Canada expired, a coalition of U.S. lumber producers has filed a trade complaint over those imports from our northern neighbor.
The U.S. Lumber Coalition filed the petition with the federal Commerce Department and International Trade Commission on Nov. 25, seeking duties imposed on Canadian softwood lumber that the coalition says is dumped into the U.S. market.
The term “dumping” in this case refers to lumber sold at less than market value, and the coalition says duties would offset the harm that these imports have caused mills in the U.S. and the communities dependent on those mills.
Zoltan van Heyningen, spokesperson for the U.S. Lumber Coalition, said in an interview with the Beacon that the petition for relief was a necessary step to get the Canadians back to the negotiation table to hammer out a new U.S.-Canada Softwood Lumber Trade Agreement.
Under the 2006 bilateral deal, which ended decades of disputes over the issue, Canadian producers agreed to a quota on imports to the U.S. or to pay taxes on the goods shipped here. The deal expired in October 2015, and no trade complaints could be filed within a one-year window.
Now that the window has come and gone, van Heyningen said the petition was necessary because Canada hasn’t stepped up on the negotiations.
“Where we are today and the fact that we ended up filing cases is a direct result of Canada flat-out failing to engage in this process,” van Heyningen said. “It’s a compromise agreement. But we need something that works. Canada simply wanted something that only works for them.”
For its part, Canada has defended itself, with a spokesperson for Trade Minister Chrystia Freedia telling the Wall Street Journal that the “protectionist climate in the U.S.” complicates matters.
Essentially, the issue comes down to both countries having two very different systems of lumber harvest. Canada’s provincial governments own the vast majority of timberlands and provide trees to Canadian producers for an administered fee. That fee can run far below the market value of timber, van Heyningen noted.
In the U.S., where timberlands are typically privately held, the market determines price through public sales.
According to the U.S. Lumber Coalition, after the expiration of the Softwood Lumber Agreement, Canadian imports increased from 29.5 percent of total consumption in the U.S. in the third quarter of 2015 to 33.1 percent in the fourth quarter of the same year. Canadian imports in the first eight months of 2016 were 33 percent higher than over the same period in 2015.
“Nobody likes to have to file a trade case. But it was really the only way we could bring the Canadians to the negotiating table,” said Chuck Roady, general manager at F.H. Stoltze Land and Lumber in Columbia Falls and director of the Montana Wood Products Association. “There’s not much to bring them to the table, so we had to file a trade case to show them we mean business.”
Roady said there “isn’t a question” that U.S. lumber businesses, especially those in Northwest Montana, have been harmed by the Canadian imports. But a difference in systems doesn’t necessarily mean someone is in the wrong, he said. It comes to bear when logs from the two systems are sold in the same market.
“The Softwood Lumber Agreement is a mechanism to level the playing field,” Roady said.
Montana’s congressional delegation worked in a bipartisan push for negotiations with Canada to come to fruition, with Sens. Jon Tester and Steve Daines and Rep. Ryan Zinke meeting with Canadian Ambassador Gary Doer in October to urge a new agreement.
The coalition filing a trade case did not surprise Tester, who said it was “timely” and very important for the whole wood-products industry.
“The petition submitted should push the Canadians to go to work to get an agreement,” Tester said in an interview last week. “Now it’s time to get an agreement.”
Despite claims that Canadian companies have purchased into American companies, thus creating a less-united front when it comes to the agreement, Tester said from his perspective in Washington D.C., the timber and lumber industry is largely in lockstep seeking an agreement.
Van Heyningen said the same.
“It’s been one of many Canadian talking points,” he said. “The irony is it’s the exact reverse.”
Tester said he’s been in talks with the Canadian ambassador about the trade agreement, and that the Canadians said they have been hesitant to come to the table to support quotas for reasons that Tester thinks “are somewhat excuses more than reasons.”
“But the bottom line is that this petition really is the first step to bringing a suit,” Tester said.
Daines and Zinke said they support the lumber industry standing up and protecting itself through this petition.
“We need to fight aggressively for Montana jobs. Subsidized and unfairly traded lumber imports continue to severely harm Montana mills, workers and communities,” Daines said in a prepared statement. “We need to use every tool we have to put in place an effective and fair agreement that supports Montana jobs.”
“I applaud the U.S. lumber industry for taking a stand to protect and defend itself against unfair and devastating Canadian subsidies,” Zinke said in a prepared statement. “Montana’s timber producers are suffering. They deserve a level playing field to compete in the global market. They have every right to exercise their legal rights while the Canadians continue to drag their feet on creating a new agreement.”
Roady and van Heyningen said the next steps involve waiting to see how Canada responds. Tester said he thinks the petition will get the Canadians back to the negotiation table.
“It really is in the Canadians’ court of play right now,” Tester said. “I think that they need to step up.”
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