Lumber pact may restore 'fair trade'

It's been a difficult pill to swallow - having Canadian lumber producers dictating trade terms for the U.S. market - but a recent softwood lumber agreement may help to resolve a long-running trade dispute between the two countries.

Some, of course, would argue that the Canadians did nothing wrong - and maybe they didn't - but what's been obvious all along is that the Canadians have had tremendous bargaining power in this fight. And it's even more obvious that the U.S. wood products industry has suffered mightily because of considerable Canadian trade advantages, along with domestic supply problems.

How is it that the Canadians have had so much leverage in a trade matter where the U.S. is the destination market? The answer, in an acronym, is NAFTA.

The North American Free Trade Agreement has given Canadian lumber producers, with their government backing them up, a legal line of argument that has led to some victories before trade review panels.

Meanwhile, U.S. lumber producers and their political backers have been arguing that "free trade" must come with a degree of "fair trade" that has been lacking when it comes to Canadian lumber production. Their position is that the Canadian industry has been subsidized by a system in which government-owned timber is made available in huge, long-term allotments to Canadian lumber producers, while American mills have to competitively bid for each and every public timber sale. And it's no secret that the U.S. Forest Service's timber program has shrunk considerably since the 1980s, largely due to a huge dose of environmental regulation and litigation.

The differences between the two systems have been most apparent at times when lumber prices have plunged. When that's happened, U.S. mills have had considerable market incentives to hold off on production, and considerably more difficulty in competing for timber sales on public lands. By contrast, Canadian mills flush with timber on the stump have actually ramped up production to compensate for lower prices.

When that's happened, lumber exports to the U.S. have only prolonged soft prices, a market factor that has contributed to the closure of many American mills.

So U.S. negotiators have long argued that softwood lumber trade has resulted in actual damages to the United States to support a steep tariff against Canadian imports. In Montana alone, there have been 22 mill closures since 1990.

Admittedly, each and every closures can be chalked up to a variety of different reasons.

But one of those reasons is the reality that the trade "balance" did not benefit U.S. lumber producers, while it did benefit their Canadian counterparts. Hopefully, the recent softwood lumber agreement will improve the situation for American lumber producers.