Timber industry urges tariff on Canadian imports

For the first time in more than a decade, the U.S. lumber industry is again pushing to impose trade tariffs on Canada over alleged timber subsidies.

The petition to the federal Department of Commerce and the U.S. International Trade Commission was filed Nov. 25 by the U.S. Lumber Coalition, the trade group representing the nation’s softwood lumber producers.

The move to establish duties on Canadian wood products comes a little more than a year following the expiration of the 2006 Softwood Lumber Agreement between the two countries, which for nine years had established a lumber-products pricing system that ended decades of trade disputes between the neighboring countries. State-side timber interests have long complained that Canadian provinces subsidize their stumpage prices, or the cost of logs cut from public lands, allegedly allowing their neighbors to the north to under-cut domestic wood products manufacturers.

“While we think that an agreement that works is the best, at the same time, if there isn’t such an agreement ... our industry has no choice but to avail ourselves of the United States trade laws,” coalition spokesman Zoltan van Heyningen said.

The B.C. Lumber Trade Council, which represents the lumber industry in British Columbia, responded in a Nov. 25 press release that the American producers’ claims were unsubstantiated.

“While we are not surprised by the filing of petitions today by the U.S. lumber lobby, as they have long advocated for limiting Canadian access to the U.S. lumber market, we are disappointed that once again we are in litigation rather than working cooperatively with the U.S. industry to grow the market for wood products in North America,” council president Susan Yurkovich stated in the release.

Trade representatives between the two countries met several times in recent years to renegotiate a new trade agreement, but have so far failed to arrive at a compromise. The most recent softwood lumber deal reached its sunset last year, followed by a one-year “stand-down period” prohibiting new trade claims that expired in October.

U.S. lumber interests have advocated for a new trade deal based on a quota system, which would limit Canadian wood imports to a percentage of the overall U.S. market share.

In June, President Barack Obama and Canadian Prime Minister Justin Trudeau issued a joint statement laying out a loose framework for a workable compromise.

The provisions outlined in the statement included a structure “designed to maintain Canadian exports at or below an agreed U.S. market share to be negotiated,” which U.S. companies interpreted as a breakthrough in support of the quota. Little progress has been made since then, however.

“Canada has, from our perspective, completely backed off trying to create some kind of agreement,” van Heyningen said in an interview Wednesday. “That’s been extremely frustrating to us, because we’ve been working very closely with our government and feel that our government has been doing everything it can.”

The industry group’s claim alleges both a steady increase of subsidized Canadian lumber exports to the U.S. and resulting damages to American producers. The claim states that Canadian lumber’s market share in the U.S. have risen 4.6 percent in the past year, and that the overall volume of lumber products crossing the border during the first eight months of 2016 has risen by 33 percent compared with the same period last year.

Todd Morgan, the director of forestry industry research at the University of Montana’s Bureau of Business and Economic Research, said Canadian lumber producers have been slow to ramp up their exports to the U.S., but even a few percentage points are significant.

“It didn’t come as one big wave in October, November [of 2015]. It’s kind of been this gradual increase, whereas U.S. lumber production has gone up quite a bit less than that,” Morgan said. “Housing starts have gone up and the price of lumber has gone up, but the amount of wood coming over from Canada has gone up proportionally.”

New home construction is the main driver of U.S. demand for lumber products, and new housing starts have been slow to rebound to pre-recession levels despite steady gains since the recession.

IN ST. REGIS, the stud mills at Tricon Timber have been running at just one shift each day since last year, when the company laid off 90 employees in response to the lumber agreement’s then-pending expiration. At the time, the layoffs raised unemployment in Mineral County by more than 3 percentage points.

While he lays some of the blame for the operational cutbacks on a lack of a consistent timber supply, Tricon’s vice president of operations Calvin Sheahan said the absence of a trans-border agreement has contributed to keeping scores of locals out of work.

“There’s 90 jobs sitting here at this mill, if we could get the prices right, if we could get the logs,” he said. “There’s more volume out there and it’s simple economics that volume is going to drive the sale price down. If the log price doesn’t match that, every log we cut at that point we cut at a loss.”

In particular, Sheahan said rising imports have driven down prices on products fashioned from lodgepole pine, a staple of the wood products industry in Northwest Montana. Chuck Roady, general manager of Stoltze Land & Lumber Co. in Columbia Falls, agreed that northern U.S. producers have been historically hard-hit by the absence of trade deals.

“It’s been pretty tough over the years on those companies close to the border that cut the exact same products and species as the Canadian mills,” Roady said. Stoltze has been struggling to keep a second shift of workers on at its mills, he added, and believes the local production slump has been exacerbated by Canadian imports.

“They go to our long-term customers and they say, ‘We’ll sell you these boards for this much less,’ and they gain market share.”

A veteran of the lumber industry for more than three decades, Roady has seen several trade deals come and go, punctuated by cross-border trade skirmishes. While he believes the Canadian provinces do in fact subsidize their logs, he blames the lack of a new softwood agreement rather than the Canadian producers themselves.

“It’s not to say either system is wrong or right, it’s just totally different and it hurts the U.S. when they sell into the same market,” he said.

ACCORDING TO the University of Montana Bureau of Business and Economic Research, the forest products industry employed more than 7,600 Montanans in 2015. Given the industry’s prominence in the Treasure State, Montana’s congressional delegation has been pushing U.S. trade representatives in recent years to find a compromise.

The joint statement in June from the two heads of state briefly fueled optimism that a new deal was within reach. But many industry analysts have since abandoned the notion that a new agreement will be inked before Obama leaves the White House.

Trudeau has indicated he’s willing to work with President-elect Donald Trump on trade issues. But with Trump’s cabinet picks still being announced, and the overall uncertainty surrounding the Republican businessman’s policy positions on trade, politicians and industry representatives are left unsure how negotiations will proceed once the new president takes office.

“Right now, there are a lot of folks that are trying to look into a crystal ball to decide what Trump is going to do and what Trump is not going to do,” said Sen. Jon Tester, D-Mont. “I think it’s important that we give him the chance to lead and work with him.”

His counterpart in the upper house, Sen. Steve Daines, R-Mont., included a request that the incoming administration “fight for a level playing field for our producers” in a Dec. 6 open letter to Trump.

Tester did express confidence that the fresh trade complaint will help pressure the Canadian government to return to the bargaining table, a sentiment echoed by Morgan.

Van Heyningen noted that the process for the U.S. government to fully implement duties would likely take at least a year.

And Canada has pledged to fight, meaning international trade courts are unlikely to resolve the issue anytime soon. Meanwhile, players on both sides have stated their preference lies elsewhere.

“I’ve been friends with a lot of people in the Canadian industry for a long time, and it isn’t jeopardized by this, but it certainly makes it a little tense,” Roady said. “I just hope we get one done. I really want to get a new softwood lumber agreement. Nobody likes these trade claims.”

Reporter Sam Wilson can be reached at 758-4407 or by email at swilson@dailyinterlake.com.