Conflict timber : it is not out of the woods!

News 15 December, 2017
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    Alexandre Moreau

    Friday, December 15, 2017 15:40

    Friday, December 15, 2017 16:24

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    The american Commission of international trade recently concluded that imports of canadian lumber were prejudicial to american producers. Thus, countervailing duties and anti-dumping duties confirmed by the department of Commerce of the United States (USDC) last November should remain in place for the next five years.

    Since last spring, canadian companies have paid out more than $ 500 million in customs duties, and there is every reason to believe that the situation will not be resolved in the near future.

    For the coming years, rates of about 20 % will apply to most canadian producers, with the exception of Irving, New Brunswick, who will have to undergo rates of approximately 10 %. However, the american Commission has rejected the decision of the USDC to impose anti-dumping duties retroactively, rejecting the argument that the canadian business practices had put us growers in a critical situation.

    The current situation is reminiscent of the last softwood lumber crisis, which began in 2001, and for which tariff rates ranging from 10% to 35% had been imposed, and which was finally concluded by an agreement five years later. During this period, Canada had used the legal tools provided in the framework of the NAFTA and the WTO. The government had finally won the case through the mechanism of the legal review provided for in the NAFTA, and the u.s. government had been forced to refund the fees collected.

    Recently, the canadian government has formally requested world trade Organization consultations with the United States to resolve the current conflict, in addition to carrying out in parallel a legal challenge under chapter 19 of the NAFTA. The situation is different today since this mechanism is challenged by the Americans in the framework of the renegotiation of the agreement.

    To understand the magnitude of the situation, it is necessary to know about the strategic importance of the u.s. market for the canadian forest industry. Historically, canadian exports of softwood lumber permit to fill approximately 32 % of u.s. consumption. In 2016, three-quarters of the approximately $ 10.1 billion of canadian exports of softwood lumber were destined for the american market. Therefore, it is more than 24 300 direct and indirect jobs that depend on specifically free access to the u.s. market.

    This may seem small relative to the size of the canadian economy, but the loss of an equally important market could ensure that several factories have insufficient production to ensure their profitability. In addition, jobs related to the harvest and to support activities to forestry are mostly dependent on sawmills, which produce, in particular timber. In Quebec, the latter consume over 80 % of the volume of wood harvested in forests.

    Also, all of the plants of the forest sector is intimately connected to those of the sawing, since the residues and chips from the transformation represent the major part of the supply of pulp and paper mills, more than 60 % in Quebec. The closure of the sawmills could therefore trigger a cascade of job losses that would hurt the hundreds of communities that depend exclusively on the forest to survive. Across Canada, the forest sector accounted, as of 2016, more than $ 23 billion in economic activity, 211 000 jobs and 7 % of total exports of goods. The damage to the canadian economy could, therefore, go well beyond just the jobs related to the export to the United States.

    For the moment, the favourable market conditions maintain the price of the lumber at a relatively high level. This allows producers to compensate for the imposition of tariffs in the refilant the increase to american consumers. However, one can hardly assume that these conditions will continue throughout the legal process, he will not be resolved anytime soon.