Softwood agreement

With the Softwood Lumber Agreement between the United States and Canada set to expire at the end of March, Congress is again looking for ways to settle a decades-long dispute over whether provincial governments in Canada subsidize the lumber industry there by providing low stumpage fees. This issue, always complicated, grows even more difficult this time by the growing insistence of a Canadian ally.

The 1996 agreement held Canadian provinces to exporting 14.7 billion board feet of duty-free lumber to the United States, about 91 percent of the previous year’s level. Export taxes would be applied after that. Canada didn’t like it and, neither did many in the United States.

Throughout the 1980s and through 1996 when the agreement was signed to end a series of countervailing duty petitions against Canada, the conflict had been seen as a fight between U.S. lumber and the Canadian government. However, homebuilding associations here, warning that higher housing costs would deny hundreds of thousands of people a chance to own a home, became more active and now have clearly gotten their message across to Congress.

Resolutions in the House and Senate last session called for the agreement to be allowed to lapse. The resolutions attracted bipartisan support, with 118 cosponsors in the House and 15 in the Senate.

The names of members of the Maine delegation, not surprisingly, are among them. Maine’s interest in softwood lumber is clear enough, but the delegation, led by Sen. Olympia Snowe on the Finance Committee, has considerably more in mind than parochialism. They have, for instance, the record of Canadian lumber being more expensive than U.S. products until the 1980s, when government policies there more than manufacturing changes suddenly made them less expensive.

They have evidence of Canadian stumpage pricing that is so aggressive that in 1998 – two years after the lumber agreement – British Columbia further reduced its prices despite the clear inequity it would produce. It took an arbitration panel to rule against the province before it would adhere to the agreement signed in 1996. And they have actions like the case of the drilled studs a couple of years ago. Canadians tried to shift a substantial portion of their lumber to the tariff-free “builder’s joinery” designation by drilling one-inch holes toward each end of their 2×4 studs and claiming they were specialty products. The U.S. Customs Service properly didn’t buy the idea and the studs went back to being called studs.

This behavior has made U.S. manufacturers of softwood lumber more than suspicious. Mill owners worry that without explicit instructions about what prices, export volumes and product designations are allowed, they will once again be forced to spend countless hours trying to get the attention of U.S. trade officials to intervene in this issue. And all the while, they will be fighting U.S. housing interests that don’t care where the wood comes from, as long as it’s cheap.

Sen. Snowe has been trying to get the attention of the Bush administration to urge it to strike a new agreement that will continue protections from the earlier agreement. President Bush and Prime Minister Jean Chretian held a get-acquainted visit yesterday. Future meetings should include detailed talks on providing a fair solution to this issue by continuing an agreement similar to what has been in place for the last five years.