U.S., Canada lumber feud looms Duty-free exports raise American ire

WASHINGTON – The feud between the Canadian and U.S. softwood lumber industries is easily summarized but not so easily solved.

Canadian producers say they want free trade. U.S. producers say they want a level playing field. Both claim their industries are hurt by the trade agreement governing how softwood, the lumber often used for home construction, crosses the border. Neither side is willing to budge.

Rusty Wood, chairman of the Coalition for Fair Lumber Imports and owner of two Georgia mills, says the 5-year-old agreement allows the U.S. market to be flooded by cheap Canadian lumber. He said the United States was “swamp-dirt dumb” for signing it.

Lumber prices are down and U.S. workers are losing jobs, Wood said. He said he has 300 families relying on him to stay in business.

“I’m just a guy wanting to survive,” he said.

Whether he does may depend on what happens when the agreement that limits duty-free Canadian exports of lumber expires March 31. Wood fears that when the deal ends, Canadian lumber will swamp the U.S. market.

Canadians want the cap and the tariffs removed. The U.S. industry wants a new agreement that taxes all Canadian softwood lumber based on its value. The industry also wants the U.S. government to pressure its northern neighbor to end what it says are subsidies that keep Canadian lumber prices artificially low.

“Our mantra is if they would just sell their timber competitively, we go away,” Wood said.

Softwood lumber comes from cone-bearing trees such as pines and is a favorite of the construction industry. The United States got about one-third of its supply, or $7 billion worth, from Canada last year.

Canadian producers say U.S. companies want to limit imported lumber to boost their own profits. They argue free trade is fair trade.

“Demand is down, prices are down, mills are facing a very tough time. … We understand that,” former Ontario Premier Robert Rae said. But “no amount of rhetoric is going to make the United States self-sufficient in lumber.”

The Canadians have an ally in the National Association of Home Builders, which claims taxes on Canadian lumber add about $1,000 to the cost of a new house.

The two countries have struggled with lumber tariffs since the 1840s. In the last two decades, the issue has heated up when trade agreements expire.

The 1996 agreement allows Canada’s four major lumber-producing provinces – Ontario, Quebec, British Columbia and Alberta – to export 14.7 billion board feet tax-free annually. Fees are charged on any lumber beyond that. About 18.5 billion board feet were shipped last year.

A board foot is a board 1 foot long, 1 foot wide and an inch thick. The amount imported from Canada last year was enough to build about 1.25 million single-family homes.

Canadian companies usually log on land owned by provincial governments and pay a fee, while U.S. companies must bid at auction.

U.S. producers say the Canadians receive an unfair advantage because their fees are usually a third to a quarter of the timber’s fair market value. Further, the Canadian industry doesn’t have as many costly environmental regulations, they say.

The result is wide fluctuations in tree values, U.S. producers say. One of the starkest examples they cite: a tree cut in British Columbia costs a company $72, compared to $319 in Washington state.

Canadian Trade Minister Pierre Pettigrew and U.S. Trade Representative Robert Zoellick have met but made little progress. Week before last 51 U.S. senators signed a letter urging President Bush to negotiate a new agreement.

Sen. Larry Craig, R-Idaho, chairman of the Energy and Natural Resources Committee’s forests subcommittee, said he wants an agreement that reflects variations in the value of currencies. The Canadian dollar currently is equal to about 65 U.S. cents.

“When you level that playing field through currency … you get a fairly equal field,” said Craig, who met with Canadian Parliament member Stockwell Day on Friday.

If no agreement is in place after March 31, Wood said, his organization is prepared to go to court to stop Canadian producers from flooding the U.S. market.

The uncertainty has U.S. mill towns and labor organizations on edge. Mike Pieti, executive secretary of the Western Council of Industrial Workers, said in Washington and Oregon alone, 52 mills have closed in five years, costing 5,000 jobs. “When [the mills] are gone, it’s a whole town that is gone,” he said.