Industries brace for wood pact end Agreement governs flow of fiber to mills on both sides of border

MADAWASKA – The approaching deadline for the expiration of a U.S.-Canada Softwood Lumber Agreement could have serious ramifications for Maine’s softwood lumber and paper industry, an industry leader said Thursday.

The 1996 agreement ends March 31, and protectionist measures by the United States could disrupt the flow of wood chips between Maine and the provinces of New Brunswick and Quebec. Don Tardie, vice president of wood products for Fraser Papers Inc., which operates mills in Maine and New Brunswick, hopes the present agreement will be allowed to continue until a new agreement is developed so wood fiber can continue to flow freely across the border.

“The big implication for Fraser is that one-quarter of our chip supplies is from our Maine lumber mills,” Tardie said. “If the present lumber agreement is not extended and we are denied access to our U.S. markets, some sawmills may shut down, and it could affect jobs in Edmundston, New Brunswick, and Madawaska.

“The same thing applies to sawmills along the Maine-Quebec boundary which furnish chips for other papermaking operations in Maine,” he said. “People don’t make that connection very clear, that it is in the best interest of the region that the softwood lumber agreement be extended until a more equitable agreement can be developed.”

Tardie said wood travels freely in both directions across the Maine-New Brunswick border. Similarly, much of the raw lumber to supply Quebec mills along the Maine border comes from this state, with wood chips coming back to feed Maine paper mills.

The provincial territories along the Maine border do not benefit from lower stumpage fees, as do other parts of Canada, according to Tardie.

Stumpage fees – the price charged by landowners for harvesting wood on their land – are a large part of the dispute between the two countries over the softwood agreement. American lumber mill officials argue that the Canadian government unfairly subsidizes lumber production by charging low stumpage fees on Crown lands. Since raw material costs are the biggest expense in producing lumber, the Canadian producers enjoy a huge advantage over their American counterparts, according to the U.S. officials. They further point to the influx of cheap Canadian lumber as the cause of scores of U.S. lumber mills being forced out of business.

U.S. Sen. Olympia Snowe, a member of the Senate Finance Committee, which oversees trade issues, has asked Secretary of Commerce Donald Evans to address the issue immediately.

“Without an acceptable negotiated solution on the table before April 1, I will be supporting the industry’s request that recognition of special circumstances exist, and for implementing the procedure laid out under U.S. law to address the problem,” Snowe wrote last week. “If the agreement is allowed to lapse without some sort of solution to the current crises, these problems [U.S. mills closing] will only worsen.”

The procedure laid out under trade laws involves litigation that would permit the industry to seek anti-dumping and other countervailing duties.

Snowe is looking for a strong agreement to level the playing field because the U.S. industry cannot compete with subsidized lumber, said Dave Lackey, Snowe’s aide.

“She hopes it won’t come to that, but she would support countervailing duties if they become the only option,” Lackey said Thursday. “We would prefer it not having to come to that.”

Snowe is the author of recently introduced legislation to take every possible action to end Canadian lumber subsidy practices.

According to Steve Clark, the retiring director of the Northeast Lumber Manufacturers Association in Falmouth, the lumber industry in the provinces of Alberta, British Columbia, Ontario and parts of Quebec get stumpage at below market prices.

“The stumpage fees in Maine are about $140 per thousand feet of lumber, and some of them [the western Canadian provinces] have stumpage fees as low as $40,” Clark said. “In turn, they can sell their lumber for much lower prices than us.”

The 1996 Softwood Lumber 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. Any lumber shipped after that annual quota has been met faces an export tax of 15 percent to 16 percent.The big controversy now is what will replace the present agreement. Western Canadians want free trade, and lumber producers in the United States want fair trade, Tardie said.

The agreement is coming to an end at a time when the lumber market is very depressed. Lumber mills have shut down on both sides of the border. The United States is the predominant market for lumber, and producers around the globe all are going after the same piece of the pie.

The price of lumber is an international problem, and that’s why mills are shutting down in Maine. The lumber market is in an oversupply in places, and the strength of the U.S. dollar is attracting lumber from offshore. Tardie said lumber is coming into the U.S. market from South America, Scandinavia and Russia, making the problem worse. Japan’s weak economy also is enflaming the issue because Western lumber manufacturers are not shipping to that traditional market.

“For Maine, New Brunswick and Quebec, it is better if the present agreement continues,” Tardie said. “There is virtually no border between Maine and New Brunswick, and wood flows in both direction all the time.

“The last thing you want is lines drawn in the sand and very protectionist attitudes, especially on the U.S. side,” he said.