A trade dispute between the USA and Canada Suhail Abboushi (2010 ) (excerpts_. 1.One largest Canadian exports to the USA.
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A trade dispute between the USA and Canada
SuhailAbboushi (2010) (excerpts_
Canadian provinces place restrictive regulations on the lumber companies with regard to the use of timberland and the sharing of infrastructure costs.
Canada ships 70 percent of its lumber production to the USA.
The US timber industry is increasingly relying on Mexican labor for thinning and replanting jobs.
Many of the jobs “protected” by trade restrictions are now jobs filled by imported labor
It is estimated that for every lumber or sawmill job protected in the USA, there are 22-25 American workers in industries that depend on Canadian lumber.
Curtailing the supplies of Canadian lumber or raising their prices hurts the thousands of US workers dependent on these imports.
Canada’s constitution and timberland ownership
Canada’s constitution confirms that:
forestland ownership belongs to the provinces
each province has its independent method of managing its timberland.
all provinces have long-term land tenure arrangements giving logging rights to logging firms.
companies pay stumpage fees for cutting the trees, hauling them away, and planting replacements to sustain forestry in the forest lands.
The US timber lobbydoes not recognize Canada’s constitutional authority - brushes aside the Constitution issue and proposed a remedy: sell Canada’s forest lands to private businesses or halt imports of Canadian lumber!
Canada’s public ownership of timberland is not a trade issue.
Canada’s Constitution assigns exclusive authority to provincial governments over natural resources like timberland.
Stumpage fee is not lower than “market price”
British Colombia designated 20 percent of its forest land to be managed in an open-auction free market system.
The province decided to use the prices set through this “free-market” mechanism to determine the stumpage fee rates for the rest of the province’s forests, so that the stumpage fees would not be lower than the “market” price.
To this date, this “free-market” arrangement has not resulted in any price or stumpage fee reductions.
The stumpage fee charged by the province under the traditional system was not artificially lower than the “market” based price.
Complexity of fee calculations:
The precise stumpage fee calculations are complex and vary across provinces.
Canadian timber companies are under numerous restrictions that further complicate the calculation of stumpage fees, e.g.,
Canadian companies are not allowed to log “at will” – they are restricted by “Annual Allowable Cut.”
Exporting raw logs is prohibited. Timber companies are required to own and operate local saw mills.
Canadian companies are required to build and maintain roads and highways to timberlands.
These companies are required to replant all logged out lands.
They may not use logged out lands for any commercial development – the government continues to own those lands.
Observers and analysts of this dispute situation agree that the impact of this web of regulations and restrictions on a uniform pricing, or stumpage fee, in Canada’s provinces is difficult to ascertain.
The Global Lumber/Sawnwood Cost Benchmarking Report (December of 2005 by International Wood Markets Research and other organizations)
US West Coast sawmills with advanced technologies are the most profitable in the world – about three times the average rate of profitability world-wide.
British Columbia’s mills, which are equally advanced in technology and capacity as the West Coast mills, were the third most profitable, lagging behind the US mills, despite the lower priced timber they have access to.
All sides to the dispute hope:
April 2006 agreement could bring a lasting solution to the conflict and let market solutions prevail
Doubtful that this conflict would have a lasting resolution: Reasons…
US disregard for agreements
Can. Land-ownership structure versus US strategy of acquisition
A pattern of managed trade interim solutions.