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Cutting through the rhetoric
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Although talks between the U.S. and Canada are planned for next month,
neither side seems willing to back down on their softwood lumber stance
by GORDON HOEKSTRA Citizen staff
The softwood lumber trade fight will soon be in its fourth year, and there is no end in sight. Although the Americans continue to say they want a return to the negotiating table, and the Canadian industry has agreed to exploratory talks in Chicago with their U.S. counterparts next month, on this side of the border, at least, there appears little hope the talks will lead anywhere quickly. In fact, the recent flurry of political and administrative moves by the U.S. meant to sterilize Canada's victories on the legal front, have incensed the B.C. forest industry and left the Canadian players in no mood for conciliation. Even Canada's International Trade Minister, Jim Peterson, in a rare display of bureaucratic emotion, lashed out at the U.S. government this week. "Recent statements made in the United States are not only wrong and invalid, but they are also extremely unhelpful in resolving the softwood lumber issue over the long term," said Peterson, who issued the statement from Davos, Switzerland, where he was attending the World Economic Forum.
He was referring, in part, to U.S. undersecretary for trade, Grant Aldonas' comments this week that it would take an order from the Court of International Trade to force the department to refund the $4 billion in tariffs already on deposit in the U.S. "Don't hold your breath," says John Brink, president of Brink Forest Products in Prince George, referring to the chance of a settlement. "The money will not come back for a long time, if ever," said Brink, one of the few remaining lumber remanufacturers in B.C.'s Northern Interior, a sector hard hit by the trade fight. Brink also noted that although the B.C. government has made forest policy reforms meant, in part, to create a more market-based timber pricing system to address American concerns, it may be harder to make that case now because of mergers in B.C.'s Interior and giant volumes of mountain pine beetle-killed timber being logged. Although the province has started to implement market-based pricing on the Coast, it has not done so as promised in the Interior. It leaves B.C., and Canada, to continue its legal fight, but Brink said people must remember the fight is a political one. The American aim is to restrict Canadian lumber imports into the country. "The Americans are in the driver's seat," said Brink. "Aldonas, after being involved in the George W. Bush presidential campaign, has now been re-assigned to the softwood file. He's tough and hard-nosed."
The U.S. stepped up its administrative and political manoeuvering after Canada scored a major victory at the end of last summer. A North American Free Trade Agreement (NAFTA) dispute panel ordered the U.S. International Trade Commission to reverse its position that Canada's lumber producers pose a threat of injury to the American industry. In early September, the trade commission reluctantly agreed and turned over its original finding. The decision is key because if there's no threat of injury, the U.S. lumber industry's case in the trade battle collapses. The U.S. has already launched an extraordinary challenge of the ruling, which will likely push a final decision into this spring, where Canada is expected to win. However, the Americans have made changes under a World Trade Organization (WTO) ruling they say would override an eventual NAFTA win for Canada on threat of injury. Canada views it as an end-run, which it believes will not stand up to scrutiny.
The U.S. industry and its supporters in Congress have unleashed other efforts to gain even more leverage in the trade fight. Senator Max Baucus, a Democrat from Montana, introduced legislation in Congress in November. The bill called for paying out the duties to U.S. lumber firms under the Byrd amendment, despite a WTO ruling that said it was against world trade rules. Then the U.S. Commerce Department reduced tariffs much less than expected in December, following the finish of its administrative review for the first year the tariffs were in place. It's an important bureaucratic step because it sets the rate companies pay going forward. The tariffs were reduced to 21.2 per cent from 27.2 per cent, much less than the Commerce Department's preliminary finding of 13.2 per cent last June. The higher tariff was based on new calculation methods that separated out B.C. and compared log prices across the border, which dispute panels have already said is not legal.
Finally, both the U.S. industry and politicians are calling for the NAFTA dispute resolution to be reopened because they charge the panels are over-stepping their bounds. "In the end, if Canada prevailed on lumber through NAFTA, there would be a review in the U.S. courts of the constitutionality of the NAFTA dispute settlement system as it is applied in this case and as it is formulated," Sen. Baucus said recently in a rare debate of the softwood issue in Congress. The recent U.S. moves have angered the B.C. lumber industry, although they have agreed to meetings in Chicago Feb. 22. "I just find the hardball tactics offensive," said B.C. Lumber Trade Council president John Allan. "It doesn't win people over ... It just pisses everyone off." Allan figures the mood at the Chicago meetings will be tense. "There's a lot of money on the table, a lot at stake, so I think people want to have a conversation, I won't say negotiation," he said. "I think the key CEOs on both sides of the border want to talk to each other because left to the litigation, we're just going to get into this tight, tight spiral of 'You won, he won, he said, she said.' The rhetoric and the lawyers will rule the day. And at the end of the day, it's a business, so, I think we want to have this talk."
B.C. Interior forest companies did well in 2004 as a result of strong lumber and panel markets. Canfor turned in a profit of $377.2 million in the first nine months of 2004, but it also paid out $215.6 million in tariffs during the same period. West Fraser posted a profit of $171 million in the first nine months, but paid out $124.8 million in tariffs. Still, the B.C. industry has no intention of rolling over. Allan said the legal battle could continue for another two and a half years. He said the Canadian side is gearing up for a fight to get its money back, as well as any challenge the Americans would launch on the constitutionality of the NAFTA dispute mechanism.
Forest-based communities and workers are also in no mood for capitulation. Early in the dispute, communities repeated a mantra to the provincial government: No deal was better than a bad deal. That stance appears to have changed little. Despite the punishing tariffs, Mackenzie, which relies on the forest sector for its economic base, has not suffered too badly, says Mayor Tom Briggs. That's because sawmills have added third shifts and are running virtually around the clock, an effort to reduce costs and increase efficiency in the face of the punishing duties. Mackenzie is home to two forest companies which run a pair of sawmills each, Canfor, based in B.C., and Abitibi-Consolidated, based in Quebec. "Although it's a lengthy one, we have to stay the course," said Briggs, of the trade fight. Briggs is also not optimistic of a negotiated settlement any time soon. "The over-reaching story coming out of the states is still a protectionist attitude," observed Briggs. "Until we can find some way around that, until we can sit down and stare at each other across the table, eyeball to eyeball, and do some reasonable negotiating, jeez, I don't know."
More than 4,000 unionized sawmill workers in B.C.'s Northern Interior also don't want to see the Canadian industry make a deal simply to end the legally wrangling. "Workers believe we've won a number of battles along the road, and that we should continue to try and put our best forward on the legal scene, but understanding that you may eventually have to negotiate," said United Steelworkers-IWA local 1-424 president Frank Everitt. "But don't negotiate at any cost."
University of Northern B.C. international studies professor Don Munton still believes Canada has the momentum in the legal fight, which it will be able to use at the negotiating table. This is pre-negotiation posturing because both sides realize that only a negotiated deal will end the softwood dispute, says Munton, an expert in Canada-U.S. relations. "There is no way the Americans are going to make any kind of an offer, or change the rate, or do anything that would undermine the already weakened position they're going into the talks with," he said. "But they're running out of straws to grasp." Will the Americans go as far as trying to reopen the NAFTA dispute resolution? Munton doesn't believe so. "It would be something so extreme that it would take the issue well beyond softwood," he said. "It would basically say to Canada and Mexico, 'you can't expect this process we agreed to, to ever work for you.' It would undermine the whole NAFTA process, and I suspect as much as the U.S. administration wants to protect certain industries, and not get itself into political difficulties or appearing to abandon them, that the last thing this administration wants is to turn its back on free trade."
©Copyright 2005 Prince George Citizen
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