by GORDON HOEKSTRA Citizen staff

B.C. lumber producers, including secondary lumber manufacturers, are developing hard-line negotiating positions as Canada and the U.S. have broken off talks to reach a softwood lumber agreement.

The Council of Forest Industries -- which represents most major lumber producers in the province, and some secondary manufacturers -- communicated its stand to Prime Minister Stephen Harper this week.

In a letter dated June 14, the board of directors of the industry council told Harper that they strongly back the B.C. government position on five key issues in softwood negotiations with the Americans.

The points are that B.C.'s market-based pricing system, which will be introduced in the Interior on July 1, needs to be grandfathered, and that lumber remanufacturers must be taxed under the deal at the price of raw materials where they are first produced. The industry council says that the first-mill treatment must be extended to lumber remanufacturers who have non-renewable timber rights as well.

The other points include:

- The running rules for the deal must be commercially viable.

- The need for a termination clause.

- And that lumber produced from B.C. Coastal private logs should be excluded from the export taxes provisions in the deal.

The council's membership list includes many of the major players on the Canadian scene as well: Canfor, West Fraser, Abitibi-Consolidated, Tembec, Weyerhaeuser, Louisiana Pacific, Pope & Talbot.

There is representation from independent companies in B.C.'s Northern Interior, including Dunkley Lumber, Lakeland Mills, Carrier Lumber and Brink Forest Products.

"It signals unprecedented support among the industry," said Brink Forest Products president John Brink. "It also provides support for the prime minister and (premier Gordon Campbell) to take a very hard stand," he said.

The Independent Lumber Remanufacturers Association is also taking a hard-line approach to the negotiations. The group's president, Russ Cameron, said virtually no B.C. lumber remanufacturers would be eligible to be charged penalties on the first-mill price based on language proposed by the Americans. If Canada doesn't stand its ground on this issue, it will be a killer for lumber remanufacturers, giving an advantage to their U.S. competitors, said Cameron.

At this point, Cameron said he'd just as soon see Canada continue and complete its legal fight with the U.S., a fight which he says Canada has already substantially won.

The positions being outlined by the B.C. lumber sector are in marked contrast to the qualified support and optimism expressed when Canada and the U.S. reached a framework deal on April 27.

"The dissent is spreading," quipped lumber industry observer Laurie Cater.

That may be, in part, because the U.S. lumber coalition is trying to alter the framework deal in their favour, said Cater, publisher of Madison's Canadian Lumber Reporter, headquartered in Vancouver.

The negotiations are also taking place against another critical backdrop, a dropping lumber market, which makes the a deal less palatable, noted Cater.

When the framework deal was signed April 27, lumber prices were high enough that Canadian producers would not have to pay export taxes. Now, however, companies would be paying taxes.

Free Trade Lumber Council official Carl Grenier said he's pleased that there's been a break in the negotiations. Grenier had been fearful that the federal Conservatives rush to reach a deal could saddle the industry with a flawed agreement.

"They have enough time now," said Grenier, who's group represents about 25 to 30 per cent of Canada's lumber exports to the U.S.

Canada's new Conservative government had set timelines so that legislation can be passed before Parliament retires for the summer, but also, so the deal is done before a planned meeting of Prime Minister Stephen Harper and President George W. Bush on July 6.

The deal will return to Canadian lumber companies about $4 billion of the $5 billion in tariffs collected by the U.S.

The tariffs will be replaced with either of two export tax schemes that decrease as the price of lumber climbs. The first option sets export taxes between five and 15 per cent, while the second option, which includes quota limits, sets the tax rates at between 2.5 and 7.5 per cent.

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