The U.S. is going to have to compromise on some remaining key issues in the softwood dispute -- notwithstanding the federal government's initialling of a final text of an agreement on the weekend -- because there are enough provincial companies against the deal to block it, Forests Minister Rich Coleman warned Monday.

In order for the agreement to be implemented, lumber producers holding 95 per cent of the tariffs collected by the U.S. must agree. That's necessary because companies must agree to give up 20 per cent of their tariffs collected, which will remain in the U.S., as well as dropping legal cases.

Coleman said that B.C.-based companies representing 20 per cent of the tariffs are against the deal. Those companies include West Fraser, Tolko, Western Forest Products, Interfor and companies represented by the province's Coast Forest Products Association.

"It's enough to block the deal," Coleman told The Citizen.

Coleman noted that he had been having high-level discussions with the federal government as late as Saturday morning, letting senior officials know -- including International Trade Minister David Emerson -- B.C. was not satisfied with progress on four key issues.

He said he was surprised when he learned Emerson initialled a final text later Saturday while in Geneva, Switzerland, with the U.S. trade representative.

The key remaining issues include a termination provision in the seven-year deal which allows the deal to be killed after two years. B.C. wanted that extended to three years.

B.C. is also seeking a border measure exemption for lumber produced from logs on private land in the province, better provisions for the lumber remanufacturing sector and more workable running rules. The deal proposes replacing tarrifs -- which sit at 11 per cent now -- 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.

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

Coleman noted that B.C. has managed to get language in the deal that ensures its market-based pricing system doesn't run afoul of the deal anti-circumvention clause.

But there is time to make more changes as the deal isn't expected to be implemented until the end of September, said Coleman.

Prime Minister Stephen Harper and U.S. President George W. Bush are expected to have some kind of signing of the deal on Thursday, a meeting scheduled for some time.

Coleman said while Canada is going to have to push back on the termination clause, it is time that the B.C. industry have some discussions directly with the U.S. Coalition for Fair Lumber Imports to find if there can be some movement over the lumber exports milled from logs from private land on B.C.'s coast and on the running rules. Coleman said he planned to start today to work on engaging the U.S. lumber coalition directly on those issues.

Few players in the Northern Interior were available for comment Monday.

Brink Forest Products president John Brink said he has reservations about the final text. He said if the deal gives lumber remanufacturers in the U.S. an unfair advantage over B.C. lumber remanufacturers, B.C. operations will move to the U.S.

Brink -- a lumber remanufacturer with operations in Prince George and Houston -- believes the federal government got into trouble by setting artificial deadlines to reach an agreement. Many industry observers have argued that Canada put itself in a poor negotiating position by trying to reach a deal before Harper and Bush's scheduled meeting Thursday.

Canfor, the largest forest company operating in the Prince George area, would not confirm whether it was supportive of the final text. (Coleman had said companies supporting the deal included Canfor, Weyerhaeuser, Pope & Talbot, Dunkley Lumber and Carrier Lumber.)

Canfor spokesman Lee Coonfer said that considering the two sides are still talking, the company would reserve comment.

On Sunday, the B.C. Lumber Trade Council said its concerns on the four key issues must be resolved before it can support a final agreement.

In a prepared statement, council president John Allan said member companies representing more than five per cent of the tariffs on deposit with the U.S. have made it clear they'll block the deal until their issues have been addressed.

Coast Forest Products Association president Rick Jeffery said Monday that it's not time to hit the panic button because there is still time to resolve the concerns. He noted the agreement still has to be passed in Parliament.

However, Jeffery said coastal companies are not going to budge on their demands. He said the American lumber coalition should be paying attention if they want to reach a deal.

NDP forestry critic Bob Simpson said he believes the federal government will use industry, particularly in B.C., as a scapegoat for a doomed softwood deal.

"The cynic in me says that Emerson knows this is a bad deal, and they won't get the Americans to move any further," said Simpson, a former forestry executive from Quesnel. "They'll have their signing photo-op on July 6, and let industry kill the deal."

Letting the U.S. keep $1 billion of the $5 billion in tariffs, half of which goes directly to the American industry, and eliminating all the legal wins, for potential a three-year deal, doesn't make sense, said Simpson.

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//Sidebar//

Four provisions that would have to be altered for the B.C. government and industry to support a final seven-year agreement:

- An agreement must provide for long term stability of trade in softwood lumber. B.C. is seeking three years, and six months notice, before the deal can be terminated. Province also wants a one-year standstill provision before U.S. can launch another softwood trade action.

- Border measures on lumber that comes from private land logs are unacceptable. B.C. says lumber produced from private land logs must be treated equally across the country. The province contends that situation in B.C. is not much different from Atlantic Canada where there are exemptions.

- Asserts that lumber remanufacturing sector cannot be disadvantaged by the agreement. B.C. says current language disqualifies a significant number of B.C. remanufacturers from being charged border measures on the first-mill price. That's the price of the lumber where it's first milled, not the price charged after the lumber remanufacturers increase its value. B.C. is seeking changes to include more remanufacturers.

- The operating rules of the deal must workable, and the level of tax companies are paying must be known before lumber is exported. The retrospective nature of some of the calculations makes the agreement commercially unworkable and must be changed, says B.C.

Source: June 30 letter from Ken Dobell, special advisor to Premier Gordon Campbell, to senior Canadian embassy trade official to the U.S.

©Copyright 2006 Prince George Citizen