The U.S. is taking Canada to international court over a timber price dispute.
As Richard Read at The Oregonian points out, lumber trade disputes between the U.S. and Canada are "as old as the hills." Differences in public and private timberland management drives a wedge between industries in the two countries, in large part because Canadian governments have been more willing and able to use public lands to subsidize the timber industry.
The subsidies help keep the market prices for Canadian lumber lower than prices for U.S. lumber. There have been many disputes over how to fairly price Canadian timber exports to the U.S., but in 2006 both countries agreed to a limit on new Canadian timber subsidies through 2013.
Then, over the past few years, the mountain pine beetle has jumped into the fray.
The bark-eating beetles have been ravaging forests in British Columbia – with tens of millions of forestland acres laid to waste. Scientists worry that global warming will continue to fuel beetle outbreaks by keeping winter temperatures just high enough to allow the beetles to survive the winter and reproduce, where in the past severe cold would have killed them off.
At issue is how the BC government and timber industry have handled the damaged trees – and the not-so damaged ones – on public lands.
The U.S. says British Columbia added a new subsidy for its timber industry by selling high-quality public timber to private companies at beetle-kill "salvage" prices. The government charges 25 cents per cubic meter for salvage timber while the rate for higher-quality logs can be $7 or $8. The lower price paid to the government for public timber allowed Canadian companies to undercut what U.S. companies were able to charge, the U.S. alleges. A U.S. lumber industry group called the Coalition for Fair Lumber Imports estimates the benefit to the Canadian timber companies was around $400 million.
The U.S. timber industry has been hurting anyway because of the country's housing market collapse. Export sales to Asia have helped boost some businesses, but industry groups say the underpriced Canadian lumber is adding to their struggle for survival.
U.S. Sen. Jeff Merkley, D-Ore., has supported the U.S. Ambassador Ron Kirk's decision to take the U.S. dispute to the London Court of International Arbitration.
“Canada has a formal trade agreement with the United States, but our friends to the North continue to ignore their responsibility by subsidizing Canadian softwood lumber exports,” said Merkley. “By undercutting American timber prices, Canada is unfairly undercutting American workers and Oregon’s timber industry. Ambassador Kirk is right on target in requesting arbitration. This action is essential in standing up for American timber companies and American jobs.”
The BC government has denied that its methods constitute a violation of the 2006 Softwood Lumber Agreement between the two countries. The methods for setting prices for beetle damaged wood were grandfathered in under the agreement, one industry leader told The Vancouver Sun:
"John Allan, president of the B.C. Council of Forest Industries, said the Americans appeared to have made up their minds to take action long before the last set of talks. Consultations requested by the U.S. last fall lasted no more than one hour, he said.
Allan said the issue is over the price the government has been charging for beetle-damaged timber. The rate charged by the government for salvage wood is 25 cents a cubic metre. Those logs are either useless for lumber or have been difficult to saw into lumber as they crack and split during manufacturing.
The B.C. industry has invested in new technology to resolve problems of splitting and has engaged in the controversial practice of kiln drying sample logs to reveal the presence of hidden cracks. A stumpage rate for all logs in the a particular load is then applied based on the condition of the sample.
The U.S. has alleged that B.C. producers "cook" the logs to create splits in an otherwise sound sample log. That notion is false, Allan said.
'We reject any allegations of subsidy,' he said, noting that the mechanism for setting such rates had been grandfathered into the softwood agreement. B.C. has lived up to its obligations under the agreement, he said."
Who's right? Who's wrong? It could take about a year for the London Court of International Arbitration to make a ruling.
I saw some on the Oregonian's site saying this problem is an example of why the U.S. should open more of its public forests to timber harvests to even the score. Hm ... what do you say to that?