Forestry | Ecotrope

U.S. vs Canada: The alleged beetle-kill timber price conspiracy

Ecotrope | Jan. 22, 2011 7:05 a.m. | Updated: Feb. 19, 2013 1:42 p.m.

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The U.S. took Canada to international court over a timber price dispute this week.

The case is based on a conspiracy theory that pegs the dreaded mountain pine beetle as a co-conspirator. The bark-eating beetle has laid millions of acres of trees to waste in the Pacific Northwest and Rocky Mountain regions; scientists expect more tree damage from beetle outbreaks as the climate heats up.

The U.S. says British Columbia has been selling more and more high quality timber off public lands at beetle-kill “salvage” prices to boost the region’s timber industry. Deliberately mislabeling good timber as low-grade, the U.S. accuses, is allowing private companies in B.C. to buy timber off public lands dirt cheap and export it to the U.S. at unfairly low prices.

U.S. Ambassador Ron Kirk said the operation amounts to an illegal subsidy that undercuts U.S. lumber prices in violation of a 2006 trade agreement. He is asking the London Court of International Arbitration to weigh in on the dispute and end the subsidy. B.C. officials and timber industry leaders deny they’ve done anything wrong.

Public timberlands in Canada have long provided subsidies to private timber industry and kept market prices for Canadian lumber lower than prices in the U.S – where more timber comes from private lands.

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 new Canadian timber subsidies through 2013. The U.S. has won other cases against unfair Canadian timber subsidies, and Canadian governments have been forced to stop action and pay penalties. But the alleged B.C. subsidy is a little less overt.

The Coalition for Fair Lumber Exports – a lobby group for the U.S. timber industry – points out that since 2007, as the U.S. housing market collapsed and domestic lumber markets tanked, more and more of the timber coming off public lands in British Columbia has been given a low grade that would make it unusable as lumber (see table below).

The Coalition for Fair Lumber Imports points to this increase in logs being graded as "lumber rejects" since 2007 as evidence the British Columbia government and industry have been conspiring to drive down prices of timber purchased off public lands and sold into the U.S.

The Coalition for Fair Lumber Imports points to this increase in logs being graded as "lumber rejects" since 2007 as evidence the British Columbia government and industry have been conspiring to drive down prices of timber purchased off public lands and sold into the U.S.

The low-grade timber should be made into paper pulp or wood chips. But the Coalition suspects the government and industry in B.C. are knowingly down-grading public timber that is actually being sold into the U.S. as cheap lumber. Using beetle kills as a cover for the subsidy, the U.S. charges, the industry is short-changing the B.C. government to boost profits while undercutting U.S. prices and depressing an already downtrodden domestic industry.

The B.C. government charges 25 cents per cubic meter for salvage timber while the rate for higher-quality logs can be $7 or $8. The Coalition estimates the benefit gained by Canadian timber companies is around $400 million. The U.S. alleges that to justify the low grade, B.C. has “cooked” test logs in a dry kiln to create splits that otherwise wouldn’t be seen. The sale price for all the logs in one particular load is applied based on the condition of the sample log.

B.C. leaders say their methods of grading beetle-damaged timber are legal under the 2006 lumber agreement. And, to be fair, B.C. forests have been among the worst hit by bark beetles. Scientists say global warming could be fueling the beetle outbreaks by keeping winter temperatures just high enough to allow the beetles to survive year-round and reproduce, where in the past severe cold would have killed them off.

But the U.S. said the 2006 agreement took beetle kills into account, and that B.C. is not holding up its end of the deal.

If the London Court of International Arbitration rules in favor of the U.S., Canada could be forced to stop the timber subsidy and pay reparations.

In the meantime, some argue this case is an example of why the U.S. should open more of its public forests to timber harvests to even the score.

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