Softwood Lumber Deal Close

[scribblet]

Finally it appears we may be coming to the end of this saga, if it does, it will look good for both Emerson and Harper.

Softwood lumber deal appears close

BARRIE MCKENNA AND STEVEN CHASE

WASHINGTON and OTTAWA — Canada and the United States appear very close to a historic breakthrough in the enduring softwood lumber dispute.

Industry sources who have been briefed on the discussions told The Globe and Mail that U.S. President George W. Bush called Stephen Harper on the weekend to outline an offer. In it the United States would lift duties on Canadian lumber and return most of the $5-billion it has collected from Canadian lumber companies.

In a complex arrangement that would include both a quota and an export tax, Canada would agree to cap its share of the U.S. lumber market at one third, which is roughly the current level.

Mr. Harper is particularly anxious to put the lumber dispute behind him before a possible state visit to Washington in the coming months. more here www.globeandmail.com

[geoffrey]

I wish I could see the full agreement, but oh well, the media again assuming they are so much brighter than us and need to interpret things they themselves know next to nothing about.

Good to see this resolving. If Bush made the call, then I'm sure we are close to solution.

[August1991]

I wish I could see the full agreement, but oh well, the media again assuming they are so much brighter than us and need to interpret things they themselves know next to nothing about.

Agreed, we'll have to see the fineprint but I think this is all you need to see:

In a complex arrangement that would include both a quota and an export tax, Canada would agree to cap its share of the U.S. lumber market at one third, which is roughly the current level.

...

Canadian representatives briefed select Canadian industry officials on the key elements of the U.S. offer yesterday, according to a Canadian industry source.

G & M

And of course the "select Canadian industry officials" are going to agree to this.

I hate to say "I told you so" but I suggested as much last summer:

Canadian suppliers should voluntarily agree to export quotas; that is, voluntarily agree to restrict their sales to the US market. The American producers would be happy with this, the Canadian producers would be happy and the only loser would be American consumers - primarily, new home buyers. The issue would entirely disappear from newspapers. (Incidentally, Japanese car producers, no fools, did exactly this in the 1980s for car exports to the US.)

21 August 2005

Frankly, I'm left with the belief that the Liberals could have negotiated this all along but chose not to because they preferred the political optics of a US trade irritant. Or perhaps Bush has decided now to be flexible with this solution because he knows this is the only way he can help Harper.

And sadly, the one group who is going to get screwed in all this is the US consumer. Politics and government, they sometimes make you want to wretch.

[geoffrey]

The consumer always gets screwed when the government gets involved.

The import quota is neccessary if the US wants to sustain their industry. Canada does unfairly subsidize the lumber industry, I side with the Yankees on this one. It's not asking much to just say ok, we accept that you subsidize your industry, just don't expand your involvement in our economy with your unfairly cheap prices.

The export tax is likely a cash grab by Ottawa more than an American suggestion. I don't get how it makes sense for the Canadians to volunteer to tax their industry at what will presumably be the same rate that the Americans were with duty.

[Leafless]

August1991

You wrote- " And sadly the one group that's going to get screwed in all of this is the U.S. consumer. Politics and government, they sometimes make you want to wretch."

And how is that August?

We import more American logs then we export.

The logs we export are the skinny ones Canadians don't want and only represent a small percentage of our total paper products and lumber exported to the U.S.

Maybe you can tell me how that small percentage of logs affects the U.S. consumer?

[Riverwind]

Canada does unfairly subsidize the lumber industry, I side with the Yankees on this one.

Canada does not subsidize its industry - that is why NAFTA keeps ruling in Canada's favour. You could argue that restrictions on raw log exports create an over supply of timber in Canada which lowers the costs for Canadian producers, however, the US does the same thing with timber cut off publically owned lands so the US can hardly complain.

[Leafless]

Riverwind

You wrote- " Canada does not subsidize it's industry."

Of course this is not entirely true.

Canada's provincial mangement 88%, 2% federal and 10% private concerning stumpage fees vs. the U.S. State management 14%, federal 13% and private 73% constitutes an unfairly balanced tenure system.

How can you possibly compare the method of tenure social vs. private not a method of initial subsidization?

[geoffrey]

Canada does unfairly subsidize the lumber industry, I side with the Yankees on this one.

Canada does not subsidize its industry - that is why NAFTA keeps ruling in Canada's favour. You could argue that restrictions on raw log exports create an over supply of timber in Canada which lowers the costs for Canadian producers, however, the US does the same thing with timber cut off publically owned lands so the US can hardly complain.

There is clearly a subsidy on Canadian lumber, as Leafless pointed out.

NAFTA may be in our favour in recent rulings, but the WTO has ruled against us a few times as well. Both parties are guilty on this one.

[August1991]

August1991

You wrote- " And sadly the one group that's going to get screwed in all of this is the U.S. consumer. Politics and government, they sometimes make you want to wretch."

And how is that August?

We import more American logs then we export.

The logs we export are the skinny ones Canadians don't want and only represent a small percentage of our total paper products and lumber exported to the U.S.

Maybe you can tell me how that small percentage of logs affects the U.S. consumer?

The US government imposed a "counterveiling duty" (a tariff) on imports of Canadian softwood lumber. This had for effect to reduce the supply of Canadian lumber in the US market, and raise the price of lumber in the US.

This was done at the behest of the US lumber industry which wanted higher lumber prices in the US and hence higher profits for itself. Bush Jnr. (and the US Congress) acceded to this request because they wanted votes in Oregon, Montana and other lumber producing states. The effect of this was to make new homes in the US more costly:

Susan Petniunas, spokesperson for the American Consumers for Affordable Homes (ACAH), a 17 member alliance of National organizations that opposes the duties, pointed out that the lumber duties, based on U.S. Census Bureau data, add at least $1,000 to the cost of a new home, pricing more than 300,000 families out of the housing market since the small amount prices them out of a mortgage. ACAH represents more than 95 percent of U.S. lumber consumption.

Link

(Incidentally, Bush Jnr did exactly the same thing with steel imports so that he would win seats in Ohio and other steel producing states. This had for effect to raise the price of a new car.)

IOW, this is a way to subsidize a domestic (US) industry at the expense of domestic (US) consumers.

----

Since the goal is to restrict Canadian lumber in the US to raise US prices, another solution is to "ask" Canada to impose a voluntary export quota. Canadian producers will happily do this because then they'll be acting as a monopolist and they'll make monopoly profits.

Riverwind

You wrote- " Canada does not subsidize it's industry."

Of course this is not entirely true.

Canada's provincial mangement 88%, 2% federal and 10% private concerning stumpage fees vs. the U.S. State management 14%, federal 13% and private 73% constitutes an unfairly balanced tenure system.

How can you possibly compare the method of tenure social vs. private not a method of initial subsidization?

Whether Canada "subsidizes" its industry or not is beside the point. US lumber producers want higher US lumber prices and any reason would justify a restriction on Canadian lumber imports.

Now, in Canada, the issue of subsidies to Canadian lumber producers is relevant. Do we want to give a free ride to this industry? I dunno. Our governments subsidize so much else, from milk to kids-under-6 to left wing Internet chatrooms, I guess lumber deserves its fair share too.

[Leafless]

August1991

You wrote- " The U.S. imposed a "counterveiling duty" ( a tariff ) on imports of Canadian softwood lumber. This had for effect to reduce the supply of Canadian lumber in the U.S. market, and raise the price of lumber in the U.S."

The SLA (softwood lumber industry) sets a QUOTA of 14.7 billion board feet for exports from four Canadian provinces.

The rebuttal states that only about 5% of Canadian lumber imports were subject to any fee, a volume that equals only about 1.67% of total U.S. lumber consumption ( since Canadian lumber supplies about one third of total U.S. demand.

According to their (U.S.) SLA numbers house prices were only raised by $100-$300.

You also wrote- " Bush Jnr. ( and the U.S. Congress) aceeded to this request because they wanted votes in Oregon, Montana and other lunber producing states."

Well August the U.S. lumber industry is a powerful organization.

Just to give you an example of numbers alone, in Canada there are approx. 425,000 small private owners.

In the U.S. there are 10,000,000 small private owners.

[August1991]

According to their (U.S.) SLA numbers house prices were only raised by $100-$300.

They would say that, wouldn't they?

The rebuttal states that only about 5% of Canadian lumber imports were subject to any fee, a volume that equals only about 1.67% of total U.S. lumber consumption ( since Canadian lumber supplies about one third of total U.S. demand.

They would say that too, wouldn't they?

The SLA (softwood lumber industry) sets a QUOTA of 14.7 billion board feet for exports from four Canadian provinces.

They can call it a "quota" if they want but the US government has collected over $5 billion in duties.

----

This a classic case of an international trade dispute. A domestic industry is using its own government to make money for itself at the expense of its own citizens. These lobbyists are vicious, and will twist any argument to their advantage. They will frequently change the meanings of words.

The Member of Parliament who supports every proposal for strengthening (a domestic) monopoly is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists.

Adam Smith

We have an ongoing thread about milk imports which is no different.

[Freshinit]

What the Americansmust realize is our Government does not only play the role of economic promoter, but more importantly as Envrionmental safeguarder. By limiting access to our lumber by private industries we limit overproduction and the destruction of climax communities. If America wishes to unfairly tax our exports, they mmust prove that we have been dumping the product with intent to destroy the American market. The simple fact of the matter is America's "privatized lumber sector" is a withering business that has produced unrealistic price caps in which the Canadian industry must and should not adhere to. WE hve the ressources, so why should a relatively miniscule free market to the south determine which price WE should sell our product for?

By the way, I sure hope no right winger tries to pull this off as a victory for the Harper Government. The United States had a very small ammount of time left to appeal this case one final time. So regardless of which Government won the January election, this deal would have inevitably gone through in a similiar fashion.

[quinton]

"we have the resources"

Isn't that what Russia said when they sold Alaska to the USA?

Do we want to liquidate our resources for short term profits?

I sure don't.

Look at the clearcuts visible from space at http://maps.google.ca

Canada isn't that vast afterall when you consider how many people have a piece of our so-called "unlimited resources".

[shoop]

Hmm, can't really remember what the Russians said when they sold Alaska, 140 years ago but it wasn't about resources.

It was about creating a buffer between Russia and the British Empire on the Northern Frontier.

Do you have any background knowledge on this issue at all?

"we have the resources"

Isn't that what Russia said when they sold Alaska to the USA?

Do we want to liquidate our resources for short term profits?

I sure don't.