Privatize Canada's Forests

[August1991]

This guy is right.

Reid Carter has a simple suggestion for Canada's provincial governments that, if adopted, could put tens of billions of dollars into their coffers, attract hundreds of millions of dollars of new investment to one of the nation's largest and most beleaguered industries, shore up Canada's public pension plans and maybe even end our most chronic bilateral trade dispute.

If that sounds like an irresistible pitch, think again. Mr. Carter, a managing partner with Brookfield Asset Management Inc. in Vancouver, has spent four years crossing Canada, talking up bureaucrats and Cabinet ministers about a proposal that sounds too good to be true, but isn't. Privately, many tell him it's a great idea; publicly, nobody will touch it with a hundred-foot tree trunk. "How come we haven't tried this?" he asks.

Why not? Because it would involve doing what many Canadians would consider unthinkable: privatizing the forests. Fully 93% of Canada's 402 million hectares of forest is owned by government -- mostly the provinces -- and Brookfield owns a portion of the rest, in B.C. and the Maritimes. If Mr. Carter had his wish, Brookfield would own a lot more. He's not alone.

National Post

Note that the provincial governments have been extremely incompetent stewards of Canada's forests. Indeed, it appears that the US government is correct in arguing that we in effect subsidize the forest industry through lower stumpage fees:

"There's a significant institutional interest among investors in Canada and globally" in Canadian timberland, he says. In B.C. alone, it is estimated the province's roughly 22 million hectares of timber harvest area would be worth an average of US$1,000 per acre -- US$22-billion in total -- if sold, enough to reduce the provincial debt by 60% and save $1.44-billion in annual interest costs. That is more than its annual revenue from forestry fees and taxes.

IOW, the provincial governments are earning less on forest lands than the rates that provncial governments currently pay to borrow.

Worse, the current regulations cause all kinds of wasteful costs:

To understand why change would be good, consider that much of forestry policy in Canada is 50 years old and hearkens back to a time when markets weren't global, environmental standards were non-existent and governments were keen to create jobs. Firms are entitled to cut trees on given sections of Crown land for fixed periods, pay fees when they cut, and have to ship the timber to specified mills. Under these licences -- ranging from five to 20 years -- firms are granted an "annual allowable cut," and have to plant replacement saplings.

The system is now dated and toxic to industry. As Peter Pearse, a leading forestry academic and special advisor to then-B.C. forestry minister Michael de Jong, noted in a 2001 report on the B.C. coastal forest industry, the system -- similar to other provinces -- was a mess. Lumber production costs on the coast were the highest in the world. Profits were down, mills closed and jobs vanished. That was before the Canadian dollar began to rise.

----

Farmers own their own land. Households own the land around their house. Golf courses and airports own their own (private) land. This land use is subject to government regulation and property law. Why do we treat forest lands differently? Australia, NZ, most of Europe and the US (yes, the US) don't treat forests as public property.

Many threads ago, Hugo and I argued about who "owns" Canada? Maybe we should ask who "manages" Canada?

And why in Canada is the word "private" so anathema?

Edited September 8, 2007 by August1991

[jbg]

Reid Carter makes some good points, but how would you suggest regulating sustainability, preventing extermination of wildlife such as bears and wolves, etc.? In the US, we have significant amounts of "national forest" land managed for multiple uses of conservation and resource tapping. It seems to work well here, in the country that's supposedly known for raw, cowboy capitalism.

Edited September 9, 2007 by jbg

[jennie]

This guy is right.

National Post

Note that the provincial governments have been extremely incompetent stewards of Canada's forests. Indeed, it appears that the US government is correct in arguing that we in effect subsidize the forest industry through lower stumpage fees:

IOW, the provincial governments are earning less on forest lands than the rates that provncial governments currently pay to borrow.

Worse, the current regulations cause all kinds of wasteful costs:

----

Farmers own their own land. Households own the land around their house. Golf courses and airports own their own (private) land. This land use is subject to government regulation and property law. Why do we treat forest lands differently? Australia, NZ, most of Europe and the US (yes, the US) don't treat forests as public property.

Many threads ago, Hugo and I argued about who "owns" Canada? Maybe we should ask who "manages" Canada?

And why in Canada is the word "private" so anathema?

I can see one problem ... I don't think you really mean "stewards of Canada's FORESTS" ... I think you mean stewards of the PROFITS from Canada's forests.

There's a big difference.

And perhaps it is because we need the Boreal forests to help us to continue to breathe in our increasingly polluted environment, and we don't trust profitmakers to respect that.

It appears to me the immediate way to correct the problems you cite is for the province to increase its stump fees.

But of course it is a mess again now because of the pine beetle.

Aboriginal people told them ... "You have to burn it to stop them."

But the private companies want to log it for money instead.

Last I heard the beetle is getting ready to turn right from BC, poised to sweep across the entire northern forest.

The private companies would rather risk the life and health of all Canadians than burn a bit of forest to save the rest?

Just because they can sell it for a buck?

That's private 'stewardship'?

No thanks.

[margrace]

and would you add privitization of our water supply to that as well, lot of money to be made there in the future?

[Pliny]

and would you add privitization of our water supply to that as well, lot of money to be made there in the future?

Good idea! Now you're thinking.

[jdobbin]

Farmers own their own land. Households own the land around their house. Golf courses and airports own their own (private) land. This land use is subject to government regulation and property law. Why do we treat forest lands differently? Australia, NZ, most of Europe and the US (yes, the US) don't treat forests as public property.

I'm sure Canada would still face tariffs even if the forests were privatized.

[geoffrey]

Aboriginal people told them ... "You have to burn it to stop them."

But the private companies want to log it for money instead.

We're burning it in Alberta to prevent the Beetle from spreading. Who cares what the Indians said on the matter, we have forest scientists that actually study such things and don't rely on conclusions based on spoken word from the great spirit tree.

Do you want wood products? Like umm... a house? It's neccessary. If the wood is dead anyways, why not log it? It's also cheaper because it's stained with a blue colour. Clearing the dead forests actually will regenerate things faster... reforestation is a huge principle of current logging and it's highly enforced.

Last I heard the beetle is getting ready to turn right from BC, poised to sweep across the entire northern forest.

Actually, there is significant evidence to the contrary. Alot of leading experts believe the Beetle has eaten itself into starvation, and the barrier of the Rocky Mountains make it very difficult for the Beetle to travel much further. As long as Alberta holds the line with selective burns like they've been doing, then really the Beetle will remain soley a BC issue.

There is also evidence that the Beetle has had similar runs in the past. It's a natural cycle, one that we just need to let run it's course.

Forest fire prevention and over protection of the forests is a leading cause of many of the forest related disasters (Beetles, huge fires, ect.) that we see today. If we aren't going to let nature run it's course over the forests, then we need an aggresive logging campaign to keep the forests at a healthy level.

The private companies would rather risk the life and health of all Canadians than burn a bit of forest to save the rest?

Just because they can sell it for a buck?

That's private 'stewardship'?

Your wrong on all accounts. The private companies don't burn the forests, the management agencies of the government do. Complain to your MPP/MLA before you blame industry.

I'm sure Canada would still face tariffs even if the forests were privatized.

I disagree. Artifically low stumpage fees from the government are the main issue for the Americans. If Canadian producers had to pay for the full cost of their activities, then we'd have competitively priced lumber again, rather than government subsidized union jobs.

[Pliny]

I can see one problem ... I don't think you really mean "stewards of Canada's FORESTS" ... I think you mean stewards of the PROFITS from Canada's forests.

There's a big difference.

And perhaps it is because we need the Boreal forests to help us to continue to breathe in our increasingly polluted environment, and we don't trust profitmakers to respect that.

It appears to me the immediate way to correct the problems you cite is for the province to increase its stump fees.

But of course it is a mess again now because of the pine beetle.

Aboriginal people told them ... "You have to burn it to stop them."

But the private companies want to log it for money instead.

Last I heard the beetle is getting ready to turn right from BC, poised to sweep across the entire northern forest.

The private companies would rather risk the life and health of all Canadians than burn a bit of forest to save the rest?

Just because they can sell it for a buck?

That's private 'stewardship'?

No thanks.

Your hatred of government shines through once again, I see.

[daniel]

.... If Canadian producers had to pay for the full cost of their activities, then we'd have competitively priced lumber again, rather than government subsidized union jobs.

The argument goes both ways.

If American farmers and food producers had to pay for the full cost of their activities, then we'd have competitively priced groceries, rather than government subsidized corporations.

[jdobbin]

I disagree. Artifically low stumpage fees from the government are the main issue for the Americans. If Canadian producers had to pay for the full cost of their activities, then we'd have competitively priced lumber again, rather than government subsidized union jobs.

Since the U.S. has placed tariffs on products from other countries even when they were in private hands, I don't know that anyone can honestly say they wouldn't do it again just to protect their markets.

Besides, the lumber lobby in the U.S. is concerned about more than just stumpage fees. They had problems with a whole host of problems, not all related to government ownership.

Edited September 9, 2007 by jdobbin

[daniel]

and would you add privitization of our water supply to that as well, lot of money to be made there in the future?

Is there anything on or off this planet the right won't privatize?

[jdobbin]

Is there anything on or off this planet the right won't privatize?

If they privatize air, it will no longer be polluted.

[geoffrey]

If American farmers and food producers had to pay for the full cost of their activities, then we'd have competitively priced groceries, rather than government subsidized corporations.

You won't find an argument from me there. I agree.

Besides, the lumber lobby in the U.S. is concerned about more than just stumpage fees. They had problems with a whole host of problems, not all related to government ownership.

If you took stumpage fees, a valid argument, out of the hands of the lumber industry in the U.S., they wouldn't have much left to whine about... rationally of course. Their anti-Canada lobby would quickly fall apart.

If they privatize air, it will no longer be polluted.

Air technically is privatised. Other than the passage of aircraft, you do own all the air from your house to heaven.

[jdobbin]

If you took stumpage fees, a valid argument, out of the hands of the lumber industry in the U.S., they wouldn't have much left to whine about... rationally of course. Their anti-Canada lobby would quickly fall apart.

Air technically is privatised. Other than the passage of aircraft, you do own all the air from your house to heaven.

I don't know that stumpage fees would end it. The list the U.S. forestry companies has on how Canada subsidizes and protects its industry is fairly lengthy.

Ah, good on the air issue. I will start charging people for breathing my air.

Edited September 9, 2007 by jdobbin

[Pliny]

I don't know that stumpage fees would end it. The list the U.S. forestry companies has on how Canada subsidizes and protects its industry is fairly lengthy.

Ah, good on the air issue. I will start charging people for breathing my air.

One of the things that kept the imbalance of the market unfair was the high American dollar. when Canada sold raw lumber to the Americans they could do it without making any profit on the transaction but make forty percent on the exchange rate.

So basically lumber companies were giving away the harvest of raw logs for no profit in order to profit on the dollar difference.

Just an example of how government interference in economies distorts markets.

[jdobbin]

One of the things that kept the imbalance of the market unfair was the high American dollar. when Canada sold raw lumber to the Americans they could do it without making any profit on the transaction but make forty percent on the exchange rate.

So basically lumber companies were giving away the harvest of raw logs for no profit in order to profit on the dollar difference.

Just an example of how government interference in economies distorts markets.

So, Canada having its own currency constitutes a subsidy.

Funny though that the latest complaint from the forest industry in the U.S. comes when the Canadian dollar nears parity with the U.S. They will likely not be happy unless Canada becomes an American state because anything else would constitute unfair trade.

[jennie]

Your hatred of government shines through once again, I see.

Why is it so important to you pliny to cast me as someone who "hates government"?

Your efforts are getting quite laughable as the post you quoted contained neither of the words 'government' nor 'hate'.

I was, instead, saying that we should not leave care and control of our forests in PRIVATE hands

(implying, instead, keep it in public hands ... i.e., government.)

[Pliny]

Why is it so important to you pliny to cast me as someone who "hates government"?

Your efforts are getting quite laughable as the post you quoted contained neither of the words 'government' nor 'hate'.

I was, instead, saying that we should not leave care and control of our forests in PRIVATE hands

(implying, instead, keep it in public hands ... i.e., government.)

You are the one who said you hated government, if you remember. Why do you think they should be so ubiquitous if that is truly the case?

[Pliny]

So, Canada having its own currency constitutes a subsidy.

Funny though that the latest complaint from the forest industry in the U.S. comes when the Canadian dollar nears parity with the U.S. They will likely not be happy unless Canada becomes an American state because anything else would constitute unfair trade.

Letting the dollar drop below par with the American dollar is exactly that, a subsidy. The government enjoyed that because there was lots of economic activity, lots of revenues for them, but our resources were going across the border in record amounts. The Liberals certainly weren't concerned about the dollar.

Edited September 9, 2007 by Pliny

[old_bold&cold]

We do not set the level of our dollar like some other countries do. We have a floating dollar, and we can not force it up or down without pegging it, and taking away the float. That can be very costly to us, in many ways. So do not wish for things you will regret later. I believe that it was around 1966 that the dollar was left to float. We could have pegged it to the USD at that time without much harm, but to do so now it would cost us lots especially in our way of living.

[jdobbin]

Letting the dollar drop below par with the American dollar is exactly that, a subsidy. The government enjoyed that because there was lots of economic activity, lots of revenues for them, but our resources were going across the border in record amounts. The Liberals certainly weren't concerned about the dollar.

A free floating dollar is not considered a subsidy. Your contention that the Liberals didn't care about the level of the dollar defies belief since it was under the Liberals that the deficit was dealt with. The market expressed its confidence in that policy by raising the value of the dollar.

The scaredy cats on the right wanted dollarization when the dollar was at 63 cents to the U.S. They were prepared to hand over Canada's internal economic levers rather than dealing with the pain of actually becoming competitive through hard work.

[daniel]

...

Ah, good on the air issue. I will start charging people for breathing my air.

Only the toxic waste is left to the public, and then the right wingers blame how inefficient the government is managing it.

[Pliny]

We do not set the level of our dollar like some other countries do. We have a floating dollar, and we can not force it up or down without pegging it, and taking away the float. That can be very costly to us, in many ways. So do not wish for things you will regret later. I believe that it was around 1966 that the dollar was left to float. We could have pegged it to the USD at that time without much harm, but to do so now it would cost us lots especially in our way of living.

The government can peg the dollar, yes. Deifenbaker did that in the sixties and, if anything, that demonstrates that political influence can be exercised. Economically, letting the dollar float and just adjusting with the usual tools of money supply, interest rates and credit availability is found to be more effective economically. The Liberals kept the dollar low in relation to the US dollar intentionally, probably to bolster Canadian manufacturing sales. Great business for Ontario. It also didn't help the American domestic manufacturing sector sort of a nice snub from Liberals.

I am not wishing for anything I will regret later. I am saying that the damage has already been done by governments interfering in economies and markets. Most of that damage occurred in the nineteen thirties and continued on from there but there were practices, mostly related to banking, that should have been outlawed in the eighteen hundreds that were allowed. Heavy regulation was supposed to be the cure instead of the correct course of action that of eliminating faulty practices.

[Pliny]

Only the toxic waste is left to the public, and then the right wingers blame how inefficient the government is managing it.

How come we have so much government and we have so much "toxic waste"? If we have more government won't we have more toxic waste? Seems that way to me.

[jennie]

You are the one who said you hated government, if you remember. Why do you think they should be so ubiquitous if that is truly the case?

I said I don't like them, perhaps I said I don't trust them. (I am Canadian, eh?)

ubiquitous? what?