Letter From Canada

The Neighbourly Disagreement

By Eribert Loehner in Vancouver

I live in the city of Vancouver on Canada’s west coast. It is the third largest city in Canada and the largest city in the province of British Columbia.

Vancouver is also just 48 km from the US border. The American states just south of the border are Washington and Oregon States. The closest major city south of the border is Seattle, Washington; an attractive city where most Vancouverites feel quite at home.

It is difficult to tell residents of British Columbia apart from our Washington and Oregon counterparts.

We speak the same language, have the same dialect, and generally have the same values. Politically, we are also very similar; ever so slightly left of center. Both Washington and Oregon did not support Donald Trump during the last election and British Columbia voted overwhelmingly for Justin Trudeau.

Co-operation from north and south

It is not surprising that cooperation between these two states and our province is very high. Due to our similarity and tight knit cooperation, there has even been a vague independence movement to cede the province and states from our respective countries to form the independent state of Cascadia.

But despite all our similarities and an amicable North American Free Trade Agreement (NAFTA), there is a trade dispute between us that seriously threatens our neighbourly love. It has dragged on for 35 years and shows no sign of being resolved any time soon. It

Canadian softwood lumber

centers on Canada’s export of softwood lumber to the United States.

Softwood lumber is lumber milled from coniferous trees such as fir, spruce, hemlock and pine. It is used predominately as a construction material. British Columbia has a major industry harvesting and milling lumber from these tree species.

The nub of the problem

The same trees are harvested and milled in Washington and Oregon States; however, the demand for lumber in the US far exceeds its domestic production.  Consequently, a large volume of softwood lumber is imported from Canada.

The dispute centers on how timber is purchased for harvesting between our two countries. In the US, trees are predominately harvested from privately held wood lots. The right to harvest must be purchased from lot owners through a system of competitive bids.

In Canada the right to harvest trees is usually through a government awarded “Tree Farm License” on public land.

A Canadian Tree Farm License specifies a “stumpage fee” to the government for the volume of wood harvested, but also includes environmental restrictions and a commitment to replant; something the American system may or may not include. When looking at the cost of harvested timber alone, it is significantly higher in the US than in Canada.  

The US wood lobby

The wood lot owners in the United States form a powerful political lobby. The availability of lower cost Canadian milled lumber affects the value of timber on their land.

In 1982, the lot owners approached the US Dept. of Commerce on several occasions claiming that the Canadian “stumpage fee” system is nothing more than an unfair government subsidy and a countervailing duty should be applied.

Since then, negotiations between Canada and the US over softwood lumber have become particularly acrimonious.  Duties of up to 27% have been levied against Canadian lumber entering the US. Four short-term agreements have been concluded between Canada and the US to eliminate these duties. One of these agreements forced Canada to impose an export tax equivalent to the US duty.

The US Dept. of Commerce has made five rulings on the matter. Not surprisingly, all favoured the US.

WTO rulings favour Canada

The World Trade Organization has made three rulings on softwood lumber; all in favour of Canada. Three NAFTA rulings have also favoured Canada. 15,000 jobs have since been lost in the British Columbia forest industry directly due to this dispute.

The last softwood lumber agreement expired in 2015.

In one of his last acts as president, Barak Obama signed a one year moratorium on any trade action related to Canadian softwood lumber.

Right now, Canadian lumber again has unfettered access to the US market; however, with new president Donald Trump focused on “bad trade deals”, the negotiations that are about to begin in an effort reach a new agreement will likely be difficult at best.