U.S. mills see peace dividend

Ending a trade war with Canada over imported lumber will deliver substantial benefits to Inland Northwest sawmills, an industry leader predicted Tuesday.

Local mills won’t have to compete with below-cost lumber dumped into the U.S. market by mills from interior British Columbia, said Jim Riley, president of the Intermountain Forest Association in Coeur d’Alene. As a result, mill owners should find it easier to invest in expensive new upgrades needed to keep them competitive in a global marketplace, he said.

Last week, Canada and the U.S. signed an agreement to settle their long-running dispute over imported softwood lumber. The accord, expected to take effect in October, protects domestic producers by implementing quotas and border taxes on Canadian imports when lumber prices fall below certain levels.

“My personal forecast is that it will provide a higher level of confidence for capital to flow on the U.S. side of the border,” Riley said. “There’s a lot more predictability about how the market will function.”

Canada produces about 34 percent of the softwood lumber sold in the U.S. The commodity spruce, fir and pine is used in home construction.

U.S. producers have long argued that Canada’s provinces subsidize private mills through cheap log sales to support rural employment. “They have an established government objective to use their forest to accomplish social objectives,” Riley said.

The Inland Northwest, which lies just south of British Columbia’s vast timber-producing region, competes directly with that imported lumber, he said.

During the last five years, strong U.S. home construction has helped absorb that surplus lumber, Riley said. But with the housing market projected to slow, domestic producers need assurance that Canada won’t undercut their markets with below-cost lumber, he said.

The U.S.-Canadian agreement runs for seven years, with a possible two-year extension. It would end years of litigation, and give both countries time to hammer out a longer-term agreement under less adversarial conditions, Riley said. However, “it isn’t a done deal yet,” he noted.

Since the agreement was announced last week, Canadian Prime Minister Stephen Harper’s conservative government has come under attack from Canada’s opposition parties, who think the deal concedes too much to U.S. rivals.

One sticking point: $4 billion of the $5 billion in softwood duties collected by the U.S. over the last four years would be returned to Canadian mill owners, with the remaining $1 billion split between U.S. producers and the U.S. government.

One Canadian political cartoon depicted David Emerson, Canada’s international trade minister, as a cop confronting a bank robber, and demanding that the robber return 80 percent of the stolen goods.

The BC Lumber Trade Council – the main voice of British Columbia sawmills – issued a tepid statement on the softwood accord, saying progress had been made, but that some of its members weren’t supporting it in its current form. For the agreement to become binding, Canadian producers representing 95 percent of the duties previously collected by the U.S. would have to back it.

Ending the softwood dispute has been one of Harper’s top priorities since he was elected in February. After a meeting with President Bush last week, Harper said the negotiations were over, and urged Canadians to sign onto the deal.