Canada subsidizes logging. The sooner we acknowledge this and force our politicians to change the stumpage system and other forest policies, the sooner we can solve the softwood dispute and remove incentives that promote unsustainable logging throughout the country.
by Will Horter, Dogwood Initiative
As the federal election heats up, Paul Martin, Stephen Harper and Jack Layton have all been talking tough about softwood lumber.
The rhetoric is thick, but more reminiscent of a fairy tale than a policy debate. If you believe the politicians –and the media and industry spokespeople—the softwood story goes like this.
Once upon a time there was a country which believed in beauty, honour and fair play. This country was full of good hearted people who made their livings as hewers of wood, sowers of crops and sellers of energy. Their major customers were primarily located in the neighboring country to the south, which was the biggest consumer of the wood, grains, vegetables and energy produced by their northern neighbor.
For decades everyone was happy, until one day about twenty odd years ago when, according to their northern neighbor, the southerners got greedy. This started a trade dispute that has lasted decades and left both sides angry.
Instead of appreciating the northerners as good neighbors, the southerners slapped pesky tariffs on the products shipped south, arguing that the government in the north subsidized its companies by charging too little for raw materials like logs.
The northerners cried foul, claiming that the southerners were bullies and were imposing tariffs to protect their own producers. After a few veiled attempts at negotiation, the northerners appealed to various trade bodies and the years passed.
Various rulings came down mostly supporting the northerners (but the southerners won a few key rulings) yet the southerners refused to comply. The northerners huffed, and they puffed, and they threatened once, and they threatened twice. And when that didn’t work they threatened again, but little changed.
Like most fairy tales, the mythology of softwood lumber described above has some basis in fact. But as with most stories that have grown to legendary proportions much important detail is missing and or has been distorted.
Let’s start with identifying the truths.
1. The U.S. is a trade bully.
2. The U.S. is trying to protect its domestic producers.
3. Canada has won most—but not all—of the trade panel rulings.
The biggest distortion is the Canadian claim that trade panels have confi rmed that Canada does not subsidize its forest products. The opposite is true and this partially explains why the US is sticking to its position—saying that major reforms are needed in Canada before it will withdraw tariffs.
In fact, virtually all trade panels have ruled that the Canadian stumpage system (the way the Crown charges loggers for Crown-owned timber) does confer a subsidy; they just disagree with the US method for calculating the subsidy, or have determined that the competing US timber industry has not been “injured.”
Canada and BC subsidize logging through a variety of circuitous policies that offset the true costs of logging. But the main subsidy results from charging way too little for trees logged on Crown land.
The governments’ own data prove this point: in BC logging companies paid only 25 cents a cubic metre for over 36% of the trees logged from Crown lands. On Haida Gwaii—which is world renowned for its huge spruce and cedar—companies paid only 25 cents a cubic metre for over 51% of the magnifi cent trees they logged in 2004.
Would you allow someone to log a tree the size of the average Canadian telephone pole from your backyard and only pay you a quarter?
I doubt it.
Most of us trying to make sense of the softwood dispute get lost in the maze of almost incomprehensible trade laws and seemingly contradictory WTO and NAFTA rulings. To get to the heart of the matter we only need to focus on the low prices (stumpage) logging companies are paying for our publicly owned wood.
A direct comparison of prices paid for logs, on both sides of the border, also highlights the below-market value (subsidized) prices paid in stumpage. An independent study which corrected for differences in the way each country scales (determined by the grade and size of a log), has shown that “log prices for cedar and hemlock species are substantially lower in BC than in Washington and Oregon.”
In fact, BC charged only 41% to 53% of US prices (from 1996-2001) for Cedar I Grade logs. The analysis was carried out comparing selected grades of Cedar, Douglas Fir and Hemlock logs. BC’s prices for these grades were substantially less than the equivalent US grade in every comparison.
Canada subsidizes logging. The sooner we acknowledge this and force our politicians to change the stumpage system and other forest policies, the sooner we can solve the softwood dispute and remove incentives that promote unsustainable logging throughout the country.
No trade panel can do this. It is up to us as concerned Canadians to hold our politicians accountable and to solve the softwood dispute while we’re at it.
Once the stumpage system is changed to capture the true value of logs from public forests, the underpinnings for the softwood dispute will disappear and the US—trade bullies that they are—will have little chance of imposing tariffs.
Despite the rhetoric from politicians and pundits, there are only two realistic options for solving the softwood dispute for the long term:
1. A negotiated agreement that imposes quotas or a Canadian fee on exports, or
2. Revising Canadian forestry laws to get rid of subsidies and ensure the true value of publicly owned timber is captured.
As a Canadian, I much prefer the latter. Yet have you noticed that our politicians seldom mention it as a possible solution?
I guess our politicians would rather blame the other guy, believing in fairy tales and the like.
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http://www.dogwoodinitiative.org/
[From WS January/February 2006]