Eric Depenau | Contributor
Early in 2015 there was a constant buzz about the pending expiration of Canada’s softwood lumber trade agreement (SLTA) with the United States. Canada has been without a proper agreement since then. Negotiations have been dragging on for years and many are lost in the process. With so many British Columbians relying on the forest industry for work, this issue was top of mind as the agreement’s final days counted down, expired, and lapsed without a new deal in place. The province’s political situation at the time also fanned public interest as leading parties expressed why they would be the best negotiators moving forward. Being as the SLTA is a federal agreement, many might think that the provinces would each share both an equal risk and an equal benefit being party to the agreement. This equality isn’t the case, BC is exposed to a greater risk than any other province and the inability to negotiate a new agreement soon could be devastating.
BC is the largest producer of softwood lumber accounting for nearly half of Canada’s overall production. Some have commented that regardless of a fair decision coming out of these talks, Canada, and BC in particular, will be able to take their business elsewhere. However simply changing markets isn’t an option, not today and not in the foreseeable future. BC has taken steps to diversify into the Asian and Indian markets but the US is still BC’s single largest recipient for softwood lumber. Reports published by the Ministry of Forests Lands and Natural Resource Operations show the value of BC lumber exports to the US in 2016 at more than $4.6 billion. Overall, forestry is responsible for more than 60,000 direct jobs and is estimated to support more than 40% of BC’s rural communities. No series of impromptu trade missions will wean BC away from the US’s economic magnet in the short term. The centrality of the US market in Canada’s forestry sector makes completing these negotiations a no fail task. So, what’s the hold up?
The reasons for the delay include both the US and Canadian Federal elections but more importantly the delay stems from the fact that many major industry organizations in the United States simply do not want to renew the contract. They believe that Canada is getting too good of a deal under the current fees and tariffs. Canada does not accept this position. Adding to this disagreement is the prevailing opinion in the US among groups like the US Lumber Coalition that, should negotiations fail, the coalition will have grounds to petition the US Commerce Department to start work on an entirely new deal. This likelihood is reinforced since Canadian owned companies in the US would have no say in the petitioning process.
In March of 2016, both nations tasked their respective cabinet members to resolve the trade dispute. Canada’s International Trade Minister, Chrystia Freeland, said that “what we have committed to is to make significant, meaningful progress towards a deal — to have the structure, the key elements there 100 days from now.”
In November of 2016, only a few months later, a memo was leaked from President Trump’s transition team suggesting that the softwood lumber dispute be used as a tool in the NAFTA renegotiations to better the agreement’s terms for the United States.
In April of 2017, President Trump’s administration carried out this directive announcing a plan to raise fees on most sources of Canadian lumber. A fact sheet on the plan states that West Fraser Mills will pay the highest duties at 24.12 percent. The second highest fees will be paid by Canfor Corp at 20.26 percent. Both companies are headquartered in BC. In retaliation, Canada’s Federal Government suggested that it will be investigating counter measures including a ban on exports of US coal through Canadian ports.
The above timeline brings our brief highlight reel of events to the present date. Despite years of negotiations, it would appear that we are not on the verge of a new agreement, that the 100-day pledge has fallen dramatically short of fruition and that retaliatory measures between the countries may become the norm in the days ahead. All of this is bad news for BC, as beetle infestation, wildfire, and competing economic interests ravage our forestry sector. The uncertainty that stems from the lack of an agreement and the threat of ever increasing costs are issues for the BC economy; issues that will remain for the foreseeable future.