Busineess

FEELING THE PAIN

Layoffs and mill closures mount as the softwood lumber dispute bites deep

KEN MACQUEEN December 3 2001
Busineess

FEELING THE PAIN

Layoffs and mill closures mount as the softwood lumber dispute bites deep

KEN MACQUEEN December 3 2001

FEELING THE PAIN

Busineess

Layoffs and mill closures mount as the softwood lumber dispute bites deep

KEN MACQUEEN

It was a Thursday afternoon, less than a week before American lumber giant Weyerhaeuser Co. pronounced a death sentence, when manager Dave Sebellin walked through the eerie, sprawling silence of the Canadian White Pine mill in Vancouver. He strolled to the edge of the Fraser River, where, as they have for eight decades, booms of western red cedar logs rode in water as still this day as grey glass. He followed the raceway to the jackladder, which, in better times, hauled logs out of the river and into battered wooden buildings the size of aircraft hangers.

The air was thick with the perfume of cedar. After 21 years in the business, “wonderful” is the only word he could find to describe the scent. He climbed the stairs and catwalks, past the giant barker, past the headrigs where the logs are sawn into slabs, past the edgers where the slabs become lumber. Nothing moved.

THE SAWS at Canadian White Pine are stilled by the softwood lumber dispute with

the United States, the mills biggest customer. Countervailing and anti-dumping duties imposed by the U.S. commerce department have added an average 32 per cent to the cost of Canadian softwood— pricing Canadian timber, and especially premium B.C. cedar, out of the U.S. market. The dispute has caused 18,000 layoffs of mill and forestry workers in British Columbia alone, and closed mills in Quebec, the next largest softwood exporter.

Negotiations between Canadian and U.S. officials have been as productive this fall as the moribund White Pine mill (page 54). Trade officials seem unable to reconcile two profoundly differing visions rooted in the fact that Canadian timber comes primarily from provincial Crownowned land, while U.S. timber is largely in private hands.

The Coalition for Fair Lumber Imports, a politically powerfid lobby dominated by southern U.S. mill and forest owners, has led the 20-year fight to limit Canadian imports, claiming they are subsidized by artificially low stumpage or harvesting prices set by provincial governments. “Until Canadas

lumber production is market-based,” says coalition chairman Rusty Wood, president of a family-owned lumber company in Perry, Ga. (and well aware of the amusement about his name), “the United States cannot let unfair trade practices destroy our mills, our jobs and the forest landowners who rely on our industry.”

The claims of protectionism cut both ways. NAFTA, the free-trade agreement, is, in the jaded view of Canadian timber producers, an acronym for Nearly Always Favouring the Americans. They see the U.S. lumber lobby as violating trade law in order to shelter their inefficient operations from competition. The U.S. also wants an end to British Columbia’s restrictions on raw log exports. Provincial forest workers consider that tantamount to exporting their jobs to U.S. mills.

The duties hit hardest in B.C., which sells 70 per cent of its softwood to Americans—half of the $10 billion in annual Canadian softwood exports to the U.S. About 125,000 B.C. workers depend on the forest industry for employment, and it generates nine per cent of the provincial

economy. It’s the only game in town in many coastal and northern communities.

White Pine, which sells 60 per cent of its production to such American customers as Home Depot Inc., has operated sporadically since the summer, needing to meet its contractual obligations, but often losing money by doing so because of the trade sanctions. The duties, says Sebellin, “has a major impact on our ability to operate.”

Just eight of400 hourly employees were working the day Sebellin, 44, took his walk. A maintenance worker approached him by the bin sorter, which separates boards by size. He couldn’t let the manager pass without asking the question on every worker’s mind: “Got any good news for me, Dave?” Sebellin had little to give but a few sympathetic words and a shrug.

STRATEGIES IN B.C. for resolving the dispute vary wildly. Washington state-based Weyerhaeuser—which in 1999 bought B.C.’s giant forest company MacMillan Bloedel Ltd.—has been circumspect. While denying its Canadian subsidiary is dumping cheap lumber in the American market, its corporate statements have straddled the fence, mindful that the core of its $24billion annual operation is based in the U.S.

Far more impatient is David Emerson, the outspoken president and CEO of Canfor Corp., Canada’s largest softwood lumber producer. Just back from a fruitless trip to Washington, Emerson hiked a

foot onto a coffee table in his 30th-floor Vancouver office, and complained that U.S. trade law is an embarrassment. “It’s really nothing more than a punitive instrument of narrow protectionist interests in the industry in the U.S., and compliant actions and decisions made by people in government.” He’s spending half his time on the dispute, time he’d rather spend growing Canfor so it isn’t left as easy prey for a foreign takeover, as MacMillan Bloedel before it.

Emerson met in Washington with Marc Racicot, the special envoy picked by President George W Bush to setde the dispute, and offered to fly him to a B.C. timber community like Fort St. James to see the damage firsthand. Racicot made a return visit to B.C. last week for talks with industry and government leaders, but he limited his visit to Vancouver, which is, of course, the province’s largest clear-cut. Both Racicot, a former governor of Montana, and B.C. Premier Gordon Campbell left a meeting with only faint hope of major progress by Christmas. Yet people “with faces and homes and families” are being hurt on both sides of the border, said Racicot, whose home state is also reliant on timber revenue. He said a lasting resolution—“open fair trade based upon ffee-market principles”— requires negotiation rather than litigation. But litigation may be unavoidable.

Canfor’s Emerson has attained near-hero status in the province by opening, in frustration, another front in the sanctions

battle. Canfor has launched a $250-million (U.S.) lawsuit against the American government for what Emerson calls “capricious, arbitrary and punitive” violations of the free-trade agreement. He worried that the suit—which will take years to resolve— might be seen as fracturing the united Canadian negotiating front. Instead, he was “blown away” by the huge measure of public support hes received. He interprets it as a sense of relief that “somebody, somewhere, was actually standing up and trying to gain back some control.”

The logs for White Pine mill come from the coast, from Vancouver Island and from the rain-swept Queen Charlotte Islands. They come from Deborah Mantic, 45, and her husband, Andreas Uttendörfer, 58, who live in splendid isolation in the bush outside tiny Queen Charlotte City. He is a fallen She measures and grades timber.

They met more than 20 years ago at a Remembrance Day dance. “She was a young and beautiful log scaler,” he says. “I asked her to dance.” Their love affair with logging stretches back further still. They speak of it in spiritual terms. Mantic grew up in logging camps where her father was a high rigger. Uttendörfer says, simply: “Its just my life.” Sometimes he stands before a tree he will cut and imagines its future. He sees it living in another form: perhaps supporting a Japanese temple, or as a fine piece of furniture, or in an American home.

They work for Weyerhaeuser. Their cur-

rent layoff will stretch deep into January. Or longer. They, like many on the Charlottes, are living off their savings, and the salmon and venison in their freezer. They are not so much angry at their American neighbours as they are puzzled.

It didn’t go unnoticed that the U.S. imposed its latest duty in the same October week that HMCS Vancouver and 235 Canadian personnel left Vancouver Island to join the American-led war on terrorism. What, after all, was the lesson of the Sept. 11 tragedy but the value of building new alliances and strengthening old ones? asks Uttendörfer. “What I’m hoping for is that people come to their senses and see that it is important for us to stick together, to make our relationship work.”

NOT EVERYONE is as diplomatic. “Turn back the frigates,” demanded a letter writer to Vancouver’s Province newspaper. During a conference call, provincial Forests Minister Mike de Jong appealed to American journalists. Tell the U.S. commerce department, he urged, “that we’re actually on your side. You know, were one of the good guys.”

Making that point is an expensive proposition. B.C. timber companies alone are spending $35 million annually on lawyers and consultants, and to lobby the issue onto the personal agendas of the leaders of both countries, the only hope for a lasting resolution. Simply getting the issue on the radar in a preoccupied Washington is a challenge. Companies like Home Depot, home

builders associations and other groups have formed their own lobby, American Consumers for Affordable Homes, to make the case for cheap lumber imports. The tariff on Canadian lumber, which accounts for a third of the U.S. market, adds an estimated $1,500 to the cost of a home, says spokeswoman Susan Petniunas. “The U.S. is pushing Canada around,” she says. “The important thing, we really believe, is for Canada to stand firm. We really think there is a huge chance to win on this.”

So far, though, the battle is political rather than consumer-driven. The wellfinanced U.S. timber lobby has a list of its own mill closures and failed businesses. It also has a powerhouse advocate in Montana’s Max Baucus, chairman of the Senate finance committee and an outspoken critic of Canadian timber imports.

The thousands of Canadian layoffs that resulted from the anti-dumping duty levied on Oct. 30 was front-page news for days in B.C. In the influential Washington Post, it merited a single business brief deep in the newspaper.

When the news did come, it was bad. On Nov. 14, Weyerhaeuser’s Vancouver office announcing the permanent closure of Canadian White Pine by March. It had operated since 1923—the first mill owned by H. R. MacMillan, and a foundation of the former MacMillan Bloedel empire. A nearby particleboard plant, employing 100, shuts in January. White Pine’s work will go to five other company mills in B.C. A Weyerhaeuser news release blamed an “unprecedented number of serious challenges” facing the B.C. coastal forest industry. Among them, the softwood lumber tariff, which left too many mills for too few markets.

Company staff had time to phone most workers with the news, but some heard it on the radio. Letters outlining setdement packages were hand-delivered later that day to workers’ homes. Dave Rodway, a lift-truck driver with 32 years seniority, said he’ll clear $20,000 severance after taxes. “I don’t know what I’m going to do,” he said, the shock still setting in. “Who’s going to hire me at 56?”

He gave a bitter laugh at the Weyerhaeuser letterhead on his severance notice. “The future is growing,” reads its motto. But not in B.C. E3