BUSINESS ECONOMY

A threat across the border

Jane O’Hara March 11 1985
BUSINESS ECONOMY

A threat across the border

Jane O’Hara March 11 1985

A threat across the border

Jane O’Hara

American trade officials in Washington refer to it simply as the “lumber problem.” But to Ottawa and to the depressed Canadian forest products industry a new threat of restrictions on lumber exports to the United States— which would cost Canadians thousands of jobs and millions of dollars in lost sales—is a critical issue that requires constant vigilance.

After defeating a concerted attempt by 350 U.S. lumber companies in 1983 to have heavy import duties placed on Canadian lumber, Ottawa is again fighting to maintain an open border.

The latest attempt to protect the slumping U.S. lumber industry is the Canadian Softwood Import Control Act, a bill that was introduced in Congress earlier this month by congressional representative Jim Weaver, a Democrat from Oregon, Larry Craig, an Idaho Republican, and Daryl Anthony, an Arkansas Democrat. The bill was backed by 19 other congressmen and had the support of powerful forest companies and lobbyists. In introducing the bill Craig sent shock waves rippling through the Canadian lumber industry. Declared Craig: “The recent onslaught of Canadian timber into the United States has reached intolerable levels.”

The new protectionist move is a reaction to the fact that Canada has been gradually increasing its share of the U.S. lumber market. Canadian lumber firms have been helped by the falling dollar which makes their products cheaper in the United States than the locally produced wood. American companies say that inexpensive Canadian lumber accounted for 30.5 per cent of all sales in the United States in 1984, compared with 21 per cent in 1974. At the same time, an oversupply of timber products has driven prices down, and many U.S. lumber firms have laid off workers and shut some mills entirely. According to the Oregon-based Industrial Forestry Association, the Pacific states have been hit the hardest, losing 50,000 out of 200,000 forestry jobs in the past six years alone.

Under the Softwood Act, U.S. producers are aiming to restrict Canadian lumber imports to about 22 per cent of the U.S. market for the next five years. But industry experts in Canada say that any

cut in Canada’s share would have a devastating effect on the forestry industry, which has not yet returned to the level of profitability it enjoyed before the 1981-82 recession. When Canadian and U.S. officials met in Ottawa for trade talks last week, the Softwood Act topped the agenda. International Trade Minister James Kelleher said talks will resume later in March, “... to see what we

can do to resolve the differences.”

American proponents of the softwood bill say that they want to negotiate a compromise that will make new legislation unnecessary. They would like Canada to agree to “voluntary” quotas similar to those adopted by Japan to limit car imports. Said Scott Fisher, then press assistant to Larry Craig: “In good times, like during the housing boom, we asked Canada to send more lumber. Now we want it to help us out in our bad times by sending less.” Added Craig: “We are hurting right now. Our lumber mills are closing and our folks are out of work.”

But Canadian lumbermen are resist-

ing any cutbacks. Fred Moonen, vicepresident, government affairs, with Vancouver-based forest giant MacMillan Bloedel Ltd., said that import restrictions “would mean that 10 per cent of the mills in British Columbia would slow down or close down. The bill is potentially a disaster for the province.”

As well, Moonen and other industry spokesmen say that quotas would be extremely difficult to administer. For one thing, the 6,415-km border is so long, and there are so many border crossings, that customs officers could not easily calculate how much lumber was being shipped every day without creating lengthy delays. For another, it might prove impossible to get Canada’s thousands of lumber producers to agree to voluntary restrictions. Canadian executives also argue that the lumber problem is largely the result of the strong U.S. dollar, which has made local producers vulnerable to European imports as well. Although lumber disputes first began in the early 1960s Ottawa has in the past successfully persuaded Washington to resist erecting restrictive barriers. In 1962 Congress passed a bill —later vetoed by President Lyndon Johnson—making it mandatory for imported wood to be stamped with the country of origin.

The most serious threat to Canadian producers arose two years ago when a group of U.S. lumber firms launched a campaign to impose a 65-per-cent duty on Canadian lumber. The U.S. companies claimed that Canadian wood was unfairly subsidized by government and as a result it should be subject to a countervailing duty. Then, the Canadian Softwood Lumber Committee spent nearly $5 million in legal fees fighting the U.S. lobby. The effort succeeded when the International Trade Administration of the U.S. commerce department ruled that Canadian subsidies were so insignificant that they did not warrant a countervailing duty.

Now, spokesmen for the Canadian Forest Industries Council, representing forestry associations across Canada, say the fight against the Softwood Act will be less expensive. And many observers contend that the restrictive bill has little chance because the Reagan administration generally favors free trade. Said a congressional aide, who asked not to be named: “The administration does not want this sort of legislation at this time. They can make sure the votes are not there.” But as it lobbies against the Softwood Act, the CFIC is leaving little to chance. Said Michael Apsey, the CFlC’s principal trade co-ordinator: “They

want less Canadian wood in the United States but our contention is that it is an open market and shall remain so.”

William Lowther

in Washington and

Diane Luckow

in Vancouver.