Canadian rhetoric on softwood conceals industry flaws
Joel Trenaman
softwood issue has taken on a nationalist
tone: complacent acceptance of the Canadian
government’s line that our forestry companies
are victims of American protectionism.
When it comes to Canada-U.S. relations, federal election campaigns seem to be the most popular time for meaningless sabre-rattling directed south of the border. This time around, no issue has been more hyped than the dispute over trade in softwood lumber. So, it’s a clear case of the U.S. bullying benevolent Canadian industries, right? The American complaints are unfounded and selfish, no? Well, not exactly.
The vast majority of media coverage of the softwood issue has taken on a nationalist tone: complacent acceptance of the Canadian government’s line that our forestry companies are victims of American protectionism. This position bends the truth and obscures the underlying structural and environmental problems within the Canadian forestry industry.
Most of the attention has been focused on the decisions of NAFTA and WTO tribunals, where Canada and the U.S. have traded arguments spun from carefully massaged economic data. The more definitive rulings have favoured the Canadian position that huge retaliatory duties are unjustified. However, many of these judgments also accepted the U.S. case that Canadian forestry is subsidized, creating unfairly low prices for this country’s softwood exports.
The primary differences between tree-felling practices here and those in the U.S. concern land ownership and “stumpage rates.” In the U.S., about 90 per cent of timber is cut in commercial forests on privately-owned land. Here in Canada, it’s the opposite. Ninety-four per cent of forestland is under government control, and governments set stumpage rates, or per-tree amounts that companies must pay to cut on government land.
Payment of the fee transfers ownership of each log to the licensee. One of the central points of conflict in the dispute is the U.S. contention that provincial governments set stumpage fees below market value, while Canada argues that the rates are not technically subsidies as much as they are taxes.
While Canada has a strong case based on trade rules and economic semantics, for all intents and purposes, the low fees do act as a subsidy — one that allows and encourages companies to log old-growth forests without paying the government rates that truly reflect the environmental costs. Stumpage rates often seem to be set arbitrarily, or based on each provincial government’s revenue goals.
According to the World Resources Institute, at least 80 per cent of forests logged in Canada are clear-cut. You do not need to be a scientist to believe that this results in the destruction of wildlife habitats and affects water quality and fish stocks. Environmental groups such as the Defenders of Wildlife claim that the industry could not afford to clear the largest and most valuable trees in valley and mountain rainforests — the most vulnerable eco-systems — without low stumpage policies and other forms of government support.
Another structural component of Canadian forestry is the use of long-term tenure agreements between governments and companies. This system has allowed a small number of companies (about 10) to monopolize the majority of tenured forestlands for decades, while these firms have also established control of the mills and processing facilities that provide employment in rural areas.
According to BC Stats, in 1999 Canada exported $269 million worth of unprocessed cut logs, despite provincial restrictions in place. Approximately $240 million of that total came from B.C. alone, where years of mill closures and resulting job losses have been blamed on the softwood dispute. Log exports continue to increase as small towns lose out on opportunities to create value-added wood products.
Yet this past November, just before the Martin government fell, industry minister David Emerson (himself a former forestry executive) announced a $1.5 billion “Competitive Strategy” to help softwood producers “continue the fight on the softwood lumber dispute.” It includes $900 million in loan guarantees and payments to lumber exporters, and $600 million to find new markets and develop new technologies.
“This just goes to show that Canada will continue to funnel vast amounts of assistance to its industry,” U.S. Commerce Secretary Carlos Gutierrez told the Canadian Press. “We will continue to insist that their subsidies be eliminated by all means at our disposal.”
It is difficult to blame the U.S. for getting just as upset with the Canadian government as our leaders have been with theirs. However, American administrations have for years preached the merits of free trade to the rest of the world while enacting airtight protectionist policies in their industries of choice.
The U.S. also needs Canadian lumber to meet the needs of its domestic market. In fact, organizations such as the National Association of Home Builders have been lobbying Washington to comply with NAFTA rulings, arguing homebuyers will save on building costs. About one-third of softwood construction materials are imported from Canada.
It is quite rare to see environmentalists calling for a market solution to natural degradation, but environmental associations on both sides of the border advocate open tenure processes and markets to set stumpage fees. For example, in 2002 a coalition of more than 90 groups in Canada and the U.S. (including the Sierra Legal Defence Fund, Greenpeace and the Suzuki Foundation) signed a letter calling for Canadian provinces to “apply true market mechanisms to timber pricing.”
The B.C. government, for one, has proposed changes to forest practices that would reallocate tenures and create a log auction system. Still, there remains a failure to fully recognize Aboriginal title or rights on logged lands, and the government has been roundly criticized for easing up even further on standards concerning environmental reviews and reforestation requirements.
Based on the pure economics of WTO or NAFTA agreements, the Canadian government may be right about softwood. Nevertheless, like the BSE crisis and the long history of Atlantic fisheries mismanagement, instead of looking inward at the unsustainable practices of a Canadian industry and the public policies supporting those actions, the federal and provincial governments have decided to put the blame somewhere else.
Joel Trenaman is a former Editor-In-Chief of the Manitoban, and a former Opinions Bureau Chief for Canadian University Press.
