Re: WTO on the softwood lumber agreement between US and Canada

["Ken Hanly" <khanly@xxxxxxxxxxxxxxx>]

Yeah! Our social and environmental policy is to subsidize corporate rape of
our forests. However the US also subsidizes forest companies through
roadbuilding etc. as I understand it..I no doubt there are other less
obvious subsidies.

Cheers, Ken Hanly

03/21/01 -- Canada Primarily Responsible for Softwood Lumber Dispute
Canada Primarily Responsible for Softwood Lumber Dispute
THE GALLON ENVIRONMENT LETTER
Vol. 5, No. 12,
Copyright (c) 2001, Canadian Institute for Business and the Environment,
Montreal & Toronto
March 21, 2001
506 Victoria Ave.
Montreal, Quebec H3Y 2R5
Ph. (514) 369-0230
Fax (514) 369-3282
Email ggallon@xxxxxxxxxxxxx
CANADA PRIMARILY RESPONSIBLE FOR SOFTWOOD LUMBER DISPUTE
The fact is that forest companies operating in Canada are receiving more
subsidies and paying lower stumpage fees than their counterparts in the
United
States. Forest companies in Canada do less reforestation and protect less
endangered species than those in the U.S. Forest companies in Canada have
been
purposefully low-grading valuable timber for which they pay much less
stumpage
fees than they would if they were more honest. As a result, the forest
companies
in Canada are operating a definite competitive advantage over the U.S.
forest
companies. Canada is allowing its valuable forests to be stripped as quickly
as
possible and sold at a discount to the United States - - without giving a
thought to sustainable yield, adequate old growth protection, and long-term
economic protection of the forest industry into the next generation. Home
builders and commercial lumber companies in the United States love it,
because
they can get such cheap timber from Canada, when they can't it from their
U.S.
forest companies. Also, it is suspected that Quebec forest companies are
cutting
trees and selling the timber cheap through the Atlantic provinces to the
U.S.
without being subject to the more expensive U.S. Canada softwood trade
agreement
(see, "Lumber Unity in Tatters as B.C. Breaks Ranks", by Ian Jack, Financial
Post, March 21, 2001). If Canada is going to participate in free trade then
it
must play on a level playing field. It can't dump cheap timber into the
United
States just to boost the immediate income of foreign and Canadian forest
companies operating in Canada. Ironically, Canada has placed itself in a
position where the U.S. will end up placing a countervailing duty on the
Canadian timber that enters the U.S.
This money will be taken by the U.S. and used in the U.S. Instead, Canada
should
have bitten the bullet and charge the proper stumpage fees and force the
companies to reforest and protect endangered species. Then Canada and its
citizens and environment would benefit from the stumpage fees rather than
the
United States. We only have to remember that the U.S. forest companies in
Washington and Oregon were stopped dead int their tracks in a national
effort to
protect the habitat of the "Spotted Owl". Some forest companies in the
largest
exporting province, B.C., know this and have broken ranks with the federal
government and forest companies in the other provinces that have stuck with
the
position that Canada has done nothing wrong and is not operating at a
competitive advantage. B.C. companies like Canfor (Canadian Forest Products)
and
Lignum Ltd. believe that they have to cut a deal with the U.S. that in
effect
increases their stumpage fees, or implement a "Canadian Voluntary Export
Tax"
(in lieu of stumpage fees). The real solution is for Canada to stop acting
like
a "hewer of wood and drawer of water" for the United States, and begin to
treat
its forests as if they are going to sustain industry in Canada for the next
several generations, rather than allow the companies to cut and run. It
should
be understood as well that the majority of the forestry activity in Canada
is
being conducted by U.S. controlled companies, not Canadian companies. For
example, MacMillan Bloedel, Canada's largest company with $3.2 billion in
annual
sales is controlled by Weyerhaeuser Co., based in the State of Washington.
Cascades Canada with annual forest products sales of $1.6 billion a year, is
controlled by Boise Cascades Co., based in Boise, Idaho. Fletcher Challenge
Canada, with $975 million in annual wood sales in Canada, while not a U.S.
company, is controlled by the giant multinational forest company out of New
Zealand, with no real roots in Canada. Ironically, it will be free trade
under
NAFTA and WTO that will force Canada t o finally come in line and operate on
the
same playing field as the U.S., and action that will see a better protection
of
the environment and a better stewardship of the renewable forest resources.
See
the Rainforest Action Network website at http://www.ran.org/ran/ . Also
visit
the Council of Forest Industries (COFI) website at http://www.cofi.org/ .
CANADA'S TRADE MINISTER, PIERRE PETTIGREW TRIES TO DEFEND CANADA'S
UNDEFENDABLE
POSITION The Canadian Press (CP) reported that Canada's Trade Minister
Pierre
Pettigrew found himself defending the country's environmental laws from an
American attack as the softwood lumber battle took a new twist. Mr.
Pettigrew
fended off allegations made by U.S. Senator Max Baucus that Canada's
softwood
lumber exports may be hurting the environment. That claim represents a new
tactic by Baucus to support his longstanding position that Canadian
provincial
and federal governments provide unfair subsidies to the softwood lumber
industry. Responding to the accusations, Pettigrew said that, "Canada is a
world
leader in forest management," during a House of Commons Committee meeting on
trade. CP reported that the U.S. industry has long complained that Canadian
provincial governments subsidize domestic lumber companies through low
tree-cutting fees and other benefits that give Canadian producers an
advantage
over their U.S. competitors. "The subsidies increase imports from Canada and
also encourage detrimental over-har vesting of Canada's old-growth forests,"
Baucus, the Democrat senator from Montana, told a news conference in
Washington
organized by U.S. environmentalists. "Simply stated, these subsidies cause
the
harvesting of timber regardless of need and at the expense of the
environment."
Not so, said Pettigrew. "If you look at the reality, with 94 per cent of
forest
land under public ownership (in Canada), we control harvest levels very
well --
much better than the United States," he said. "We grow twice as many trees
as we
harvest in Canada -- this is a very significant number." This last statement
by
Pettigrew may be wrong. Canada does not know how many trees it is regrowing,
nor
is it clear that the trees they are regrowing are the same species of
valuable
timber that they are now cutting and exporting to the U.S.. It may well be
that
"junk trees" with little value are growing in the place of the great old
growth
timber pines that are being clear-cut. A Timber Management Class
Environmental
Assessment in Ontario carried out from 1988 to 1991, revealed that Ontario
was
mismanaging its forests; that it was not reforesting adequately; and, that
different forest district offices counted standing trees and cut trees
differently between the district offices - there was no overall exact
science
employed by the Ontario Ministry of Natural Resources (MNR) related to
courting
the commercial trees overall in the Province. Then, just as the province was
putting in place proper measures in 1995 the Mike Harris Government came in
and
slashed the MNR budget by more than 30 per cent. It also cut MNR's
regulatory
powers through the "Red Tape Commission" which was designed to get
government
out of the way of business in Ontario, including its forests. The Harris
Government shutdown or sold most of the provincial tree nurseries.
Reforestation
was placed into the hands of industry. It's not clear at all that adequate
reforestation is being undertaken, particularly when the industry reneged on
its
financial responsibilities by reporting that "natural regeneration" was
faster
and better than tree planting. In the face of these facts it is not clear at
all
that Canada is planting two trees for everyone cut.
Susan Casey-Lefkowitz, of the Natural Resources Defense Council, called for
a
new Canada-U.S. agreement on softwood lumber that deals with both economic
and
environmental subsidies. "We'd like to see that negotiated as quickly as
possible because we fear that any lag time between the current agreement and
a
future agreement is only to further cause destruction of our shared North
American environment." Source, "Pettigrew Disputes U.S. Shot at Canadian
Environmental Laws", by Sandra Cordon, The Canadian Press, Ottawa, March 19,
2001. See the full story at
http://www.canoe.com/CNEWSPolitics0103/19_pett-cp.html
BEHIND THE SOFTWOOD LUMBER DISPUTE, WHAT'S IT ABOUT?
Canada and United States signed a five-year Softwood Lumber Agreement in
1996.
It expires March 31, 2001. In 1996, the Softwood Lumber Agreement was
negotiated
at the behest of US lumber producers by the US Commerce Department and the
Office of US Trade Representative. It capped the amount of lumber that could
be
imported duty-free from Canada into the U.S. at 14.7 billion board feet
(bbf)
per year, and taxed lumber over and above this amount on a sliding scale.
While
this quota applies to the whole of Canada, the bulk of lumber exported into
the
US - 9.8 bbf - comes from British Columbia. Alberta, Quebec and Ontario
supply
the rest under the Agreement. However, 14.7 bbf of timber exported under the
Softwood Lumber Agreement is only the duty-free amount exported into the US.
Many Canadian lumber producers have simply chosen to pay the tariff in order
to
have access to lucrative US markets, increasing the total amount of lumber
products exported to the US to 25 bbf.
The Softwood Lumber Agreement covers lumber exports to the United States
from
four provinces, which accounted for 16.2 billion board feet (BBF) of the
17.0
BBF imported from Canada in 1995. There are high Canadian export fees on
shipments in excess of 14.7 BBF. Under an amendment to the Agreement
announced
in August 1999, shipments from British Columbia (the largest producer) face
fees
of up to $148 per million board feet (MBF). Shipments in excess of the
fee-fee
quota from Quebec, Ontario, and Alberta are subject to fees of up to $108
per
thousand board feet (MBF). The government involvement allows producers to
restrict competition without facing antitrust charges. From 1991 to 1994,
Canadian lumber faced a countervailing duty (CVD), based on findings of
subsidy
by the Department of Commerce and injury by the U.S. International Trade
Commission. Each finding was appealed to a binational panel. The subsidy
finding
was struck down in a 3-2 decision. The injury finding was rejected 5-0. The
binational panels' decisions were based on U.S. trade law. After the
countervailing duty (CVD) was struck down, U.S. law was changed, by
provisions
attached to the bill implementing the Uruguay Round GATT, passed by Congress
under fast-track rules in December 1994. Using the leverage provided by the
changes in U.S. trade law, U.S. lumber firms were able to threaten a new CVD
and
demand limits on shipments from Canada.
The result was the 1996 Softwood Lumber Agreement, with its "voluntary"
restraints. The scope of the Softwood Lumber Agreement is specified in terms
of
classifications under the Harmonized Tariff Schedule (HTS). The U.S. Customs
Service has reclassified some products, putting them under the quota. The
products involved-drilled studs, notched studs, and rough header lumber-were
reclassified from HTS 4418 "Builders' Joinery and Carpentry" to HTS 4407
"Wood
Sawn or Chipped Lengthwise" Prior to the Softwood Lumber Agreement, when
there
was a higher duty on products under HTS 4418 than on products under HTS
4407,
the U.S. Customs Service insisted that these products could not be imported
under HTS 4407. The Harmonized Tariff Schedule of the U.S. is based on an
international agreement of over 170 countries. The Harmonized System
Committee
of the World Customs Organization issued a final decision in October 1999
that
drilled studs were properly classified under HTS 4418, not under HTS 4407,
but
the U.S. has refusedto follow that decision. Restricted supplies of timber
from
U.S. public lands have limited lumber output in the West, increasing the
share
supplied by the South and by Canada. What happened was that sales of timber
from
federal lands fell from 10.4 BBF in 1990 to 3.2 BBF in 1998. Supplies of
lumber
from the Western U.S. declined by 19 percent from 1989 to 1999. Imports of
lumber from Canada grew by 35 percent from 1989 to 1999. Imports of lumber
from
other countries grew by 737 percent from 1989 to 1999. Supplies of lumber
from
the South grew by 35 percent from 1989 to 1999. About 34 percent of lumber
consumed in the U.S. in 1999 was from Canada. Source, National Association
of
Home Builders (NAHB), 1201 15th street, NW, Washington, DC 20005, ph.
202-822-0200, email info@xxxxxxxx . See the article at the
http://www.nahb.com/lumber/lumber_background.htm . Also see
http://www.ecosystem.org/transb/art9.html
HISTORICAL BACKGROUND ON THE LUMBER DISPUTE Following 14 years of formal
dispute, the United States and Canada in April, 1996 reached agreement
regarding
alleged Canadian subsidy of that nation s softwood lumber industry. After
first
rejecting a 1982 petition from U.S. lumber companies charging the Canadian
government with subsidizing its softwood lumber industry, the U.S.
Department of
Commerce (DOC) subsequently accepted a second identical petition filed by
U.S.
lumber companies four years later. Following negotiations, the Dept. of
Commerce
and the Canadian government reached an agreement whereby the Canadian
government
would impose a tax on softwood lumber exports and attempt to transform its
forestry programs. However, in September, 1991 Canada decided to terminate
the
tax claiming it was no longer needed. The United States disagreed and
pursued a
legal case with the U.S. International Trade Commission (ITC). In July, 1992
the
ITC ruled in favour of the United States. Canada is pursuing the case via
the
Free Trade Agreement and GATT. Four years h ave passed since the
disagreement.
As of April, 1996 a new agreement has been reached between Canada and the
U.S.
Canada has agreed to limit its softwood lumber shipments to the U.S. In
exchange
that the U.S. would not launch any new trade action against Canadian
softwood
producers for five years. On three separate occasions, the Canadian federal
and
provincial governments have been charged with subsidizing the softwood
lumber
industry. The U.S.-based Coalition for Fair Lumber Imports first filed a
petition in 1982. It claimed that the Canadian government's timber programs
offered lumber to the Canadian softwood industry at a price 27 percent lower
than the U.S. rate. However, in May, 1983 the DOC rejected those allegations
and
the petition was denied. Commerce based its rejection on U.S. law which
defined
a subsidy as government assistance provided to a single industry or group of
industries.
The Canadian government stumpage fee program did not offer assistance to
just
one industry or a group of industries, but to a number of different
industries.
Without filing an appeal, a U.S. lumber group filed a second petition in
May,
1986 repeating the same allegations against Canada. Although there had been
no
material changes in the Canadian forestry program since 1984, the U.S. Dept.
of
Commerce accepted its petition. The department found that the federal and
provincial governments provided a 15 percent subsidy to a single industry:
the
softwood industry. Once Commerce determined this rate, it threatened to
impose a
15 percent countervailing duty to counteract the alleged subsidy. Canada
chose
to avoid the implementation of the tax by negotiating a Memorandum of
Understanding (MOU). Although this agreement also forced Canada to impose a
15
percent tax on softwood lumber exports, it was more beneficial for Canada
than a
15 percent countervailing duty charge, which would have lined U.S. coffers.
After the
Dept. of Commerce found that the timber oversight programs of BC, Ontario,
Quebec and Alberta, along with the log export restrictions of BC, were
countervailing subsidies, the Department determined a country-wide ad
valorem
tax. This tax was calculated according to the amount Canada lowered lumber
prices. DOC found that the stumpage programs provided a net subsidy of 2.91
percent and that the log export restriction granted a 3.60 percent net
subsidy,
generating a net subsidy of 6.51 percent. These duties were determined on
May
18, 1992, but they could not be implemented until the International Trade
Commission (ITC) confirmed that these subsidies materially damaged United
States
industries. On July 6, ITC made a final affirmative decision and the
countervailing duty was imposed. Source, "TED Case Studies: Case No. 75:
"US-Canada Softwood Lumber Dispute". Find the report at
http://www.american.edu/TED/USCANADA.HTM . Also see the direct wording of
the
1996 Softwood Lumber Agreement at the website http://www.d
btrade.com/casework/softwood/summary.htm
ABOUT THE COALITION FOR FAIR LUMBER IMPORTS The U.S. lumber firms seeking
protection from import competition operate together under the name Coalition
for
Fair Lumber Imports. Most of the funding for the Coalition for Fair Lumber
Imports comes from five companies: Georgia Pacific, International Paper,
Sierra
Pacific, Temple- Inland, and Potlach Lumber Co. The five companies own large
tracts of private forest land. The Coalition for Fair Lumber Imports has one
of
the largest budgets of any single-issue lobby group in Washington. The
Coalition
for Fair Lumber Imports on March 24, 1999, accused Canadian sawmills of
seeking
to evade the scope of the 1996 U.S.- Canada softwood lumber agreement and
falsely claiming that the U.S. industry is trying to add more products to
the
pact. The Coalition for Fair Lumber Imports represents small and large
lumber
producers from every region in the United States. Members include the
Independent Forest Products Association, the Intermountain Forest Industries
Association, the Northeastern Lumber Manufacturers Associatio n, the
Southeastern Lumber Manufacturers Association, the Southern Forest Products
Association, the Western Wood Products Association and many state wood
products
and forestry associations. The Coalition's efforts have been supported by
the
Paper, Allied-Industrial, Chemical and Energy Workers International Union
and
the United Brotherhood of Carpenters and Joiners of America who represent
over
650,000 workers.
Scott Shotwell, Executive Director of the Coalition for Fair Lumber Imports
said
that, "no one is seeking to add new products to the Softwood Lumber
Agreement.
The U.S. Customs is quite rightly--as required by law--seeking to close
loopholes whereby some Canadian mills have evaded the softwood agreement by
drilling small holes or notches in their lumber or scratching the face of
their
lumber and then claiming that it is no longer lumber or siding," Shotwell
said
in the March 24, 1999 press release. Source, "U.S. Lumber Firms Charge
Canadian
Mills With Misconstruing, Evading Lumber Pact", Vol. 16, No. 13,
"International
Trade Reporter", March 31, 1999. See the full article at
http://subscript.bna.com/SAMPLES/itr.nsf/85256269004a99228525625400656cb3/4a
8a028f2e079b7b85256746000778db?OpenDocument
.
CANADA'S FREE TRADE LUMBER COUNCIL
A coalition of Canadian softwood lumber producers, known as the Free Trade
Lumber Council, recently asked the Canadian federal government to intercede
on
their behalf on the matter, charging that the U.S. Customs was trying to
expand
the pact (16 ITR 495, 3/24/99). Frank Dottori, co-chair of the Free Trade
Lumber
Council and chief executive officer of Quebec-based Tembec Inc., has claimed
that the reclassification would threaten up to $1.3 billion of Canadian
softwood
lumber exports to the United States and significantly increase prices for
U.S.
consumers.
CANADA LUMBER EXPORTS TO U.S. HIT NEW RECORD 18.2 BBF U.S. import data for
1999
just made available show that Canadian exports of lumber to the United
States
hit a record high in 1999. Over 18.2 billion board feet (BBF) of timber from
Canada's forests were exported to the United States. In fact, since the
adoption
of the U.S.-Canada Softwood Lumber Agreement in 1996, Canadian imports have
hit
a record almost every year. Canadian imports from 1996 to 1999 averaged 17.8
BBF
annually, compared to 17 BBF in 1995. Canada's share of the U.S. market has
also
continued at near record levels, reaching 34% in FY 1999. Canadian import
penetration has averaged over 34% under the Agreement, down somewhat from
the
36.6% peak of FY1995 but nonetheless higher than in any year prior to 1995.
The
Agreement has permitted a sustained increase in U.S. production (and U.S.
jobs).
In 1999, U.S. lumber production was 16.3% higher than it was in the period
immediately preceding the Agreement. At the same time, Canadian production
is
also reaching record levels and has actually increase d by 17.2%, more than
the
U.S. increase (data through November 1999). In fact, 99.6% of the lumber
consumed in the United States is not subject to any fee under the Agreement.
See
the full press release at
http://www.incongress.com/issues/article.cfm?ArticleID=340 .
U.S. CONCERNED ABOUT THE WAY CANADA SETS SUCH A LOW STUMPAGE FEE A U.S.
forest
business webletter called "E-Wood.Com", edited by Fred Morris, reported
that,
"British Columbia is the source of more softwood exports to the U.S. than
any
other Canadian province and source of the Canadian subsidy for stumpage.
What
Americans perceive as the subsidy Canadians understand as grade-setting, the
way
stumpage is assessed by the provincial government from its public lands..
Ninety-five percent of Canadian forest land is owned by the Crown, and
forest
product firms pay grade-set rates for trees on the stump instead of market
prices. Grade setting is practice of harvesting only low-grade timber to set
the
grade for huge cutblocks, as a way to trigger a downward appraisal of their
stumpage payments. Then they switch to harvesting only high-grade timber but
pay
the low-grade stumpage rates." The same U.S. internet business reported that
the
B.C. forest company, "Doman Industries Ltd., claimed the B.C. Government was
aware for several years of irregularities in what companies were paying
for timber stumpage yet allowed the practice to continue. "We have no
choice. We
must seek compensation," Doman director Rick Doman said., adding that, "our
balance sheet is basically weaker because of this stumpage fee discrepancy
between companies." A recent Vancouver Sun newspaper survey of stumpage
rates
showed that Doman - which harvests over three million cubic metres of timber
a
year, paid an average price of $26.83 a cubic metre in 2000, more than four
times rival Interfor, which paid only $6.28 a cubic metre. A cubic metre is
about the equivalent of a telephone pole Under an obscure piece of
legislation
called the Ministry of Forests Act, the forests minister is required to
ensure
stumpage is collected in a fair and equitable manner. Source: Vancouver Sun
See
the comments at http://e-wood.com/news/news_archive_Detail.asp?id=3851 . See
the
full article at
http://www.e-wood.com/nsearch.asp?keyword=grade-setting&f=11/1/00INTERFOR,
TIMBER WEST, AND WEYERHAEUSER GOT AWAY WITH PAYING VERY LOW STUMPAGE RATES
IN
B.C.
In November 22, 2000, the U.S. internet newsletter "e.Wood.Com" reported
that,
"by using a loophole in provincial regulations, three of British Columbia's
largest forest companies paid next to nothing for 115,000 truckloads of
timber
harvested from the coastal rainforest. And the provincial government let
them do
it, fearing it would push small companies out of business if it tried to
collect
the lost revenues the only way it could -- by raising the price of logs for
everybody else. The three companies, International Forest Products,
TimberWest
Forest Ltd. and Weyerhaeuser, were identified in a 1999 computer search by
the
forests ministry after anecdotal information was received that companies
were
avoiding stumpage payments through grade-setting. The search turned up 36
instances since the spring of 1998 where the three companies had received at
least a 50-per-cent drop in their stumpage rates. A fourth company, Terminal
Forest Products, was identified once for a total of 37 instances. Forest
companies view
the issue of grade-setting as a symptom of the mess surrounding B.C.'s
system of
collecting revenues from public forest lands. "If you could equate
grade-setting
to windfall forest profits, maybe that's an issue, but in fact you have
companies that are barely able to stay afloat," said Steve Crombie, director
of
public affairs at Interfor. See the full story at the e.Wood.Com website
http://e-wood.com/news/news_archive_Detail.asp?id=3198 .
SIERRA LEGAL DEFENSE FUND REPORT ON AVOIDED STUMPAGE CHARGES IN BRITISH
COLUMBIA

A new report entitled, "Stumpage Sellout: How Forest Company Abuse of the
Stumpage System is Costing B.C. Taxpayers Millions", by Mitch Anderson and
John
Werring, was released January 2001 by the Sierra Legal Defence Fund (SLDF).
It
found that major forest companies logging on B.C.'s coast shortchanged the
province by $224 million. That International Forest Products (INTERFOR) was
the
single largest beneficiary of those savings by almost $100 million on its
own.
It was carried out by a stumpage manipulation technique, known in industry
circles as grade setting. On one Interfor cutting permit alone, grade
setting
techniques appeared to result in the initially appraised stumpage rate
falling
from $41.01 a cubic metre to $2.19 a cubic metre, resulting in a loss to the
taxpayers of B.C. of over $5 million. Interfor also reduced the stumpage it
paid
to the legal minimum of 25 cents a cubic metre on more than half the wood it
logged on the Coast in the last quarter of 1999. Such reductions are
achieved by
a compan y cutting a poor section of forest with low quality trees and
presenting the findings to the provincial forestry inspectors as the type of
tree that they are going to cut and sell throughout the next several years.
The
province, without the resources to challenge or test the company's
allegation
that it will be harvesting such cheap trees, sets a low grade and therefore
a
low stumpage rate for all the trees the company harvests. As soon as the
company
gets the approval for a low stumpage fee based on the junk trees it
originally
harvested, it sets off to high grade the forest of the very expensive and
high
quality trees and paying the province a pittance of correct stumpage fee
that
should have been assessed for the expensive trees.
Sierra Legal also found that had major forest companies paid the full
stumpage
rates for logs between 1993 and 1998, as much as $6 billion more in stumpage
fees may have been collected by the taxpayers of British Columbia. This has
been
considered a subsidy by the United States softwood lumber and industry and
has
been attacked as unfair for the forest industries in the U.S. that are much
more
closely monitored and which pay much larger stumpage fees that are used to
help
manage the growth of new and healthy forests there. To end grade-setting and
other potential abuses of the stumpage system, the report calls on the
government to request the Auditor General investigate the entire stumpage
and
appraisal system; to increase the presence of the civil service enforcement
officers in the field to ensure company accountability; order that more wood
to
be sold by auction so that market forces, not industry or government,
dictate
the price paid.
Stumpage is the method used by the provincial government to generate revenue
for
the cutting of trees on Crown land. Stumpage rates vary depending on the
value
of the timber, market conditions, and logging costs. Rates are determined by
combining these variables in a complex formula detailed in the Coast
Appraisal
Manual produced by the Ministry of Forests. In 1998, combined stumpage
payments
of more than $1.7 billion were collected from logging companies operating on
Crown land. British Columbia has some of the most valuable wood in the
world.
B.C. is also logging a huge volume of wood. Victoria has set annual logging
rates, also known as the Allowable Annual Cut or AAC, at least 20% above the
sustainable rate by the government's own numbers. Under the Forest Act, the
minimum stumpage rate is set at $0.25 per cubic metre. Such rates are
intended
to apply only sporadically, and usually only to the lowest quality logs. Yet
it
is this fee that most often applied to companies which were hoodwinking the
B.C.
Gov ernment. To understand the significance of this - if the 25 cent rate is
applied to a fully loaded logging truck, the province receives only $10.00.
In
the third quarter of 1998, the percentage of wood that Interfor was
accessing
for $0.25 per cubic metre ballooned. By the end of the following year, an
incredible 53% of Interfor's coastal logging volume was assessed at the
lowest
25-cent number, and generated only $10 per logging truckload. This is in one
of
the richest temperate old growth rainforests in the world. No other major
forest
company operating in the same B.C. region came close to the low Interfor
stumpage rate. In fact, SLDF found that by 1998, the proportion of wood sold
by
the province for less than $10 per logging truckload ballooned to well over
90%
for virtually every tenured logging company in the district.OVERVIEW OF
CANADA'S
FORESTS AND FOREST INDUSTRY, WRI The report entitled, "Canada's Forests at a
Crossroads: An Assessment in the Year 2000", was prepared by the World
Resources
Institute (WRI)'s Global Forest Watch Canada, managing editors Wynet Smith
WRI,
and Peter Le, Global Forest Watch Canada, November 2000. The report found
that
Canada's timber, "harvest quotas are often set above long-term sustainable
yields. For example, in British Columbia, the leading provincial producer of
timber, 90 percent of lands managed for harvest (timber supply areas) are
logged
above the long-term sustainable levels set by the government." The forest
industry in Canada generated over $68 billon (US $47 billion) in total sales
in
1996. It directly employed over 350,000 Canadians in 1998. Canada continues
to
be the world's largest exporter of forest products. Forests in Canada
continue
to be converted at a rate of about 55,000 to 80,500 hectares per year, and
logging is occurring on about 1 million hectares per year. Of Canada's 922
million hectares of land area, 417.6 millio n hectares are forested. This
total
includes areas clearcut and left to regrow, along with forests not
considered
commercially productive. Forests currently cover 45 percent of Canada's
landmass. Over half, 244.6 million hectares of Canada's forest area is
considered commercial or timber productive forests, which is suitable for
timber
harvest. Of this amount, 235 million hectares are actually available for
commercial use. Nine million hectares are not available for harvesting. The
report found that forest, "industry consolidation has resulted in the
concentration of vast areas of forest in the hands of a few companies in
Canada.
Thirteen companies have holdings at least the size of Switzerland,
accounting
for over 48 percent of Canada's forest tenure areas." The federal government
reported that approximately 60 percent of logged areas in Canada are left to
regenerate naturally and 40 percent are seeded or planted, although the
numbers
vary significantly by region. For example, in B.C., the area prescribed for
natural regeneration has declined from 50 percent in 1998 to less than 35
percent in 1992-1993. National data on the regeneration status of areas
logged
prior to 1974 are not available. The report found that, "regeneration
efforts
prior to 1975 were generally inadequate or non existent, and as a result
there
was a substantial backlog of understocked forests which reached 2.5 million
hectares in 1996. Some recently logged areas are reported as understocked
due to
the time lag between logging and the results of silvi cultural treatments
(tree
planting), or natural stand development." It also found that there is a
problem
with soil erosion and the loss of sufficient topsoil to support the regrowth
of
another generation of commercial trees, following clearcutting. See the full
Sierra Legal Defense Fund report at
http://www.sierralegal.org/reports/SLDF_stumpage3.pdf
IN 1998 FOUR U.S. ENVIRONMENTAL GROUPS SUE U.S. OVER CANADA SOFTWOOD LUMBER
AGREEMENT On December 10, 1998, four environmental groups filed suit in a
U.S.
court, in an effort to require the United States to apply environmental laws
to
the softwood lumber trade agreement with Canada. The five-year Softwood
Lumber
Agreement, struck in 1996, settled a long-running trade dispute with Canada
and
slowed Canadian shipments of softwood lumber into the United States. But the
environmental groups say the agreement encourages the province of British
Columbia to harvest too many trees from its forests. The groups were
concerned
that, "the over-cutting would harm wildlife such as grizzly bear in Canada,
and
also hurt wildlife across the border in the United States." Bill Snape,
Legal
Director for Defenders of Wildlife said that, "we want the agreement to take
into account environmental and endangered species considerations." The
lawsuit
seeks to apply the Endangered Species Act and National Environmental Policy
Act
to the Canada - U.S. Softwood Trade Agreement. Also joining the suit were
the
Earthjusti ce (the old Sierra Club Legal Defense Fund), Northwest Ecosystem
Alliance, Kettle Range Conservation Group and Pilchuck Audubon Society. The
suit
was filed in the U.S. District Court for the District of Columbia. Visit the
Earth Justice website at http://www.earthjustice.org/
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> The U.S. producers claim that the export ban is therefore a hidden
> government subsidy to the Canadian wood industry. They are also
> concerned that Canada's ``stumpage'' system for licensing lumber
> cutting on provincial land - which often takes into account social and
> environmental policy, not just market rates - is unfair.
>
> WTO rules allow member states to impose additional import duties if
> lower-priced subsidized imports are damaging their own producers.
>
> Until March 31, U.S.-Canadian lumber trade was regulated by an
> agreement which allowed Canada to ship 14.7 billion board feet of
> duty-free lumber to the United States each year, with tariffs set for
> shipments beyond that level. A board foot is equivalent to 144 cubic
> inches of wood.
>
> In return, the United States agreed not to launch any trade action,
> including the imposition of protective duties.
>
> Two days after the agreement ran out, the U.S. Coalition for Fair
> Lumber Imports asked the Commerce Department to rule that subsidized
> lumber from Canada was damaging the U.S. industry and to impose duties
> to counter that.
>
> The investigation is still continuing. On Thursday, the Canadian
> government submitted 250,000 pages of evidence to the U.S. Department
> of Commerce to support its claim that it does not subsidize its
> industry.
>
> ``The U.S. industry has alleged that a Canadian 'wall of wood' would
> cross the border. We have responded to their unfounded allegations
> with a mountain of evidence to refute their claims,'' said Canadian
> Trade Minister Pierre Pettigrew.
>
> He had earlier claimed that the lower prices were because ``our
> industry is more modern and, frankly, more efficient.''
>
> U.S. producers have claimed that Canadian lumber imports increased by
> 26 percent in the two months following the end of the agreement.
>
>