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BC wins one in softwood lumber feud with US

Ruing says beetle-infested timber didn't contravene 2006 agreement.


July 19, 2012
by CANADIAN PRESS

VANCOUVER: Even as Canada declares victory in a major softwood lumber dispute with the US, the organization representing BC’s forest industry doesn’t expect the persistent American lumber lobby to reduce its competitive tactics.

An international tribunal convened under the 2006 softwood lumber agreement ruled July 18 that Canada did not circumvent the deal by shipping large quantities of pine beetle-infested lumber south of the border.

The US government argued that BC mills had an unfair advantage in softwood sales because they’ve been selling logs made from the destroyed trees at lower prices.

The three-member panel at the London Court of International Arbitration ruled in favour of Canada, though the details of the ruling will remain confidential for 10 days.

If Canada lost the arbitration, financial penalties could have totalled as high as $380 million.

“When you dodge that bullet, you obviously feel pretty good,” said John Allan, president of the BC Lumber Trade Council, which represents 85 per cent of the province’s lumber producers.

But he said he doesn’t expect the unanimous ruling, which cannot be appealed, to persuade the U.S. forestry lobby to stop complaining.

“I know their oversight over what we do in Canada will not go away, it will never go away,” Allan said in an interview, noting the industry south of the border have been making similar complaints since the early 1980s.

“They never back down. It doesn’t pay them to back down.”

Provincial and federal politicians were lauding the decision as a triumph for the roughly 53,000 people who work in BC’s wood products industry.

“The fact that this is behind us, it’s clearly demonstrated that BC has been vindicated,” the province’s jobs minister, Pat Bell, told reporters in Vancouver.

“We’re operating under the rules provided under the softwood lumber agreement. I think (that) will give people the confidence to know that there’s a long-term future in the industry.”

Bell declared the ruling “total victory,” describing the U.S. claims as “frivolous” while suggesting it means brighter days are ahead for the industry.

Ed Fast, the federal minister of international trade, also welcomed the ruling.

“This positive outcome is the result of our close collaboration with provincial and industry partners and proof that the (softwood lumber agreement) is good for Canada’s forestry sector,” he said in Ottawa.

The US launched the complaint in January 2011, arguing B.C. was unfairly subsidizing wood damaged by the mountain pine beetle, which has been chewing out the guts of forests for years. Pine beetle is a problem in areas across the province, but the BC Lumber Trade Council said the decision focuses on wood in the province’s Interior.

Industry observers said the dispute was the most serious to date under the softwood lumber agreement, because it struck at the core of forestry policy and timber pricing.

The US Lumber Coalition expressed bitter disappointment in the ruling.

“While the coalition vehemently disagrees with the (court) panel conclusion, we respect and appreciate the efforts of this panel and the U.S. government to grapple with the complex issues involved in this case,” said coalition chairman Steve Swanson, who also runs the family-owned Swanson Group in Oregon.

The Office of the United States Trade Representative said it remains concerned by BC’s practice of providing “publicly-owned timber” to lumber producers for prices far below market value.

“It is important to note that the tribunal did not sanction the pricing practices in British Columbia,” Nkenge Harmon, deputy assistant United States trade representative, said in a statement.

“Rather, as a result of a flawed approach to evaluating the evidence before it, the tribunal concluded that it was unable to find a conclusive link to action by the government of Canada.”

Harmon said the office will continue to monitor the situation closely, noting the US has won two previous cases under the softwood lumber agreement.

BC denied the province was cheating, saying American producers should have known there would be an effort to clear dead, beetle-infested timber.

Allan, the BC Lumber Trade Council president, said even though this ends the arbitration dispute, the BC industry is being attacked from another direction.
He pointed to US threats to prevent Canada from joining a Pacific free-trade zone unless wood complaints are resolved.

Canada was represented by a Washington-based law firm in the recent dispute, and it likely cost millions to resolve, Allan said. Even though it’s over he doesn’t foresee any particular impact on the industry, which has about 25% US market share.

The softwood lumber agreement was mutually extended two years last January until October 2015,

BC exported $3.83 billion worth of softwood lumber to all world markets in 2011, with roughly half going to the U.S. China is the province’s second largest and fastest growing market.

© 2012 The Canadian Press