30,000 B.C. jobs at risk after softwood 'bomb': Forests minister calls new duty a U.S. effort to intimidate Canada
Copyright 2001
The Vancouver Sun
November 1, 2001
By Gordon Hamilton
The United States was accused of dropping the trade equivalent of a bomb on Canada on Wednesday by imposing punitive anti-dumping duties on lumber exports.
The duty, almost 40 per cent for one of the province's major producers, is expected to force sawmills to close and put up to 30,000 B.C. workers on the street.
"This is a neutron bomb the Americans have used to nail their competitors," said David Emerson, president of Canfor Corp., Canada's largest lumber producer.
The duty was anticipated but its impact triggered strong anti-U.S. sentiment in British Columbia one day after HMCS Vancouver sailed to join the U.S. war against terrorism. B.C. Forests Minister Mike de Jong accused the Americans of trying to intimidate Canada into signing a bad deal to get out from under the pressure the duties have put the Canadian industry under.
"This is about intimidation," de Jong said. "We are one of the good guys and someone should tell the American people that while their attention is understandably focused elsewhere in the world, there is a very small group of bureaucrats, politicians and a few industrialists who are doing a hatchet job on their closest allies."
De Jong was clearly frustrated over the imposition of an anti-dumping duty that averages 12.57 per cent on Canadian lumber exports, a $10-billion a year business. The anti-dumping duty is on top of a 19.3-per-cent countervailing duty.
One company, Slocan Forest Products, will be required to pay a 19.2-per-cent anti-dumping duty duty, bringing its total duty to 38.5 per cent.
De Jong said this latest U.S. move needs to be countered by linking other trade issues, such as oil and gas exports to the softwood dispute.
Emerson also called for "high-level trade negotiations" in which Canada can use other trade issues for pressure.
The alternative, he said, is that Canadian industry will be "picked off bit by bit until we are soaked up by the U.S."
De Jong said in meetings he and Premier Gordon Campbell will be holding with federal Trade Minister Pierre Pettigrew and Prime Minister Jean Chretien, B.C. intends to raise the issue of links.
"We will be discussing all the available options," he said.
The combined duties are expected to hit workers and companies with equal brutality.
Emerson said his company is curtailing production by 30 per cent this year.
Industry analyst Charles Widman expects half of all loggers and sawmill workers in B.C. -- 30,000 people -- to be unemployed as a result of the duties. Until Wednesday, B.C. Interior companies had been coping with the U.S. moves by taking temporary shutdowns. That's likely to end now, said Jake Kerr, chairman of Interior lumber giant Lignum.
"I don't think there is any company operating in B.C. at these market levels that can operate in any reasonable fashion with these type of duties," said Kerr.
Companies are being affected because even though they are not paying cash at this time, they are accruing debt on their balance sheets, throwing them out of compliance with their banking arrangements, said John Allan, president of the B.C. Lumber Trade Council.
Duncan Davies, president of coastal company Interfor, said the Canadian industry is accruing $3 billion a year in liabilities as a result of the two duties, dragging the entire industry down.
Davies said Interfor's balance sheet is strong but he is chafing at seeing the company's strength being dribbled away in duties.
"This is doing serious financial damage to the underlying integrity of our industry. We should be investing. Instead we are accruing liability."
He said when companies begin running afoul of their banking covenants, they will be in serious trouble.
"Sure they can write cheques, but the question is, will anyone cash them?" he said.
Interfor expects to have five of its seven mills shut by the time the duty is imposed next week.
At Slocan, which employs 4,000, president Jim Shepherd said he is shocked over the level of duty his company is now forced to pay. He said it must be "a gross error."
He said such a rate cannot be sustained by Slocan.
"Obviously any business, cannot be penalized at the border to the tune of 40 per cent, 30 per cent or even 20 per cent. At some point, it must be recognized that this is not sustainable.
He said Slocan, which is currently operating all of its sawmills, will be taking no immediate action but does intend to appeal the duty.
Emerson said Canfor will be forced to keep some of its plants operating even though they are losing money because of contractual commitments it has with U.S. customers such as Home Depot.
"We will be taking more down-time, significantly more down-time," he said. "But we have a commitment to those customers to keep those lumber stocks filled so we will to some degree run, even though we are losing money to maintain our commercial relationships."