B.C. forest policies hammered
Industry has been targeted by Victoria as a tool of social engineering because it is politically vulnerable, Canfor chief tells board of trade.
Copyright 2000 Pacific Press Ltd, The Vancouver Sun
October 6, 2000
By Gordon Hamilton
The head of B.C.'s largest forest products company Thursday blamed the provincial government for much of the industry's economic woes, saying forest policies are ''narrow-minded, short-sighted and completely out of touch with the realities of the larger world.''
In a speech to the Vancouver Board of Trade, Canfor president David Emerson said he was breaking with the standard wisdom of forest industry executives to keep silent on forest policy.
''One of the unwritten rules of a forest executive has always been that you keep your mouth shut because the government controls your asset base so you had better be nice. Well, today I am crossing the floor.''
He said the industry has been targeted by Victoria as a tool of social engineering because it is politically vulnerable, yet because of the economic value of the forests, is also viewed as a cash cow.
He said that in 1999 Canfor paid $172 million in taxes and levies, and $311 million in stumpage, the money forest companies pay to log Crown land. On top of that, Canfor employees paid $138 million in taxes.
On the other hand, Canfor's dividends to shareholders amount to an average of $21 million a year. In 1999 there was no dividend.
''By my arithmetic it looks like a total take by government of $621 million for a single year compared with the shareholder portion of $21 million.''
Emerson was later challenged by a member of the business audience who noted the forest corporation went from a $1-billion loss in 1998 to a $1-billion profit in 1999.
Emerson said the forest company restructured its operations and became more innovative to survive.
''But we are at the point where we cannot carry on without public policy changes to support it.''
He singled out stumpage policies and the softwood lumber agreement between Canada and the United States as examples of policies that have harmed the forest industry.
He was particularly critical of the government for its 1997 bailout of Skeena Cellulose, which was achieved in part by reducing stumpage rates for that company.
However, since the government did not alter its stumpage revenue targets, the bailout resulted in stumpage rates going up elsewhere, a system called ''waterbedding'' by the government because if stumpage falls in one region, the lost revenue is simply added to other regions.
''It not only props up a weak competitor, but it does so by adding to the cost of other companies in the same business elsewhere in the province.''
He said Canfor's Prince George operations are paying an additional $46 US for every thousand board feet of lumber produced because of the stumpage policy of taking from one region to pay for reductions in another.
Lumber prices are currently about $205 US a thousand board feet.
''This is akin to a 20-per-cent tax on the total value of lumber production from the region,'' he said.
He described changes announced Thursday by Victoria to coastal hemlock stumpage rates as having a marginal impact on Canfor, which is primarily an Interior producer.
Regarding the softwood lumber agreement, he said B.C. lumber exports have dropped 8.5 per cent since the agreement was introduced in 1995.
The result, he said, has been a loss of 20,700 jobs and more than $500 million in lost investment. He said lumber must be given the same priority in Ottawa as other trade issues, salmon, split-run magazines and automobiles.
And he called on Ottawa to take a tough stand against American interests pushing for continued trade restrictions.
In a later interview, Emerson said the B.C. industry is finally united on the stand it wants Ottawa to take with the Americans in coming talks.
Free trade is the preference, he said but if managed trade is considered, then the current system of quotas limiting exports must not be part of it.
''Quota- managed trade is really something out of the dark ages.''
He said transitional arrangements, such as an export tax could be an alternative.
''The problem with quotas is that what you are doing is really destroying the industry in certain regions of Canada -- most particularly B.C. -- because you will never have enough quota to satisfy the quota-short producers.
He said the current system allows companies to export freely from the provinces not covered under the agreement.
Capital has been flowing to those provinces at the expense of B.C., he said.