11/24/01 -- Felled by lumber fight

Felled by lumber fight
Workers, forestry firms feel pain of U.S. tariff dispute

Despite increased hopes of detente, casualties continue to mount in the cross-border battle over softwood lumber.

Abitibi-Consolidated Inc. of Montreal announced this week that about 5,000 workers at 18 sawmills in Quebec and British Columbia will be laid off from the end of November through to mid-January.

They will join a long line of forest workers - about 25,000 so far, according to the industry - ho have been idled in the wake of tariffs totalling 32 per cent levied by the United States on Canadian softwood lumber.

Half of those unemployed work in idled west coast sawmills, with 5,500 others off the job in the B.C. interior. Industry watchers have said that without a solution, those figures will continue to grow. "We've got 12,500 people that are sitting at home and we can't tell them when they're going back to work," said Brian Zak, president of the Coast Forest and Lumber Association, whose members have closed 21 of 35 sawmills.

The other 14 coastal mills are producing wood for Japan and Europe.

"We can't tell people they'll be back before Christmas or whether it's going to be a long time afterwards," Zak said in an interview yesterday. "It's devastating for them and for the economy and there's no quick fix."

Canada's softwood lumber industry exports about $10 billion a year to the U.S. - half of it from British Columbia - and has about 90,000 direct employees.

The U.S. commerce department slapped a 19.3 per cent interim tariff on Canadian softwood in August, saying the industry in this country had a price advantage because it is subsidized through low fees provinces charge to cut timber on crown lands.

That was followed up last month by an additional duty averaging 12.6 per cent on Canadian softwood lumber exporters, as the Americans ruled they dumped their products at below-cost prices.

The tariffs are expected to cost the Canadian industry about $2 billion a year.

Canada has announced it's appealing the 19.3 per cent duty to the World Trade Organization but a decision could take as many as two years.

Three separate international trade panels have sided with Canada in the past but industry members and workers say they cannot afford to wait.

"Everyone is absolutely shell-shocked," said Darrell Wong, president of Local 2171 of the Industrial Wood and Allied Workers of Canada.

About 500 of the union's members at two Vancouver facilities - a particleboard plant and a sawmill - perated by Weyerhaeuser Co. Ltd. learned last week operations will permanently cease in the new year as a result of changed market conditions that were exacerbated by the U.S. tariffs.

"It's going to be an awful tough Christmas," Wong said in an interview prior to a rally yesterday at the Weyerhaeuser mill where employees burned the letters detailing their severance packages. "And a resolution in the softwood lumber dispute isn't going to do a damn thing to change that."

But optimism about a deal has been raised following meetings this week between U.S. lumber envoy Marc Racicot and B.C. Premier Gordon Campbell. The former Montana governor was in British Columbia this week talking to politicians and forest industry officials as part of a fact-finding mission on the issue.

Racicot, a personal friend of U.S. President George W. Bush, said the softwood impasse is a high priority for the United States.

"There are people with faces and homes and families on both sides of the border that are being impacted by the particular challenge that confronts us both," Racicot told reporters here this week. "So we must move with as much speed and dispatch as we can."

But Racicot made it clear the United States expects Canadian provinces to adopt "a market-based" system of timber distribution.

At the heart of the decades-old softwood fight is the ownership of timber resources.

The vast majority of Canadian forests are publicly owned. Provincial and territorial governments give lumber companies the right to log and set the rates, or stumpage fees, each pays for the timber it cuts. But producers in the United States, where most forests are privately owned, say Canadian governments charge stumpage rates below market levels.

Campbell, who insists his government is willing to adopt a more market-oriented timber pricing system, said he was "very pleased" with his meeting with Racicot and thought a deal could be had by Christmas.

"We are committed to working together to try to resolve this matter in the long term to the benefit of American consumers and workers as well as British Columbia workers," said Campbell, whose province provides about 18 per cent of all U.S. lumber consumption.

Federal International Trade Minister Pierre Pettigrew, in B.C. yesterday, said while he wants to settle the trade dispute as quickly as possible, it's also important the accord works over the long term.

"What we want is the right deal," he told reporters in Victoria. "We want a longterm solution to this problem.

"We don't want to be back at this in two or three or four years' time as we've been in the past."

Pettigrew also rejected suggestions this week by Quebec government officials that they would seek a separate lumber deal with the United States.

"I've been very clear on this," he said. "We are moving as a country."

In the meantime, the original 19.3 per cent countervailing duty, which is only in place for 120 days, will be suspended Dec. 3. That means Canadian producers shipping wood south will only be hit with the 12.6 per cent tariff.

Lumber industry analyst Charles Widman said while that offers "a bit of a relief, it is certainly not something we should holler about."

Canadian companies still have a liability of about $1 billion on their books from the 19.3 per cent levy, Widman said. That will have to be paid promptly if the United States ultimately wins this round of the dispute, he added.

On the B.C. coast, where logging costs are higher and products are often four times the value of those elsewhere in the country, the second 12.6 per cent duty still makes it hard to sell to southern markets.

It's clear that Canada will have to adopt a more market-oriented system of timber stumpage, Widman said. In the meantime, Canadian governments and companies should agree to an export tax of between 15 and 18 per cent on softwood shipments.

In addition to that "bridging mechanism" between longterm changes, he said, exemptions from tariff should be sought for specialized woods, which typically do not compete directly with U.S. products.

"It would buy us a deal," Widman said in an interview. "And once that happens, we can start to get some of these people back to work." Error: Unable to read footer file.