Daniel Webster would instantly recognize the lumber trade dispute erupting once again between the United States and Canada.
The legendary American statesman helped settle the Aroostook Lumber War, an 1842 skirmish in the same conflict. But the treaty he negotiated only briefly interrupted the strife that dates all the way back to 1789, when Congress passed a 5 percent tariff that included Canadian lumber.
This time, the fisticuffs feature a cast of obstinate characters including hard-pressed Oregon mill owners, a renegade Canadian lumber baron and North America's most destructive bark beetle.
The conflict entangles two nations that otherwise are the best of friends, with two-way trade exceeding $430 billion a year.
U.S. industry leaders contend British Columbia misclassifies timber as salvage material so Canadian companies can bombard the United States with subsidized lumber, undercutting U.S. mills and jobs.
Managers of southern Oregon's Swanson Group, for example, blame unfair Canadian competition, in large part, for continuing production cuts and the 2007 closure of their Glide mill that employed 100.
Canadian government and industry leaders dispute the charges while bracing for the next U.S. legal salvo. Washington could haul Ottawa back to a London tribunal as soon as this week.
Jeff Redd, associate editor at Eugene-based Random Lengths, which tracks the forest-products industry, says the housing crash has heightened tensions as companies fight for shares of a diminished $6 billion U.S. softwood lumber market.
A loader carries Douglas fir tree tops to the mill at Seneca Sawmill Co. in Eugene.Redd expects the conflict to continue indefinitely, potentially raising prices.
"It's very seldom there's been peace in this lumber war," Redd says. "I don't imagine either side's going to change its basic premise anytime soon."
Northwest hard hit
The dispute is crucial to the economies of Oregon, Washington and British Columbia, where forests contain vast stands of fir, pine and other softwoods.
The softwoods are milled into studs and beams for construction, in contrast to hardwood used for cabinetry and floors. Canada holds a 28 percent share of the U.S. softwood market.
Timber was important in Daniel Webster's era, too, when Congress authorized 50,000 troops to mass on Maine's disputed border with New Brunswick. These days, lumber battles are mainly confined to courtrooms, but Congress remains involved. Rep. Peter DeFazio, D-Ore., and other Northwest delegation members want the Obama administration to fight what they consider illegal Canadian subsidies.
Speaking for Canada, John Allan, president of the BC Lumber Trade Council, claims politics trumps common sense. "The U.S. lumber lobby is using U.S. senators, namely Max Baucus of Montana and Olympia Snowe of Maine, to press the administration to take us to the woodshed and beat the hell out of us," Allan says.
Allan says his industry organization spent more than $100 million as litigation exploded between 2001 and 2006. "Once you get dug in on that stuff," he says, "surrender's impossible."
The heart of the timber tussle is the U.S. claim that Canada maintains a government-controlled system that unfairly subsidizes the lumber industry while the United States uses a market-based approach.
In Canada, officials set prices of timber, most of which is owned by provincial governments. In the United States, companies buy timber at auction.
The Coalition for Fair Lumber Imports, a U.S. industry group based in Washington, D.C., claims British Columbia and other provinces provide timber at below-market costs, depressing lumber prices.
"It allows Canadian companies to chase the lumber price down further and still make money," said Zoltan van Heyningen, the U.S. coalition's executive director. "U.S. lumber producers - who are, especially in the Northwest, the most efficient in the world - struggle to survive day-to-day while these guys in Canada make record profits and capital investments."
A rainbow forms above Douglas fir logs stacked at the Seneca Sawmill Co.'s yard in Eugene. Canadian lumber that is essentially subsidized is making it hard for the Oregon company to compete successfully.
Multiple go-rounds
Since 1982, the dispute has gone through four rounds, dubbed Lumber I, Lumber II and so on. Lumber IV culminated in a 2006 agreement. The United States agreed to stop collecting countervailing and anti-dumping duties. Canada committed to tax and limit lumber exports, and to introduce no new subsidies.
"Almost immediately upon signing the agreement, we had violations occurring," says Steve Swanson, chief executive of Glendale-based Swanson Group. U.S. trade officials twice took Canada to the London Court of International Arbitration.
Swanson, who chairs the Coalition for Fair Lumber Imports, says British Columbia came up with a way to circumvent the 2006 agreement, using a mountain-pine-beetle infestation as an excuse.
Historically the B.C. government charged only 25 cents a cubic meter for pulp-quality logs, deeming them Grade 4 on a four-point scale. That's far below the normal stumpage price for lumber-grade logs, which average $12 a cubic meter, Swanson says.
Grade 4 logs used to make up only 10 percent of timber from British Columbia's interior regions used for dimensional lumber. But van Heyningen says provincial officials have jacked up the share to almost 50 percent, citing bug kill. "If you look at the numbers," van Heyningen says, "it's impossible that such a vast amount of logs are correctly graded as Grade 4."
So B.C. lumber mills enjoy cut-rate wood prices, based on falsely graded timber, van Heyningen says, while U.S. producers pay much higher market rates.
Not true, says Pat Bell, British Columbia's minister of forests, mines and lands. Grading standards and enforcement haven't changed since 2006 when the agreement was signed, Bell says. Grade 4 timber volumes have increased legitimately because of widespread bug kills, he says, which were plainly evident in 2006.
"I live in Prince George, at about the center of the province," Bell says. In 2006, "there were days when you could travel 50 miles in any direction and not see a live tree."
Bell, who co-owned a logging company before entering politics, says most of the wood being sold for 25 cents is so badly degraded it has to be used for pulp or bioenergy. "This is just another tactic of the American coalition trying to provide a subsidy to their industry by putting tariffs on the Canadian forest-products industry," he says.
Yet Bell's position is contested by an unlikely source: a fellow Canadian. Rick Doman, chief executive of Montreal-based Eacom Timber Corp., comes from a family that owned a wood-products business in coastal British Columbia.
Doman says the U.S. coalition is right about falsified grading of timber. Despite being bug-killed, he says, the timber is good enough to be shown off by Canada as material for the gigantic roof of the Richmond Olympic Oval, built for the 2010 winter games in Vancouver. He says the 25-cent price enjoyed by interior-British Columbia mills forced his family's coastal company, which had to pay $20 a cubic meter, into creditor protection.
"The losers were the B.C. taxpayers," whose timber assets were sold for a song, Doman says.
Enter China
Allan, the B.C. industry spokesman, dismisses Doman's comments as sour grapes.
He says mills in British Columbia's interior have invested in optical scanners and other improvements so they can make lumber from beetle-killed timber. Van Heyningen says Allan disproves his own point, because Grade 4 timber is defined as wood so degraded that less than half of it can be sawed into lumber.
Allan responds that B.C. companies shouldn't be penalized for innovating to handle salvaged logs. His industry group includes giants such as Canfor Corp. and West Fraser Timber Co., whose spokesmen decline to comment on the trade dispute.
Allan says U.S. companies should stop spending money on lawyers and invest it instead, as British Columbia does, in promoting exports to China and other expanding markets. In October, Bell says, B.C. producers sold $144 million of lumber to China and Japan and only $124 million to the United States.
Indeed China is breathing life into a Glendale mill owned by Swanson Group, the Oregon company that blamed Canadian competition, in part, for closing its Glide plant. The Glendale mill, which was to close as well, is working to fill the company's first Chinese contract.
But Steve Swanson figures his mills, running at 50 percent capacity, would be operating at 75 or 80 percent if not for the competition from Canada. The company pays line workers $30,000 a year plus benefits. Salaries for electricians and other tradespeople reach $80,000.
In Eugene, Rick Re, vice president and general manager of Seneca Sawmill Co., tells a similar story.
"If subsidized lumber continues to come into the U.S., our wood-products industry is going to contract," Re says. "The Canadians are exporting their unemployment to the United States, and we're living with it."
--Richard Read
http://www.oregonlive.com/business/index.ssf/2011/01/oregonians_say_canadian_logs_a.html
The legendary American statesman helped settle the Aroostook Lumber War, an 1842 skirmish in the same conflict. But the treaty he negotiated only briefly interrupted the strife that dates all the way back to 1789, when Congress passed a 5 percent tariff that included Canadian lumber.
This time, the fisticuffs feature a cast of obstinate characters including hard-pressed Oregon mill owners, a renegade Canadian lumber baron and North America's most destructive bark beetle.
The conflict entangles two nations that otherwise are the best of friends, with two-way trade exceeding $430 billion a year.
U.S. industry leaders contend British Columbia misclassifies timber as salvage material so Canadian companies can bombard the United States with subsidized lumber, undercutting U.S. mills and jobs.
Managers of southern Oregon's Swanson Group, for example, blame unfair Canadian competition, in large part, for continuing production cuts and the 2007 closure of their Glide mill that employed 100.
Canadian government and industry leaders dispute the charges while bracing for the next U.S. legal salvo. Washington could haul Ottawa back to a London tribunal as soon as this week.
Jeff Redd, associate editor at Eugene-based Random Lengths, which tracks the forest-products industry, says the housing crash has heightened tensions as companies fight for shares of a diminished $6 billion U.S. softwood lumber market.
A loader carries Douglas fir tree tops to the mill at Seneca Sawmill Co. in Eugene."It's very seldom there's been peace in this lumber war," Redd says. "I don't imagine either side's going to change its basic premise anytime soon."
Northwest hard hit
The dispute is crucial to the economies of Oregon, Washington and British Columbia, where forests contain vast stands of fir, pine and other softwoods.
The softwoods are milled into studs and beams for construction, in contrast to hardwood used for cabinetry and floors. Canada holds a 28 percent share of the U.S. softwood market.
Timber was important in Daniel Webster's era, too, when Congress authorized 50,000 troops to mass on Maine's disputed border with New Brunswick. These days, lumber battles are mainly confined to courtrooms, but Congress remains involved. Rep. Peter DeFazio, D-Ore., and other Northwest delegation members want the Obama administration to fight what they consider illegal Canadian subsidies.
Speaking for Canada, John Allan, president of the BC Lumber Trade Council, claims politics trumps common sense. "The U.S. lumber lobby is using U.S. senators, namely Max Baucus of Montana and Olympia Snowe of Maine, to press the administration to take us to the woodshed and beat the hell out of us," Allan says.
Allan says his industry organization spent more than $100 million as litigation exploded between 2001 and 2006. "Once you get dug in on that stuff," he says, "surrender's impossible."
The heart of the timber tussle is the U.S. claim that Canada maintains a government-controlled system that unfairly subsidizes the lumber industry while the United States uses a market-based approach.
In Canada, officials set prices of timber, most of which is owned by provincial governments. In the United States, companies buy timber at auction.
The Coalition for Fair Lumber Imports, a U.S. industry group based in Washington, D.C., claims British Columbia and other provinces provide timber at below-market costs, depressing lumber prices.
"It allows Canadian companies to chase the lumber price down further and still make money," said Zoltan van Heyningen, the U.S. coalition's executive director. "U.S. lumber producers - who are, especially in the Northwest, the most efficient in the world - struggle to survive day-to-day while these guys in Canada make record profits and capital investments."
A rainbow forms above Douglas fir logs stacked at the Seneca Sawmill Co.'s yard in Eugene. Canadian lumber that is essentially subsidized is making it hard for the Oregon company to compete successfully.Multiple go-rounds
Since 1982, the dispute has gone through four rounds, dubbed Lumber I, Lumber II and so on. Lumber IV culminated in a 2006 agreement. The United States agreed to stop collecting countervailing and anti-dumping duties. Canada committed to tax and limit lumber exports, and to introduce no new subsidies.
"Almost immediately upon signing the agreement, we had violations occurring," says Steve Swanson, chief executive of Glendale-based Swanson Group. U.S. trade officials twice took Canada to the London Court of International Arbitration.
Swanson, who chairs the Coalition for Fair Lumber Imports, says British Columbia came up with a way to circumvent the 2006 agreement, using a mountain-pine-beetle infestation as an excuse.
Historically the B.C. government charged only 25 cents a cubic meter for pulp-quality logs, deeming them Grade 4 on a four-point scale. That's far below the normal stumpage price for lumber-grade logs, which average $12 a cubic meter, Swanson says.
Grade 4 logs used to make up only 10 percent of timber from British Columbia's interior regions used for dimensional lumber. But van Heyningen says provincial officials have jacked up the share to almost 50 percent, citing bug kill. "If you look at the numbers," van Heyningen says, "it's impossible that such a vast amount of logs are correctly graded as Grade 4."
So B.C. lumber mills enjoy cut-rate wood prices, based on falsely graded timber, van Heyningen says, while U.S. producers pay much higher market rates.
Not true, says Pat Bell, British Columbia's minister of forests, mines and lands. Grading standards and enforcement haven't changed since 2006 when the agreement was signed, Bell says. Grade 4 timber volumes have increased legitimately because of widespread bug kills, he says, which were plainly evident in 2006.
"I live in Prince George, at about the center of the province," Bell says. In 2006, "there were days when you could travel 50 miles in any direction and not see a live tree."
Bell, who co-owned a logging company before entering politics, says most of the wood being sold for 25 cents is so badly degraded it has to be used for pulp or bioenergy. "This is just another tactic of the American coalition trying to provide a subsidy to their industry by putting tariffs on the Canadian forest-products industry," he says.
Yet Bell's position is contested by an unlikely source: a fellow Canadian. Rick Doman, chief executive of Montreal-based Eacom Timber Corp., comes from a family that owned a wood-products business in coastal British Columbia.
Doman says the U.S. coalition is right about falsified grading of timber. Despite being bug-killed, he says, the timber is good enough to be shown off by Canada as material for the gigantic roof of the Richmond Olympic Oval, built for the 2010 winter games in Vancouver. He says the 25-cent price enjoyed by interior-British Columbia mills forced his family's coastal company, which had to pay $20 a cubic meter, into creditor protection.
"The losers were the B.C. taxpayers," whose timber assets were sold for a song, Doman says.
Enter China
Allan, the B.C. industry spokesman, dismisses Doman's comments as sour grapes.
He says mills in British Columbia's interior have invested in optical scanners and other improvements so they can make lumber from beetle-killed timber. Van Heyningen says Allan disproves his own point, because Grade 4 timber is defined as wood so degraded that less than half of it can be sawed into lumber.
Allan responds that B.C. companies shouldn't be penalized for innovating to handle salvaged logs. His industry group includes giants such as Canfor Corp. and West Fraser Timber Co., whose spokesmen decline to comment on the trade dispute.
Allan says U.S. companies should stop spending money on lawyers and invest it instead, as British Columbia does, in promoting exports to China and other expanding markets. In October, Bell says, B.C. producers sold $144 million of lumber to China and Japan and only $124 million to the United States.
Indeed China is breathing life into a Glendale mill owned by Swanson Group, the Oregon company that blamed Canadian competition, in part, for closing its Glide plant. The Glendale mill, which was to close as well, is working to fill the company's first Chinese contract.
But Steve Swanson figures his mills, running at 50 percent capacity, would be operating at 75 or 80 percent if not for the competition from Canada. The company pays line workers $30,000 a year plus benefits. Salaries for electricians and other tradespeople reach $80,000.
In Eugene, Rick Re, vice president and general manager of Seneca Sawmill Co., tells a similar story.
"If subsidized lumber continues to come into the U.S., our wood-products industry is going to contract," Re says. "The Canadians are exporting their unemployment to the United States, and we're living with it."
--Richard Read
http://www.oregonlive.com/business/index.ssf/2011/01/oregonians_say_canadian_logs_a.html
While certainly the Canada imports have a long history of being an issue, it's pushing the envelope to insist that the logs over 50% unsound are misclassified. Many US mills also follow a rule that if a log is over 50% deduction for unsound it is called a "cull" and paid accordingly. Most of the BC timber in the interior has in fact been beetle killed, and the trees are in final stages of deterioration with the sap wood rotten and only the heart wood remaining. If we can survive another year or two, that too will be gone and
ReplyDeleteBC will no longer be a factor in the timber business for years to come.