Canadian forest industry giants with large operations in Northern Ontario are prepared to fight duties on exported softwood lumber to the bitter end, in spite of a recent U.S. Department of Commerce decision to axe the duty in half, says one forestry official.
“We will not accept a deal that has us paying this duty,” says Pierre Simard, the director of public affairs and government relations for Tembec, a Montreal-based lumber producer with forestry operations in the Timiskaming region.
“We must recover all of the money deposited for the duty,” Simard adds.
In May 2002, the U.S. commerce department imposed countervailing and anti-dumping duties averaging 27 per cent on Canadian lumber producers, arguing that Canadian lumber is unfairly subsidized. The argument was that most Canadian lumber is harvested on government-owned land, at what they say are artificially low prices, driving down the price below market value. After several decisions by the World Trade Organization (WTO) and a NAFTA panel, it was determined that the U.S. must recalculate its formula for determining harm to the American industry. The duty has since been halved, although Canadian producers must still pay down a deposit on their lumber, pending a final settlement.
According to Simard, the U.S. has legal recourse to appeal the decision into as late as next year. No appeals are possible after that. Meanwhile, says Simard, the Canadian industry will continue to suffer. Mills all across Northern Ontario, such as Kenogami, had to lay off workers and scale back operations. This was on top of a general slump in the industry.
“During the whole time the duty has been in force, Canadian industry was not able to invest in our mills. At the same time, the U.S. industry was able to invest. We lost ground in the American market. We’ll need to be aggressive in recovering it,” Simmard contends.
The lack of investment in Canadian mills reduced their competitive edge, lumber producers say.
During the same time, European lumber companies were able to enter into the huge American market, and began to take U.S. market share that previously belonged to Canada, he says. The damage to the Canadian industry, he asserts, is permanent.
“Even if we recover our costs in the end, we will have always lost the time we could have been investing and selling.”
Although the Americans have made their case loud and clear, Simard says they have yet to prove tangible benefit to their industry by the way Canada harvests its lumber. In the end, lumber producers like Tembec believe Canada’s position will be vindicated and the slow process of recovering market share will begin.
“By the end of the year, the picture will become quite clear."
