canada-us softwood lumber dispute - ubcm.casept~26/update_canada_us_softwood_lumber.pdfcanada-us...
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Canada-US Softwood Lumber Dispute
Susan Yurkovich President and CEO, BC Council of Forest Industries President, BC Lumber Trade Council
Jason Fisher Associate Deputy Minister, Forest Sector Ministry of Forests, Lands, Natural Resource Operations & Rural Development
September 26, 2017 UBCM Convention
WORKSHOP OVERVIEW
BC Lumber Trade Council • Forestry in B.C. • Softwood Lumber Dispute History • Market Context
Province of B.C. • Litigation • Negotiations • Government actions
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FORESTRY IS FOUNDATIONAL TO THE BC ECONOMY
140,000 direct and indirect jobs
140 BC communities depend on forestry
1 in 4 manufacturing jobs (28%)
$12.9 billion to the provincial GDP
$1.4 billion invested annually
FOREST PRODUCTS ARE 1/3 OF B.C.’S EXPORTS
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B.C. SHIPS OUR FOREST PRODUCTS TO MORE THAN 100 COUNTRIES
B.C. IS THE LARGEST PRODUCER OF SOFTWOOD LUMBER IN CANADA
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
BC AB ON PQ Other
2016 Softwood Lumber Production (MFBM)
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WORKING HARD TO DIVERSIFY B.C.’S MARKETS
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
BC Softwood Lumber Exports (MFBM)
US China Japan South Korea EU India Other
China + Japan’s share of B.C.’S softwood exports 11% 2006 33% 2015
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WORKING HARD TO DIVERSIFY B.C.’S MARKETS
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
BC Softwood Lumber Exports (MFBM)
US China Japan South Korea EU India Other
US Share of softwood exports 84% 2006 59% 2015
MAINTAINING ACCESS TO THE U.S. IS
CRITICALLY IMPORTANT
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SOFTWOOD LUMBER DISPUTE: A long history Four Countervailing Duties investigations
Lumber I – 1982 (8 months) Lumber II – 1986 (8 months) Lumber III – 1991 (35 months) Lumber IV – 2001 (67 months) Lumber V – 2017…
Three Managed Trade Deals 1986 Memorandum of Understanding (5 years) 1996 Softwood Lumber Agreement 1 (5 years) 2006 Softwood Lumber Agreement 2 (9 years)
Three Periods of Free Trade Jun 1983 – Apr 1986 (34 months) Sep 1994 – Mar 1996 (19 months) Nov 2015 – April 2017 (18 months)
In last 30 years, we have had only 37 months of free trade
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2006 SOFTWOOD LUMBER AGREEMENT
7 year deal with 2 year extension
Based on Canadian market share of 34%
Two options: export tax or quota with lower tax rate; B.C. chose export tax
Expired October 2015
One year standstill ended October 2016
POST 2006 SLA
Efforts to extend 2006 agreement not successful
US election results in change of government
US lumber lobby filed petition November 25, 2016
Preliminary CVD on April 24, 2017
Preliminary anti-dumping June 26, 2017
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How has the market responded?
LUMBER MARKETS
$225
$275
$325
$375
$425
$475
$525
$575
$625
Jan-‐11
Apr-‐11
Jul-‐1
1
Oct-‐11
Jan-‐12
Apr-‐12
Jul-‐1
2
Oct-‐12
Jan-‐13
Apr-‐13
Jul-‐1
3
Oct-‐13
Jan-‐14
Apr-‐14
Jul-‐1
4
Oct-‐14
Jan-‐15
Apr-‐15
Jul-‐1
5
Oct-‐15
Jan-‐16
Apr-‐16
Jul-‐1
6
Oct-‐16
Jan-‐17
Apr-‐17
Random Lengths Framing Lumber Composite Price (C$/mbf)
Random Lengths Framing Lumber Composite Price (C$/mbf)
Expiration of 2006 SLA
Market Begins to Price in Duties
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U.S. Homebuyers Pay the Price of Duties
U.S. CONSUMPTION IS GROWING
18 Source (historical data and forecast US domestic consumption): Forest Economic Advisors LLC
Potential Supply Gap of Approx. 6 Billion Board Feet
by 2020.
Would require the equivalent of 30+ new mills in the
US in under 3 years.
-
5
10
15
20
25
30
35
40
45
50
55
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Billion Board Feet
US Domestic Consumption
US Domestic Production
Canadian Imports
3rd Country Imports
Actual <---- ----> Forecast
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20 Source (historical data and forecast US domestic consumption): Forest Economic Advisors LLC
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US HOUSING, LUMBER DEMAND IS INCREASING
REBUILDING WILL FURTHER DRIVE DEMAND
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B.C. INDUSTRY
BCLTC fully supports Canada’s efforts to reach a new agreement with the U.S.
Any new agreement must work for B.C.
Working closely with Province
B.C. has a heavy legal burden • 3 of the 4 mandatory respondents in B.C.
• Supporting governments with injury case
We have a lot at stake
LITIGATION
NEGOTIATIONS
GOVERNMENT ACTIONS
Jason Fisher Associate Deputy Minister, Forest Operations Ministry of Forests, Lands, Natural Resource Operations & Rural Development
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THREE CASES UNDERWAY
Injury • U.S. industry claims Canada either
“materially injuring” or “threat of injury”
Countervailing Duty (CVD) • Allegations of subsidy
Anti-dumping Duty (AD) • Allegations of dumping, i.e. selling below
costs
LUMBER V TIMELINE
Nov 25, 2016 U.S. lumber lobby filed petition
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ALLEGATIONS OF US INDUSTRY Canadian timber is subsidized
Canadian imports distort US market
When markets are bad, imports push out domestic production; when demand increases, Canada takes the lion’s share of the increase
US industry is unable to make enough money to invest over the business cycle
Claim that Canadian imports are injuring US domestic industry
LUMBER V TIMELINE
Nov 25, 2016 U.S. lumber lobby filed petition
April 24, 2017 Preliminary countervailing duty announced
• 19.5% to 24.12% for B.C. companies
• 90 days retroactive duties for most
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LUMBER V TIMELINE
Nov 25, 2016 U.S. lumber lobby filed petition
April 24, 2017 Preliminary countervailing duty announced
• 19.5% to 24.12% for B.C. companies
• 90 days retroactive duties for most
June 26, 2017 Preliminary anti-dumping duty announced
• 4.59% to 7.72% for BC companies
• Combined duty rates ranging from 26.75% to 30.88% for BC producers
DUTY RATES
Company CVD AD Total
West Fraser 24.12% 6.76% 30.88%
Canfor 20.26% 7.72% 27.53%
Tolko 19.50% 7.53% 27.03%
Resolute 12.82% 4.59% 17.41%
J.D. Irving (New Brunswick)
3.02% 6.87% 9.89%
“All others’ 19.88% 6.87% 26.75%
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U.S. WILL RULE ON INJURY THIS FALL
Decision by November 14
If affirmative, final duty rates will come into force
… and Canada will begin appeals
If negative, no duties are applied
We have a compelling case …
US CLAIMS OF INJURY UNFOUNDED
In the US, the data shows that …
• Demand for lumber is up
• Lumber production is up
• Operating income is up
• Employment is up
• Profitability is up
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US LUMBER INDUSTRY IS STRONG AND IMPROVING
215
… but this is lumber
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LITIGATION APPROXIMATE TIMELINES
ADMINISTRATIVE REVIEWS AND APPEALS
Annual administrative reviews by Department of Commerce to set duty rates
Appeal options: • NAFTA Chapter 19
• World Trade Organization (WTO)
• US Court of International Trade
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NEGOTIATIONS
NEGOTIATIONS
BC and Canadian governments have made softwood a priority
David Emerson BC’s trade envoy
Premier Horgan met with key players in Washington, July 27/8
Ambassador David MacNaughton’s meeting with Canada’s trade envoys, Aug 24
Secretary Ross extends final duty rate determination to Nov 14 to allow more time for negotiation
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KEY ISSUES FOR B.C.
Canadian share of US market
B.C.’s share of Canadian allocation
Ensuring that US doesn’t limit Canadian imports only to create opportunities for third countries like Russia
WHAT ABOUT NAFTA?
Parallel negotiation to softwood
Chapter 19 dispute resolution mechanism is key
Aggressive timelines set, but complicated negotiation may extend timeframe
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SUPPORT FOR WORKERS, COMMUNITIES Federal-provincial task force formed, June 2017
$867 million in funding announced
• Federal loans & loan guarantees
• Expanded overseas marketing to diversify markets
• Extension of work-sharing agreements to reduce layoffs
• Supports for affected workers to upgrade skills/transition
B.C. ACTIONS
Working closely with industry
Continued focus on market diversification
Investing in forest lands
Wildfire fighting, salvage and recovery
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MORE INFORMATION
Regular updates are online at: www.gov.bc.ca/softwoodlumber
bclumbertrade.com