softwood lumber dispute – canada and united states
TRANSCRIPT
SOFTWOOD LUMBER DISPUTE – CANADA AND UNITED STATES BY: PAUL YOUNG, CPA, CGA
PAUL YOUNG, CPA, CGA BIO
• 26+ years if experience in finance, accounting, costing, business strategy, taxation, mergers/acquisition, academia, internal audit/controls, risk management, financial solutions• Email: [email protected]
AGENDA
• What is Softwood• Softwood Exports• Softwood Destinations• Softwood Issues• Return to Protectionism policies
WHAT IS SOFTWOOD LUMBERSoftwood is wood from gymnosperm trees such as conifers.Softwood is the source of about 80% of the world's production of timber, with traditional centres of production being the Baltic region (including Scandinavia and Russia), North America and China.The term is opposed to hardwood, which is the wood from angiosperm trees. Softwoods are not necessarily softer than hardwoods. In both groups there is an enormous variation in actual wood hardness, with the range in density in hardwoods completely including that of softwoods; some hardwoods (e.g. balsa) are softer than most softwoods, while the hardest hardwoods are much harder than any softwood. The woods of longleaf pine, douglas fir, and yew are much harder in the mechanical sense than severalhardwoods.
Source: https://en.wikipedia.org/wiki/Softwood
CANADA LEADING SOFTWOOD LUMBER PRODUCERS
• Source: https://www.eics-scei.gc.ca/report-rapport/SWL%20monthly%20Exports%20Report_201609.htm
Analysis• ½ of softwood
lumber comes from BC
• Ontario, Quebec, Maritimes and Alberta have sizable softwood exports
SOFTWOOD DESTINATION/CANADA
• In 2015, the value of Canada’s forest product exports increased by 6.3% over 2014, rising to $32.7 billion from $30.8 billion.
• On the wood product side, the U.S. housing recovery continued to drive Canadian softwood lumber exports. In 2015, softwood lumber exports totalled $8.6 billion, a 3% increase over 2014. The value of wood panel exports increased by 18%, to $2.68 billion, with significant increases in all panel types, especially plywood (29%) and fibreboard (28%).
• As for pulp and paper, wood pulp exports increased 6.5% over 2014 levels, to $7.7 billion. In 2015, exports of printing and writing paper barely grew (by 1%), while newsprint exports fell 10% from the previous year
• Source: https://www.nrcan.gc.ca/forests/report/economy/16558
UNITED STATES SOFTWOOD LUMBER ISSUES• Forest Ownership
• Outside of the Maritimes, most forests in Canada are provincially-owned, while in the U.S. they’re privately-owned. The U.S. has long alleged that allows Canadian producers to sell their lumber at a lower price, undercutting American producers in the process. The Americans claim that amounts to a subsidy, a claim Canada has fought (largely successfully) at the World Trade Organization.
• Ongoing issues • This is the fifth battle between the U.S. and Canada over softwood lumber. The dispute goes back to the early 1980s. Since
then, during periods when deals have expired, the U.S has collected billions of dollars from duties imposed on Canadian lumber. Some of that has been returned eventually.
• There are two types of duties that can be imposed: countervailing and anti-dumping. The duties act as a tax on Canadian lumber exported to the U.S. and can cripple the Canadian industry.
• Source - http://globalnews.ca/news/2999152/5-things-to-know-about-canadas-softwood-lumber-trade-war-with-us/
UNITED STATES SOFTWOOD LUMBER ISSUES• Sticking Point
• There are nine issues being negotiated in an effort to reach a long-term deal but the biggest sticking point appears to be market share. The U.S. wants a hard cap on Canada’s share of the American market. The Canadian and American ideas of what that cap should be, though, are said to be at least five percent apart and each percentage point is significant.
• In a joint statement following President Obama’s visit to Ottawa last June, market share was established as an issue for negotiation. Today, the U.S. Lumber Coalition claimed, “to date, Canada has continued to insist on frameworks that are inconsistent with the joint statement.”
• Job Losses• According to Statistics Canada, as of 2013 , about 360,000 Canadians were employed by the forestry industry. Job losses are a
reality if duties are imposed.• In the early 2000s, for example, the U.S. imposed a combined duty of 27.22 percent and within months 15,000 workers in B.C. were
laid off. Ongoing negotiations are so tenuous, Canadian producers refused to comment on potential job losses or hits to the industry.
• Source - http://globalnews.ca/news/2999152/5-things-to-know-about-canadas-softwood-lumber-trade-war-with-us/
ARE PROTECTIONISM POLICIES RETURNING• With slow growth there is more pressure on government to
protect key industry from foreign pressures• Industries in different countries will argue that industries in
other countries are subsidize. The problem is defining what classifies as subsidy. • Increase protectionism can lead to higher prices due to
duties/tariffs. The end consumer could pay the price for expansion of protectionism policies.
SOFTWOOD LUMBER DEAL EXPIRATION DATE• Negotiations between United States and Canada on a new Softwood
Lumber deal have been ongoing for over a year• The biggest problem has been there has been shift in Government in
Canada as well as federal election in the USA. Changes in government can complicate negotiation, especially in election years.
• Source: - http://www.cbc.ca/news/politics/softwood-lumber-standstill-expires-thursday-1.3801771
KEY COMMENTS
• Canadian lumber and government officials told the U.S. trade representative that any new softwood lumber agreement must reflect the differences in forestry regimes across the country. http://www.plant.ca/general/canadian-lumber-execs-press-softwood-deal-us-trade-rep-162346/
• Canadian softwood lumber executives will meet this week with America's trade ambassador as they brace for the prospect of U.S. tariffs that they say could result in mill closures and layoffs. U.S. Trade Representative Michael Froman will speak with the Canadian lumber industry in Toronto on Wednesday, days before U.S. producers could start petitioning Washington to impose new duties on Canadian softwood. Source: http://www.tsn.ca/u-s-trade-ambassador-to-meet-with-canadian-lumber-executives-before-softwood-deadline-1.578396