The ongoing dispute about Canada dumping lumber into the U.S. has been going on since 1982 and was promoted by the lumber manufactures in the U.S. who argued that Canadian lumber producers were being subsidized by the Canadian and provincial governments. Not everyone in the States is in favour of the duties especially the U.S. lumber purchasers which means higher building costs. Even with the tariffs Canada and B.C. in particular have been shipping millions of board feet of lumber to south of the line for decades because the U.S. mills can’t meet the demand for building materials. What is even more interesting is that some of the biggest American milling facilities are now owned by Canadian lumber manufactures some who have more mills in the States than they do in Canada.
Quotas could be set by Canada or each province or maybe by the companies themselves in consultation with the U.S.officials and would be based on the amount of lumber that has been exported for the past few decades.
If an agreement could be made for each company wishing to export lumber south, a limited amount of lumber would be exported with the understanding that the tariffs would be dropped on any lumber crossing the border. For the Canadian companies it would mean more profits for a lesser amount of lumber sold. This would be good news for the U.S. lumber manufacturers and especially for the U.S. lumber purchasers. The surplus Canadian lumber could be sold to other overseas markets, China and Japan. Canada could impose its own penalties for any company going over its agreed-to quotas which would be a better option than the States imposing duties and keeping these in their country.
This type of agreement would bring much more stability to the Canadian lumber exporting community as well as the U.S. lumber manufacturers. From a Canadian perspective the quotas would have a monitory value which would go along with the price of a lumber mill and its associated tenure if and when mills were sold. While quotas have not been popular for some producers they have proven useful for the dairy industry and other farming ventures.
Once the quota concept was agreed to it would be much easier to make adjustments if the quota was deemed to be high or low. It would also help take the politics out of the discussion with the U.S. government having to defend high lumber prices to their citizens because they can’t come to an agreement and being able to defend their decision to the local lumber manufactures.
Harry Nelson, forestry professor from UBC had the following comments when I sent him a copy of the above article.
Canada was unable to renew the soft wood lumber agreement (SLA) in part because the industry didn’t agree on who should get them. It is not only a within-B.C. problem but across Canada. In theory one gets around the question of who gets it by auctioning it off but that is not usually palatable to the industry. Second is the level. I’d expect the U.S., if it were willing to entertain quota, would set a limit below the current level of exports. And then there is the calculation of what that level is and whether it is static, like SLA I – or dynamic as happened under SLA II (tied to housing starts). Under the original one (SLA I), it was much more straightforward — the limits were set around lumber itself (HS 4407 as I recall). The scope of the dispute now encompasses far more products, so how would you either pull it back to lumber or allocate it across the different types of products now covered.