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B.C. warns of higher lumber prices for U.S. customers

Workers sort and move lumber at the Delta Cedar Sawmill in Delta, B.C., on Friday January 6, 2017.

DARRYL DYCK/THE CANADIAN PRESS

U.S. consumers and home builders stand to suffer with hefty U.S. duties looming on Canadian softwood lumber, British Columbia's Minister of Forests warns.

"Duties will translate into higher prices, will translate into higher construction costs. Higher housing costs ultimately impact the U.S. housing market and the U.S. economy," Steve Thomson said in an interview on Thursday. "Free trade would be the ultimate objective, but that has not been the history on this file, and we've always done best when there's a managed trade agreement."

The U.S. Department of Commerce is expected to issue its preliminary determination for countervailing duties on April 24, followed by an announcement on anti-dumping duties in mid-June. Industry experts say the two types of preliminary duties could total 30 per cent to 40 per cent.

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While residential construction south of the border has rebounded since the 2008-09 recession, slapping tariffs on Canadian softwood exports would raise lumber costs and disrupt U.S. objectives "to build economic base and build economic activity and create jobs," Mr. Thomson said.

The 2006 Canada-U.S. softwood lumber agreement expired in October, 2015, with a one-year waiting period before any related legal action could be taken. Last November, a petition from a group led by the U.S. Lumber Coalition demanded that the U.S. Department of Commerce and the U.S. International Trade Commission challenge what it calls Canada's lumber subsidies, which producers in the United States view as unfair.

The B.C. government has aligned itself with Canadian lumber producers and Ottawa to fight the petition.

"We're also working with the federal government on what is the appropriate collective response of governments in the event of an application of both countervailing and anti-dumping duties, depending on what those levels are," Mr. Thomson said during a break at the annual convention of the Council of Forest Industries, which represents producers in the B.C. Interior. "We're obviously concerned about smaller and medium-sized enterprises initially, who would have to start paying those duties."

British Columbia accounted for 61 per cent of the value of Canada's softwood exports last year to the United States.

"A managed trade agreement is preferable to a long process of litigation," Mr. Thomson said.

He added that he agrees with the view of B.C.'s trade envoy to the United States, David Emerson, who believes softwood should remain separate from talks on renegotiating the North American free-trade agreement.

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Mr. Emerson said last week that he does not think supply management in Canada – for products such as milk, eggs, cheese, butter and poultry – would be a good bargaining chip if softwood were to somehow get caught up in NAFTA discussions.

"There are organizations and individuals who are suggesting, for example, that we could throw supply management under the bus in order to get a deal on softwood lumber. But I can tell you from my time in Parliament, that is going to be a long, complex and hazardous road to go down," Mr. Emerson cautioned during a conference call.

Jock Finlayson, executive vice-president of the Business Council of British Columbia, said he expects the see-saw disagreement over lumber will continue to be a separate issue.

"The softwood dispute has its own history, legacy and sharp edges," Mr. Finlayson said in an interview on Thursday. "History would say that there will be penalty tariffs of some sort instituted. That's part of the dance."

Susan Yurkovich, president of the Council of B.C. Forest Industries, opened the two-day conference in Vancouver with a reminder of the need to look beyond the U.S. market.

"We are also aggressively pursuing new market opportunities, reaching farther across the globe to grow the demand for our wide variety of high-quality wood products," she told delegates.

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B.C. producers have enjoyed a big jump in softwood shipments to China over the past decade, but the United States remains by far the province's largest lumber export market.

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About the Author

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More

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