The Canadian forest industry is suffering a harsh blow in its struggle against lumber exports in the United States.
The trade dispute between Canada and the United States will enter a new chapter on Tuesday, while the US Department of Commerce will confirm the imposition of countervailing duties of 20% on average on Canadian exports.
For some major players in the industry, this rate varies depending on the assessment made by US officials.
Thus, Resolute Forest Products will be taxed at 12.82%. For West Fraser, Canfor and Tolko, based in British Columbia, rates will be 24.12%, 20.26% and 19.5%, respectively.
JD Irving, of New Brunswick, will face a rate of 3.02%.
And a three-month retroactive tax
In addition, with the exception of Resolu, West Fraser, Canfor and Tolko, other companies in the industry will have to pay countervailing duties retroactively over 90 days.
The US Department of Commerce has chosen not to impose this measure on four major players in Canada, considering that they have not significantly increased their exports recently.
In practical terms, the Canadian lumber tariff means that the retroactive tax may affect the smallest players in the industry. Companies affected by the retroactive measure will thus have to pay sums corresponding to their exports since the end of January. Otherwise, they will not be able to cross the border.
A coalition of US lumber industries welcomed Monday as the Department of Commerce produced a preliminary assessment of the subsidy rate for the Canadian lumber industry.
According to the notes attached to this press release, the subsidy rates for companies would be as follows:
JD Irving: 3.02%
West Fraser: 24.12%
Other producers and exporters: 19,88%
According to the Department of Commerce, exports of lumber to the United States totaled US $ 4.7 billion in 2016. The Montreal Economic Institute estimates that the US market accounts for nearly 75% of Canadian exports Lumber and nearly 24,300 direct jobs.
Canada wants to defend industry
Canada does not intend to stand by this decision.
“The Government of Canada disagrees with the US Department of Commerce’s decision to impose unfair and punitive duties. There is absolutely no basis for the charges, “Natural Resources Minister Jim Carr and Foreign Minister Chrystia Freeland said in a statement.
We are committed to working with the US administration to achieve a lasting solution … We remain confident that a negotiated settlement is not only possible, but in the interests of both countries.
Extract from a joint statement by Ministers Carr and Freeland
They want to defend the softwood lumber industry in the courts. “In successive decisions since 1983, international tribunals have refuted unfounded allegations of subsidization and injury to US industry. We have won in the past and it will be again this way, “they said.
Minister Carr will hold a meeting this week with the federal-provincial softwood lumber working group to examine additional measures to assist affected industries, workers and communities.
Ottawa has not yet advanced on financial assistance to forestry companies in relation to the imposition of countervailing duties. In 2001, after the imposition of tariff barriers, the federal government had taken several months to implement two financial assistance programs. It initially provided more than $ 300 million in 2002 and $ 1.5 billion in November 2005.
In a statement, the Union of Quebec Municipalities (UMQ) denounces the decision of the US Department of Commerce and urges the federal government to grant loan guarantees to businesses that will be affected by the US decision.
“The federal government has already announced some short-term support measures for forest regions. This effort is insufficient. We are demanding a formal commitment by Ottawa to recognize the foundational contribution of the forest economy to communities across the country that depend on it, “said Gilles Potvin, Mayor of Saint-Félicien and member of the Forest of the UMQ.
Louis Blouin traveled to the Outaouais region of Maniwaki, a town that had been hard hit during the last conflict in the 2000s.
Québec will help the industry
Quebec announced earlier today that, “in the moments that will follow” the American announcement, it will unveil the measures put in place to help the industry.
The provincial Liberal government has already announced that it will provide forestry producers with loan guarantees to support them against the penalties that will be imposed at the border.
Philippe Couillard reiterated his intention to do so, and indicated that he would continue to support the community’s innovation projects.
“Our attitude will be twofold. First, there is an attitude of defense and promotion of our forestry system and the active support of sawmill companies. But also, push our industry even more towards innovation and the development of new products, new markets, “he enumerates.
According to Mr. Couillard, the coming months, the next few years, will be “difficult” for the industry.
It will not be short as a situation. We are expecting a fairly long period of negotiations, sometimes of recourse to the courts.
Québec estimates that between $ 200 million and $ 300 million will be required to implement a program to assist the Quebec forest industry.The Prime Minister also says he hopes that aid will also come from the federal government, to help the industry, but also to promote the development of new markets.
For example, he said, Ottawa could support the development of new technologies such as biodiesel or cellulose filaments, which are recognized as an exceptional reinforcement adjuvant.
Fifth Softwood Lumber Conflict
The US government wants to impose countervailing duties on softwood lumber as the agreement governing trade in this material between Canada and our southern neighbors has expired since October 2015 and the discussions that have been going on until now, Have not succeeded.
The Americans accuse Canada of unfairly subsidizing local forestry companies through low stumpage fees.
Why unfair competition?
The US Lumber Coalition believes that Canadian lumber producers are subsidized by Canadian governments and that our forestry industry is not meeting international standards.
The coalition estimates that stumpage fees in public forests in Canada are below market value, allowing Canadian producers to sell cheaper lumber in the US market and even, she says, Dumping by selling wood at a lower price than comparable sales on the Canadian market.
In Quebec, a new forestry regime was introduced in 2013 to respond to the complaints of American producers.
Auction mechanisms have been introduced for the sale of timber from public lands. The Government of Quebec states that “this wood is not subsidized” and that there is “no reason why penalties should be imposed in Quebec. ”
The return of export taxes will thus launch the fifth trade dispute on softwood lumber between Canada and the United States.
The last one was in 2001. The Americans had imposed countervailing duties of 27.22% on lumber and anti-dumping duties of between 2% and 16%, depending on the companies involved.
Canada then prosecuted the United States before the World Trade Organization (WTO), which proved it right. This ruling had opened the door to a compromise between the two countries.