The Softwood Lumber Dispute agenda Evolution of softwood

The Softwood Lumber Dispute

agenda � Evolution of softwood lumber dispute � Underlying causes � BC reforms to avoid Forest Revitalization Plan � 2006 agreement � themes

Modern History of Dispute � Lumber I: early 80 s - increased US countervailing duty pressures � Lumber II: 1986 – MOU - export tax � Lumber III: 1992 US countervailing duties (6. 5%) � 1994 - Canadian victory in binational panel US changes law to undermine basis for ruling � 1996 -2001 – softwood lumber agreement Certain amount tax free Substantial export fees above that level � Lumber IV: April 2002 – US DOC final determinations: 27. 2% duties Canada won every major case October 2006 – new Softwood Lumber Agreement October 10, 2013 3

US arguments � Stumpage system - prices timber at less than market value � Cut controls – flood market at low point of cycle � Log exports – increase supply of domestic logs, depressing price � Direct grants/loans October 10, 2013 4

BC Policy Reforms �How US trade pressures influenced BC forest policy - 2003 Market-based pricing Tenure takeback Economic deregulation

Stumpage Defined �Stumpage is the price paid by a licensed forest company for a publicly-owned tree 6

BC’s Stumpage System (until 2004) � Comparative Value Pricing (>90%) Product prices – logging costs, adjusted to account for gov target revenue � auction-based market pricing (<10%) small business sales October 10, 2013 FRST 415 7

Agenda 2 BC policy reforms announced as response to US softwood lumber challenge 8

Agenda 2 BC Proposal in Softwood Lumber Dispute � � � � � institute market-based pricing eliminate below-cost sales eliminate “blending” of blocks with significantly different stumpage values to reduce “cross-subsidies” award new timber rights competitively, by awarding them to the highest bidder allow Forest Licences and Tree Farm Licences to be subdivided reduce restrictions on the transfer of tenures, including eliminating the 5% AAC takeback eliminate “cut control” requirements that require a minimum amount of timber be harvested regardless of market conditions eliminate utilization requirements; eliminate appurtenancy provisions that tie harvesting rights to requirements to process the timber in company-owned mills 9

Decision: Forest Revitalization Plan

Forest Revitalization Plan “biggest change in 50 years” � Takeback and Redistribtion � 20% taken back from long term replaceable licences first 200 K m 3 exempt � 10% to auctions � 10% redistributed to First Nations (8%) Woodlots Community Forests � Compensation: October 10, 2013 $200 million FRST 415 11

Forest Revitalization Plan “biggest change in 50 years” �Changes in economic regulations allow subdivision and transfer without penalty eliminate appurtenancy eliminate minimum cut control requirements October 10, 2013 FRST 415 12

FRP – Setting a Fair Price 13

Canada-US Softwood Lumber Agreement of 2006 � 7 year term, with option to renew for 2 � end to litigation, US pledges to dismiss new actions � Canada to receive $4 billion � US receives $1 billion $500 million to US companies $450 million to “meritorious initiatives” $50 million to create a “North American Lumber Council” October 10, 2013 14

Softwood Lumber Agreement of 2006 – managed trade Price per thousand board feet Over US$355 US$336 -355 US$316 -335 US$315 or under October 10, 2013 Option A –Export Charge (%) Option B – Export Charge plus Volume Restraint** 0 0 5 2. 5% + regional share of 34% of U. S. Consumption 10 3% + regional share of 32% of U. S. Consumption 15 5% + regional share of 30% of U. S. Consumption 15

Lumber prices – 2001 -13 http: //cfs. nrcan. gc. ca/selective-cuttings/43

International Context: Summary � International Forces: reform Contribute to crisis, constrain environmental agreements world market trends ▪ push prices down green markets - certification, boycotts ▪ push costs up, threaten demand US trade pressures ▪ push costs up ▪ Force difficult policy reforms ▪ major challenge to sovereignty October 10, 2013 17

Themes �US trade pressures have pushed costs up and constrained BC’s policy sovereignty. �BC’s market-oriented forest policy reforms were strongly influenced by trade pressures by the United States