A 19.3 percent duty on softwood lumber exported from Canada to the United States, as proposed by the U.S. Department of Commerce, could devastate local saw mills.
Owners and operators here can only wait—and hope the Canadian government and lobby groups can sway the Bush administration before a final decision is rendered Aug. 23.
“We’re hoping the Canadian government will fight it enough that it’s not going to go through,” said Kendal Lundy, owner of Nickel Lake Lumber east of Fort Frances.
With a profit margin of about 12 percent on softwood lumber shipped across the border, local mills like Nickel Lake Lumber and Manitou Forest Products near Emo—which sell 70-75 percent of their wood in the U.S.—simply can’t afford to pay the 19.3 percent duty.
“It’ll definitely affect us. At this point, we’re just in a wait-and-see game,” noted Manitou Forest Products manager Dale Kaemingh.
“If they stick to 20 percent I don’t know what we’re going to do . . . take some down time, cut production . . . we might have to cut cost on our raw material,” he added.
While the final decision is being weighed in the U.S. over the coming week, local mills already are cutting back on their inventory preparing for the worst.
If the duty is passed, mill operators will have to expect American consumers to pay more to compensate for the duty or they will have to search Canada for new markets.
“It’s a tough decision. I think some of the U.S. customers would pay it because there’s some products that are hard to get in the States—others wouldn’t,” said Lundy.
Helping the Canadian mills are some U.S. lobby groups, such as the Coalition for Affordable Housing, which sees the government’s position as counter-productive, raising production costs and slowing development in the U.S. with the increased prices for consumers.
The U.S. Department of Commerce announced its preliminary decision last week in reaction to U.S. lumber producers’ claims that Canadian producers are subsidized by government.
Adding to the impact is that the U.S. Department of Commerce has determined the duty, if passed, should be retroactive to May, forcing Canadian companies to pay past duties or stop shipping across the border.
“It’ll hurt but we’ve gone through this every five years with them [the U.S.],” said Kaemingh. “The position we’ve taken is we don’t want to negotiate a duty. We’re not subsidized, we’ve proven that, and free trade is free trade.”
Local MP Robert Nault, also the federal minister of Indian Affairs and Northern Development, has expressed disappointment over the U.S. government’s decision.
“What is quite upsetting is on one hand the U.S. government talks about free trade, and on the other they proceed with what is clearly an attempt to protect their own lumber industries,” said Nault.
“This is the same argument that they have been unable to prove in three previous occasions before a trade tribunal,” he noted. “In the last 20 years, the U.S. lumber industry has been unable to show that Canada’s forest industry is subsidized.
“We will continue to argue forcefully that no export subsidies exist, and that we will defend the rights and competitiveness of the Canadian softwood lumber industry,” Nault vowed.
Bob Runciman, Ontario’s minister of economic development and trade, also reacted strongly to last week’s preliminary subsidy ruling by the U.S. Department of Commerce.
“We oppose this ruling although we are not surprised,” he said. “It’s an example of how the U.S. government signals to industry south of the border that it is protecting its interests by taking allegations of unfair trading practices seriously.
“Past experience has demonstrated to us that high preliminary rulings on subsidy are dismissed, either at the final determination stage or on appeal,” he noted.
“Our government will continue to work with our softwood lumber industry to fight these unjust allegations of subsidy,” Runciman stressed.
“This 19.3 percent number is not based on any reasonable analysis of factual information,” charged Tim Millard, president of the Ontario Forest Industries Association.
“This 19.3 percent duty is U.S. political posturing intended to bully Canadian softwood lumber producers into negotiating something less than free trade instead of continuing to fight the case,” he argued.
The Ontario industry, represented by the OFIA and the Ontario Lumber Manufacturers Associ-ation, sees permanent free trade as the only acceptable outcome to the softwood lumber debate.