Wasted Days and Wasted Nights – the Canada/US Softwood Lumber Dispute (Part 1 of 2)

By Carlton Owen, retired CEO, US Endowment for Forestry and Communities
Tree Frog Editorial
July 19, 2021
Category: Opinion / EdiTOADial
Region: Canada, United States

Carlton Owen

Much Ado About … Differing Systems (to read part two, click here)

After 20 years the United States is calling quits to its longest shooting war – Afghanistan. The two aptly named “World Wars” lasted an average of just over five years. Yet, our longest trade dispute – that between the U.S. and Canada over softwood lumber — has being going on for nearly four decades! Fortunately, trade disputes aren’t fought with bombs and bullets; but like most wars, there are few gains, and many loses just the same.

In 1959 Freddy Fender released his second most successful recording, “Wasted Days and Wasted Nights.” If we cut past the rhetoric on both sides of the border it is difficult to see lasting gains in either country or our respective forest sectors resulting from the aptly named “softwood lumber wars.” It’s been mostly wasted decades and wasted dollars.

What’s Stoked the Wood Fire to Date?

Without getting into a full dissertation regarding the charges and counter charges, I hope there are a few higher-order facts upon which both sides can agree.

Over the early years of the dispute Canadian producers – especially those in western provinces – had the timber resource and manufacturing capacity to turn up the dial on production when desired. In those days it was relatively easy for Canadian producers to meet one-third or more of U.S. wood demand. Were it not for barriers put in place to slow the flow, the share might have been even greater. 

The power to have such an impact on the world’s largest softwood consuming market (the U.S.) rests to a great extent in the fact that approximately 94% of Canadian forests are owned by the Crown (public timber). Of those lands not set aside as parks, the remainder serve as sources of raw material in a social system to support rural economies and jobs. Second, Canada – with a massive timber resource but a domestic market about one-tenth the size of the U.S. — has always had a focus on exports. Given those conditions why look anywhere other than the gorilla of lumber consumption just to the south?

The U.S. on the other hand traditionally had a strong mix of public and private timber lands. Over the 1980’s and into the 90’s allocations to wilderness and other non-timber uses of public lands were accompanied by a plethora of lawsuits that saw flows from federal lands decline to an unsteady drip. Producers had no choice but to rely on more predictable and secure private timber sources.

Too, in Canada, with its social underpinnings there is a close relationship between government and industry, whereas in the U.S. the relationship between the two is often antagonistic. Respective approaches to research and investments for innovation are just one telling example of the difference. In Canada, FPInnovations (FPI) is a jointly funded, government and private sector powerhouse. In the U.S. almost all basic research is now left to the USDA Forest Service as major forest product companies have largely discontinued their research investments. 

For decades U.S. producers have plowed relatively little into innovation and mill improvements while the producers to the north have continued to upgrade and find ways to make more from less using a seemingly endless supply of small logs. A result of that anomaly has been the closure of more than three dozen of Canada’s low-producing sawmills just between 2000 and 2015.

If I’m Struggling, It Must be Someone Else’s Fault

The conditions and differences fomented a growing chorus of voices in the U.S. complaining about subsidized raw material prices and anti-competitive practices in the north that disadvantaged private producers to the south where log prices were far more volatile. Add to this the fact that the U.S. has never in recent history been able to fully meet its own lumber demand, and one has the foundation for a good fight. 

Different Times; Different Conditions (2021 is not 1981)

The Coalition for Fair Lumber Imports that once included many of the largest U.S. producers, is today called the U.S. Lumber Coalition and is largely comprised of a much smaller group of independent producers in the Pacific Northwest and South. One would have to be pollyannish not to recognize that there are other interests at play in keeping the flames burning – millions upon millions of dollars gained by legal firms on both sides of the border.

Canada’s moves to set aside millions of acres for environmental purposes has played a small role in that nation’s inability to reopen the spigot on lumber flows, but such pales in comparison to the tens of millions of acres of forests killed by the tiny but voracious mountain pine beetle. Even with the most advanced biotechnology and silvicultural practices those forests won’t be a factor in resource supply for the next century or more.  Canadians have also learned a harsh lesson about putting too many eggs in a single basket, that of relying on the U.S. as its only market. Thus, it has looked for and found other outlets for significant portions of its production.

Another factor impacting North American and global timber markets can be found in the fast growth rates of managed forests in the South.  Fast growth associated with reduced harvests due to the Great Recession has resulted in a burgeoning supply of harvestable timber with logs prices half that of a decade ago.

What’s Been Gained after 40 Years of Fighting?

Having worked with two major U.S. forest products producers that stood on opposite sides of the dispute – Potlatch Corporation and Champion International – and having spent a not-insignificant time in Canada, I understand the views of both factions. Yet I see almost no lasting gains to Coalition supporters with perhaps Canadians being the greater beneficiaries.

Look at the facts. Setting aside the millions flushed in legal fees, there has been only one instance in which the complainants measurably benefited. Under the 2006 settlement, $500 million in duties were directed to Coalition supporters to settle pending lawsuits. At the same time, nearly ten times that amount was rebated to Canadian producers. Another $500 million, a portion of which could be counted as gains to U.S. interests, were used to fund “meritorious initiatives” (a story for another time).

Generally speaking with the exception of that one episode that was made possible because of a now defunct U.S. law (the “Byrd Amendment”), dollars exacted under the various chapters of the softwood lumber dispute have either been retained in Canada and used to support its forest sector or have been rebated to the producers. Where duties served to shore up the selling price of lumber Canadian producers benefited just as did U.S. producers. But, if the lion’s share of duties were ultimately refunded to producers in one form or another, can someone please explain how such has extracted lasting pain or loss to the Canadian sector? 

At the same time, the dispute has done much to distract from market growth and at times has had some of the sectors most important customers (e.g. the National Association of Home Builders) attacking the U.S. industry and seeking Congressional intervention. Again, I ask someone to explain how “ticking off one’s customers” and making substitute products more viable benefits North America’s forest products industry regardless of where those products are produced? 

It’s time to look for new solutions.  I’ll make a go at that in part 2 of this op-ed. (in tomorrow’s Tree Frog News)

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Carlton Owen has 45 years’ experience in leading change for the greater good of the sector including stints with Potlatch Corporation; policy work with trade organizations in Washington, DC; a decade with Champion International Corporation; owner of his own global consulting practice; and the last 15 years as founding chief executive of the U.S. Endowment for Forestry and Communities. He can be reached at carltonowen1@gmail.com

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