Who are you calling losers?
Terence Corcoran
National Post
Paul Lachine
An illustration of two men each holding a American flag and a Canadian flag axe chopping down the same tree.
The headline on this page last Wednesday was provocative enough: "We're a loser in lumber." The article, by Washington lawyer John Ragosta, said Canada had lost four international rulings on softwood lumber. Why does Canada insist on claiming victory? Those fighting words drew spirited responses from Bob Rae, Rick Doman, John Duncan and others in defence of Canada's trade position. For readers who missed the original commentary, it can be found on our Web site at www.nationalpost.com. Type "Ragosta" in the search box. But the debate doesn't end here. Next week: John Ragosta responds.
BOB RAE: BLUFF AND BLUSTER FROM THE U.S
John Ragosta's article on the softwood lumber dispute is all bluff and bluster. As counsel to the protectionist Coalition for Fair Lumber Imports he has worked long and hard lo these 20 years to keep lumber prices in the U.S. artificially high, thereby milking American consumers to the tune of billions of dollars. So now that Canadian industry and government have come together to take their strong case to NAFTA and the WTO, Mr. Ragosta has to resort to simple misrepresentation to make his case.
As a youth I attended public school in the United States, and was obviously shocked to learn in one of my first history lessons at Horace Mann Public School that the Americans won the war of 1812. In describing what happened in the lumber wars since the early 1980s Mr. Ragosta has resorted to some unusual distortion, even for someone pleading a weak case.
Let's consider, briefly, the facts. In Lumber I, Commerce ended the case, without an appeal, finding that Canadian softwood lumber was not subsidized. In Lumber II there was no decision. In Lumber III, in 1992, the Web site of the U.S. Trade Representative (USTR) tells us that a GATT panel found that the U.S. 301 action violated the GATT. A binational panel hearing the appeal found that the case had to be retried, which it was, and Commerce issued a decision on remand that Canadian softwood lumber was not subsidized.
Now it's true that back then Mr. Ragosta accused the panelists who ruled against him of being in conflict, and sued for an "extraordinary challenge". But he lost that case. The smear continues, but when it was first alleged it was found to be without substance. Then he claimed that the whole of the NAFTA dispute mechanism violated the U.S. Constitution, a case he ultimately withdrew -- with prejudice.
But the Coalition is not just wrong about what happened in the past. Their whole allegation about the Canadian industry turns the truth on its head. It is the U.S. industry that is subsidized. Governments in the United States build and maintain the roads, plan the harvest, reforest, pay for protection against forest fires (Smoky the Bear wears a government costume after all). In Canada, the private companies pay for all that.
According to a recent BMO Nesbitt Burns report, Canadian wood products profitability is less than half that of the United States because the Canadian tenure holder is responsible for the forest, including environmental remediation and reforestation. That same report also noted that "in the past 30 years, wood costs for U.S. South lumber producers have risen 6.3 times, but their selling price has risen by 2.6 times. The U.S. South independent lumber producer is being squeezed out of business by the timberland owner." The Wall Street Journal noted just this week that what has happened as a result of the nearly 30% tariff wall is that woodlot values in the United States will jump even more. This is the kind of protectionist bonanza that any sensible advocate of open markets and fair competition would decry.
That is what this dispute is all about. It's not really about public land versus private land, or Canadian forestry practices at all. The vast majority of timber on private lands is not sold at auction at all.
It's about a relatively inefficient and decidedly less productive U.S. industry using its political clout to keep out products that will keep prices in the United States low. It's about an increasingly desperate rump of the U.S. industry doing whatever it can to keep prices high and their values high, and doing their utmost to bring the Canadian industry to its knees.
Throughout these discussions, Canada has been prepared to put forward reasonable positions that would address common concerns: tenure policy, timber pricing, and a recognition that while practices might take different forms they should reflect market and environmental realities on both sides of the border. The proposal also included a transitional border measure to provide the necessary time for provinces to make the agreed reforms, an end to the softwood lumber-related litigation launched by both parties, co-operation in sustainable forest management, and the establishment of a binational council to monitor and enforce the agreement and to resolve any future disputes.
That is what the protectionist Coalition rejected. Their latest rhetoric sounds more like the dyspepsia of a dejected Islander fan than anything else. Canada is right to go to NAFTA, and right to go to the WTO, and also right to say to the Americans: Come up with something reasonable and we'll look at it. At the moment there's no reason on the other side, only bluster and bluff, and the crudest kind of economic intimidation. Team Canada will never knuckle under to that.
Bob Rae, former Ontario premier, is advisor to the Free Trade Lumber Council.
RICK DOMAN: WE CAN'T LOSE
NAFTA is not providing free access to United States markets, nor does it provide rules to quickly and efficiently resolve disputes that arise.
There is evidence that the U.S. coalition's petition against the Canadian lumber industry does not conform to U.S. or international law, nor is it fair or equitable. For example, in their arguments, the U.S. coalition improperly uses cross-border comparisons, and claims that western Washington State has similar geography to coastal British Columbia, and therefore presumes that logging costs should be the same. Anyone who has visited both will realize that the geographies are not at all similar.
The U.S. coalition states that Canadian provinces "set timber prices at about one-third of market value" and "the overwhelming majority of timber harvested from government land in Canada is old growth." There is absolutely no evidence to support statements of this nature.
The Department of Commerce conducted its countervailing duty investigation (CVD) on a countrywide basis. It did not investigate the extent to which individual producers of softwood lumber products in Canada had benefited from the alleged subsidies.
Doman contends that the United States, in reaching these decisions, has breached a number of sections of Chapter 11. A key principle of NAFTA is that each member country shall accord to investments of investors of another member country, treatment in accordance with international law, including fair and equitable treatment and full protection and security. The United States action against the Canadian lumber industry is also an attack on Canadian sovereignty and should not be condoned under international trade laws.
Finally, producers of softwood in other foreign countries, all competitors of Canadian companies, are receiving more favorable treatment from the United States. They are not members of NAFTA, not subject to the antidumping and countervailing duties, and not subject to arbitrary and discriminatory targeting of their softwood lumber imports into the United States.
Other countries outside the NAFTA agreement, including the former Russian Republic, Scandinavia and South America countries and Eastern Europe continue increasing their lumber exports to the United States while Canada is blocked by the U.S. duties at a time when U.S. lumber demand is growing. The U.S. cannot supply its own requirements. Yet they are harming Canada to the benefit of other, non-NAFTA, countries.
A basis of the U.S. petitioner claim against Canada is that the increasing Canadian share of the U.S. market is causing U.S. companies financial harm. Yet the 34% Canadian share of the U.S. market is virtually unchanged over the past five years. Nor have we seen evidence to support the coalition claim of financial injury due to increasing market share.
U.S. rules unfairly allow the U.S. industry to win twice. Canadian companies are effectively fined, then those fines are handed to U.S. companies that are Canadian competitors. The funds provide a financial war-chest for the U.S. industry to continue and increase its actions against the Canadian industry.
Chapter 19 of NAFTA entitles interested parties to contest the CVD final determination. Doman was one of a number of companies, provinces or associations that filed an appeal.
It is difficult to imagine that, with a proper legal process, Canada cannot win.
Rick Doman is president of Doman Industries.
JOHN DUNCAN: DRIVING LUMBER PRICES UP
If how Canada charges for cutting timber is so bad and so terribly subsidized, then why has John Ragosta's lobby group not demanded a countervailing duty against raw logs? They come from the same Canadian forests that he is complaining about with regard to lumber.
If the U.S. lumber special interest coalition's "offer" is so good, why is no one from industry allowed to talk about it? Why was their chairman, Rusty Wood, not able to give details of the plan, "saying it would be a violation of U.S. anti-trust laws?" Isn't this collusion to fix prices by any other name?
If public auctioning of timber from public lands is so wonderful, why are the public forests in the United States in such disarray? You can try to blame it on the data management system, but when the U.S. General Accounting Office released its report in 2001, "watchdog groups accused the U.S. Forest Service of hiding the details of its timber program, which has long faced criticism for spending more money than it takes in. The agency's fiscal year 1997 figures showed the timber program lost $88.6-million."
According to a market performance report, International Paper (one of the backers of the Coalition for Fair Lumber Imports) is the largest timberland owner in North America and over the 2000 to 2001 period, its wood products division made an operating profit of US$1.2-billion. This was more than three times the operating profit of Canada's eight largest lumber producers combined. It obviously doesn't need protection from Canadian industry.
Weyerhaeuser and Louisiana Pacific operate on both sides of the border and they have clearly identified that we are not subsidizing, but that we have different goals and objectives. Slowly but surely, the Coalition's way of doing business is going to drive up lumber prices, creating a shortage of quality Canadian lumber on the U.S. market and encouraging the use of lumber substitutes. This dispute is going remove free market principles from the North American lumber trade to everyone's detriment.
Finally, Mr. Ragosta's self-serving, highly profitable and partisan position means he is the last person anyone should look to for an unbiased treatment of this subject.
John Duncan, M.P., is International Trade Critic for the Official Opposition.
NEXT WEEK: John Ragosta, counsel for the Washington-based Coalition for Fair Lumber Imports, responds |
