First let me state that your stupid remarks about "crackerland" shows your lack of travel experience and expertise. All bigots are worthless, you have shown nothing more than any other. Next, how are you going to defend your nation with no firearms?
<<Your few hundreds of porcine timber baron buddies down there in Crackerland are not only planning to rip off US homebuyers for billions>>
Guess you have no understanding of what a minor % of the cost of a home is lumber or that the bulk of the cost is labor.
<<some of your responses to the dispassionate factual input of Bob Johnson have nauseated me>>
OK, go stick you finger down you throat and learn something:
II. CANADIAN SOFTWOOD LUMBER SUBSIDY PRACTICES
A. British Columbia
British Columbia ("B.C.") leads Canada in softwood lumber production, exports to the United States and lumber subsidies. B.C. softwood lumber exports to the United States in Canadian fiscal year (“ CFY” ) 1999/2000 totaled 8,659 million board feet (“ MMBF” ), notwithstanding the Lumber Agreement's modest tariff-rate quota restraints. Attachment 4.
The combination of the province's stumpage system, a policy of non-enforcement of forestry rules and the log export ban provides British Columbia's softwood lumber industry with enormous subsidies. A preliminary comparison with the most recent available prices for comparable U.S. timber directly across the U.S./British Columbia border shows that public timber from the B.C. Coast is provided, on average, for around $300/thousand board feet (“ MBF” )[ 3] less than its fair market value, and public timber from the B.C. Interior is provided, on average, for roughly $150/MBF less than its fair market value. Attachment 1.[ 4]
First, B.C. subsidizes its lumber industry by setting stumpage fees far below the market value of the timber. The harvest of government timber is administered through a system of tenure types, which include licenses for cutting on specified parcels of land ("Tree Farm Licenses," "Timber Licenses") and licenses to cut specified volumes in various acres ("Forest Licenses"). The system – which a former B.C. deputy premier described as “ Soviet-style” [ 5] – is dominated by large, integrated Canadian lumber producers whose tenures are long-term and renewable in perpetuity ("evergreen").
As in the other provinces, the essential bargain is that producers agree to operate mills and employ workers in return for which the province guarantees a certain supply of timber for below-market fees. As a group of Canadian small business operators deftly observed:
We understand that the current system of tenure was implemented in order to lure the massive amounts of capital to build pulp-, paper- and sawmills. Then-current policy also placed a high value on institutionalizing a long-term, more or less homogenous harvesting plan for the entire Province, including the establishment of necessary access infrastructure… . Whether or not this strategy was correct remains open to debate. Clearly, however, it has served its purpose. The mills are built, the infrastructure has been developed, and, we believe, sufficient time has passed for a return on capital to have taken place… . Now is the time to see if the manufacturing side of the industry can stand alone, without a guaranteed log supply.[ 6]
In order to further ensure that sawmill jobs are preserved, B.C. mandates environment-damaging minimum cut requirements[ 7] and log export restrictions, discussed below.
The below-market stumpage fees in British Columbia are set through the so-called "Comparative Value Pricing" system. Comparative value pricing starts with a determination of the total amount of stumpage the province wishes to collect from all the major licensees. The province then calculates "target rates:" the average per-unit rates that would be expected to result in the desired level of aggregate collections. Stumpage charged to particular harvesters varies according to the quality of the timber harvested, but the average stumpage rate is supposed to remain near the “ target rate.” Although target rates are adjusted in light of movements among lumber and wood chip prices, the system is fundamentally non-market-based[ 8] since it begins with an average stumpage rate (the target rate) which is an administered price not reflecting the real value of the timber. As the B.C. Raincoast Conservation Society explained:
Without a competitive market for timber, we will never ensure that the government's licensees do more than just collect the revenues that should have been collected by the government as stumpage. If these companies are unable to survive in a competitive environment, we don't need them. The government has no business insulating its favoured friends from the reality that our old growth forests are very scarce and very valuable. The B.C. government is wasting billions of dollars propping-up a tenure system that should have been extinct long-ago.[ 9]
Below-market timber pricing in B.C. has been recognized by the U.S. Department of Commerce[ 10] and has been acknowledged by many in British Columbia itself: “ Jigging the stumpage only proves what the Americans have said all along: B.C. subsidizes its forest industry.” [ 11]
In addition to below-market stumpage fees, academic and government studies document a policy of non-enforcement of forestry rules which enables B.C. lumber producers to obtain timber at no cost or below scheduled rates through mis-grading and mis-scaling. One of the studies, authored by Michael R. Pendleton of the University of Washington and based on open access to B.C. Ministry of Forest documents, found systematic nonfeasance and malfeasance on the part of Forest Ministry enforcement in two critical areas: scaling enforcement and timber harvest enforcement.[ 12] Professor Pendleton also suggested that similar Forest Ministry nonfeasance occurs in silviculture enforcement. Another study, released by B.C.’ s Auditor General, confirmed the Forest Ministry’ s failure to enforce the timber harvesting requirements.[ 13] By tolerating massive fraud and wholesale theft of its public stumpage by the lumber industry, British Columbia is effectively providing timber not only at below-market prices but for free – a "devastating give away."[ 14]
Another major element of British Columbia's integrated subsidy system is its log export ban, as the Department of Commerce determined in its most recent investigation of Canadian softwood lumber subsidies.[ 15] With few exceptions, the ban precludes exports of unprocessed logs.[ 16] It prevents non-B.C. producers from acquiring logs harvested in B.C. and thus benefiting from the below-market stumpage provided by the B.C. government. In addition, the log ban helps keep B.C. producers’ wood costs artificially low.[ 17] (While the log export ban is, in essence, a component of the below-market timber system, it can also be seen as an additional indirect subsidy to the B.C. lumber industry.) Canadian federal law reinforces and broadens the provincial ban on log exports by placing “ logs of all species of wood” on Canada’ s “ export control list,” i.e., a list of products whose export is subject to limits.[ 18]
Finally, the B.C. Government confers a host of other subsidies to the B.C. lumber industry. Examples include a number of tax benefits, payments for land removed from the forest companies’ license areas, bailouts of indebted companies, etc.[ 19]
B. Quebec
Quebec is second only to British Columbia among the Canadian provinces in softwood lumber production and in softwood lumber exports to the United States. Quebec softwood lumber exports to the United States in CFY 1999/2000 totaled 3,926 MMBF, again, in the face of the Lumber Agreement. Attachment 4.
Quebec pursues a major program of stumpage subsidies designed to enhance artificially the growth of its lumber industry through renewable tenure arrangements known as Timber Supply and Forest Management Agreements.[ 20] A preliminary comparison with the most recent available prices for comparable U.S. timber near the U.S./Quebec border shows that Quebec public timber is provided, on average, for around $150/MBF less than its fair market value. Attachment 1.
Quebec sets stumpage rates annually using the so-called "Mean Value of Standing Timber" method, allegedly a type of "parity" or comparative technique. This method sets stumpage by adjusting an average private timber price for supposedly different costs associated with harvesting timber from public lands. This methodology contains several systemic flaws, resulting in stumpage fees that are far below the public timber's fair market value. Historically, Quebec's adjustment factors were so large that they would often result in "negative" stumpage, i.e., the stumpage calculation implies that the government would have to pay someone to take the trees. Yet, the province arbitrarily chose a low positive level in these circumstances and harvesting proceeded – demonstrating that the Quebec "adjustments" are fanciful. In 1999, Quebec regulations called for a 23% increase in stumpage rates but the Quebec Government simply reduced this to a 6.8% increase when provincial lumber producers complained.[ 21] The level of reduction appears to have been guided by nothing more than political considerations. A similar pattern seems to be occurring this year.
The existence of the subsidies is well known. The former B.C. Forests Minister noted that
[ t] he [ Quebec] government … is subsidizing the forest industry with low stumpage rates . . . Quebec lumber is now turning up in U.S. markets as close to B.C. as Washington state, because its producers can afford to pay those [ export fee] penalties thanks to bargain-basement stumpage rates . . . They are subsidizing. They are not even making their costs . . . I know how the Americans feel.[ 22]
Indeed, the current Quebec Natural Resources Minister recently justified the smallness of a stumpage increase as being necessary to "maintain the competitive position" of the Quebec industry.[ 23] In addition, the Cree First Nation has observed that “ Quebec ignores [ the] promises [ of the James Bay Treaty] and gives the wood to the companies to be sold to the USA at cheap prices.” [ 24]
Like the other major lumber-producing provinces, Quebec also contributes to and protects the subsidy on provincial lumber production through a ban on log exports[ 25] and through a number of other benefits, such as payments for land removed from the forest companies’ license areas, bailouts of indebted companies, tax benefits, etc.
C. Ontario
Ontario administers a stumpage program that provides public timber for lumber production at rates that are far below the market value of the timber.[ 26] A comparison with the most recent available prices for comparable U.S. timber near the U.S./Ontario border shows that Ontario public timber is provided, on average, for around $100/MBF less than its fair market value. Attachment 1. Ontario softwood lumber exports to the United States totaled 1,718 MMBF in CFY 1999/2000, notwithstanding the Lumber Agreement. Attachment 4.
In Ontario, forest industry companies gain access to timber supplies through Forest Resource Licenses. The larger Forest Resource Licenses are the Sustainable Forest Licenses and are in effect for 20 years. They are renewed every five years after a positive review.[ 27]
In 1994, Ontario implemented a new method of stumpage calculation for public timber. Ontario calculates stumpage as the sum of a "Minimum Stumpage Rate" (set by regulation according to the revenue needs of the province), a "Forest Renewal Charge" (a silviculture charge that is often reimbursed) and a portion of a "Residual Value Rate" (the timber cost that allegedly remains when other costs – often inflated – are subtracted from lumber prices).[ 28] Unfortunately, the new method is just another system for setting stumpage fees at below-market, administered rates. In the words of Howard Hampton, Ontario's former Minister of Natural Resources, "[ the residual value rate] would have been a lot higher had it been a pure, market-driven structure."[ 29]
Like the other major lumber-producing provinces, Ontario also contributes to and protects the subsidy on provincial lumber production through a ban on log exports[ 30] and through a number of other benefits, such as payments for land removed from the forest companies’ license areas, bailouts of indebted companies, tax benefits, etc.
D. Alberta
As in British Columbia, Quebec, and Ontario, the provision of below-market government stumpage and a log export ban operate in tandem as a means of subsidizing Alberta's lumber production through artificially depressed wood costs. A preliminary comparison with the most recent available prices for comparable U.S. timber near the U.S./Alberta border shows that Alberta public timber is provided, on average, for roughly $160/MBF less than its fair market value. Attachment 1. Alberta softwood lumber exports to the United States have risen from 1,210 MMBF in CFY 1996/1997 to 1,322 MMBF in CFY 1999/2000, notwithstanding the Lumber Agreement. Attachment 4. Virtually all softwood timber harvested from provincial land in Alberta derives from three tenures: Forest Management Agreements, Timber Quotas and Commercial Timber Permits.
The system for setting stumpage prices in Alberta is extremely opaque. Apparently, timber prices are somehow indexed to lumber prices, but the complete indexing formula does not seem to have been publicly released.[ 31] It appears that the formula relies on a quasi-residual value system that suffers from the inherent flaws of residual-value methodologies, e.g., it encourages participants to inflate costs artificially in order to reduce their timber fees.
Independent Alberta observers have repeatedly concluded that enormous subsidies exist. One Alberta industry participant noted that government stumpage revenues are "a pittance compared to what timber's worth."[ 32] Moreover, in the few instances when timber is sold competitively in Alberta (and where documented collusion has not occurred), timber commonly sells for several times the administered price.
Like the other major lumber-producing provinces, Alberta also contributes to and protects the subsidy on provincial lumber production through a ban on log exports[ 33] and through a number of other benefits, such as payments for land removed from the forest companies’ license areas, bailouts of indebted companies, tax benefits, etc.
E. Manitoba, Saskatchewan, the Yukon and Northwest Territories
Government stumpage programs throughout other areas of Canada confer subsidies on Canadian lumber production. In Manitoba, Saskatchewan, the Yukon and Northwest Territories and other Canadian federal lands located in the provinces, government timber fees are set through administered systems – not competitive bidding – and are far below the market value of the resource.[ 34] Preliminary comparisons with the most recent available prices for comparable U.S. timber near the U.S./Manitoba border and near the U.S./Saskatchewan border show that Manitoba public timber is provided, on average, for roughly $110/MBF less than its fair market value, and Saskatchewan public timber is provided, on average, for around $180/MBF less than its fair market value. Attachment 1. Lumber imports from Manitoba and Saskatchewan have risen sharply from 399 MMBF in CFY 1996/1997 to 633 MMBF in CFY 1998/1999, notwithstanding the Lumber Agreement. Attachment 4.
As in other lumber-producing provinces, Manitoba, Saskatchewan, the Yukon and Northwest Territories also contribute to and protect the subsidy on provincial lumber production through a ban on log exports and a number of other benefits, such as payments for land removed from the forest companies’ license areas, bailouts of indebted companies, tax benefits, etc.
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