ANGER RISES OVER RAW-LOG EXPORTS
As forestry jobs are lost, backlash at impact grows
Nathan Vanderklippe, Financial Post
Published: Saturday, June 30, 2007
canada.com
VANCOUVER - Every day for a week last spring, Gerry Walerius and dozens of others in his hometown of Port Alberni, B.C., drove to a rainy mountain pass a short distance from town, parked their pickup trucks on a knoll overlooking the road and began to count.
"We started at like 6 a.m. and went to five or something in the afternoon, just counting trucks," he said.
By the end of the week, they calculated that an average 85 log trucks passed them each day, each loaded with trees destined for export to mills far from their own log-dependent town. They were furious, especially as they watched their own mills sputter.
Near Port Alberni, B.C., an average 85 log trucks passed by daily on the way to deliver raw logs to overseas mills and finishing plants.
Getty Images
"They say there's no wood" for local mills, Mr. Walerius said. "But it's pretty hard for people to swallow when you can just about get run over by the log trucks."
Across the country, workers and unions have voiced similar complaints as a growing global demand for raw materials sparks controversy over Canada's perceived inability to process its own goods.
In the months since Mr. Walerius's roadside count, B.C.'s Forestry Minister has promised a solution -- now nearly four months delayed -- and opposition to the log exports has hit a crescendo pitch. In Port Alberni and nearby towns, protesters have blocked logging trucks from driving out of town, held angry community meetings to discuss the issue and marched on the legislature in Victoria.
Their efforts have been buttressed by numbers showing that since 2000, the volume of unprocessed timber --protesters call it "raw logs" -- exported from B.C. has grown from 2.7 million cubic metres to nearly five million.
"The increase alone amounts to just shy of 58,000 highway truckloads of raw logs," said Ben Parfitt, a resource analyst with the Canadian Centre for Policy Alternatives, who calculated that the log exports have cost B.C. 5,800 jobs.
"We're talking about tremendous amounts of lost employment potential," Mr. Parfitt said.
And the issue is not restricted to British Columbia. In Alberta, a TransCanada Corp. proposal to build a 3,000-kilometre pipeline to funnel unprocessed oilsands bitumen to upgrading plants in Illinois has been met with similar anger, with opponents arguing it will cost the province 18,000 direct and indirect jobs.
At the same time, the country's manufacturing industry, hard-hit by the soaring loonie, has shed 260,000 jobs since May, 2004 -- 52,000 this year alone -- prompting the digging of a mock cemetery on Parliament Hill to mourn the seeming demise of Canada's ability to do anything but ship away its natural resource bounty.
According to Export Development Canada, raw commodity shipments hit nearly $100-billion in 2006, and have swelled from 14% of the total value of Canadian exports in 1997 to 21% last year, a 50% increase.
In the United States, raw commodities form 5.7% of total export value, 9.5% in the U.K., 3.6% in France and 1% in Italy. Australia outstrips Canada with 32% of its exports in raw form.
"We have reverted to being hewers of wood and drawers of water," wrote Diana Gibson, research director at the University of Alberta's Parkland Institute, accusing the country's leaders of suffering from "a colony mentality and resource hinterland identity."
All of which has prompted a vigorous debate about what the country should do. In Alberta, Ed Stelmach, the Premier, has instructed Mel Knight, the Energy Minister, to figure out how to increase from 65% the percentage of oilsands output upgraded inside provincial borders.
The debate has also led to suggestions that the country take serious measures. Some have suggested bailouts and tax incentives. In Alberta, others have called for an outright moratorium on further raw bitumen shipments. In B.C., the Forestry Minister has floated an idea of a 15% tax on log exports that would match the current 15% tax on processed lumber mandated by the softwood-lumber deal. Port Alberni's protesters have carried signs demanding a complete ban on log exports; union leaders have pushed for an exorbitant log-export tax.
"Government policy should aim to get as many jobs as possible from the timber that's harvested in B.C. and so there has to be a prohibitive tax on log exports to encourage more domestic manufacturing," said Kim Pollock, the Canadian research representative for United Steelworkers Canada.
Fred McMahon, the director of globalization studies with the Fraser Institute, called any such move "an incredibly stupid, prosperity-and job-destroying idea."
A recent Export Development Canada report found those in the resource industry actually make more than those in manufacturing, Mr. McMahon said. "People are talking about the exporting of jobs when we haven't seen unemployment rates like this for 30 years. They have a complete detachment from reality.
"If you look at the economic history of Canada, we started as an exporter of raw materials -- minerals, logs, fur, whatever. Has that impoverished us? We're one of the richest nations on the planet and, frankly, we developed the capital and the expertise for this more advanced economy by the sale of raw materials," he said.
Industry tends to agree. In B.C., where export logs fetch a 30% to 40% premium over those sold on domestic markets, timber companies have warned that restrictions on exports could have the unintended consequence of stanching the flow of logs to local sawmills by making it uneconomic to cut trees down.
Rather than pleading for government to tax log exports, one industry official said domestic processing plants need to restructure so they can afford to buy logs at the same price as their counterparts in the United States or Asia.
"The sawmilling industry on the coast of B.C. is in the fourth quartile in terms of cost structure. And that's the real problem," he said.
Similarly, economists say the efficiencies Canadian manufacturers are gaining through the tough times -- despite job losses, the country's manufactured output has barely fallen in recent years -- will ultimately strengthen them.
What also gets lost in the debate over raw exports is consideration of the biggest player in Canada's economy: the shop-ping-mall crowd. It's a basic element of trade theory that we sell our commodities to other nations because they can make them into goods more cheaply than we can, said Todd Evans, the director of economic analysis and forecasting with Export Development Canada. We get paid for our bitumen, nickel and logs -- resources that form part of Canada's so-called "competitive advantage" -- and in turn fork out less for our iPods and Ikea furniture.
"Consumer spending is about 60% of our economy, so that's one big chunk of the economy that is benefiting from these types of trading arrangements," he said.
The raw export problem is also not as bad as it may seem, said Pedro Antunes, director of national and provincial forecasting at the Conference Board of Canada. "People often look at the current-dollar values of our exports and say, 'Oh we've become a resource-based economy once again.' "
But the actual volume of raw exports has not increased so much as the value of that trade in the current frenzied commodities market, he said.
Still, that comes as little consolation to Mr. Walerius and the people of Port Alberni, for whom the machinations of a Canadian economy in flux has a decidedly personal edge. Cutbacks at the local pulp mill have forced his wife into early retirement at 55, and the town's children are leaving en masse for places like Fort McMurray, Alta.
"It's been devastating for this town," he said.
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