Heavy levy

Heavy levy

In one fell swoop the us has dealt a crippling blow to the Canadian lumber industry, slapping a 27 per cent duty on softwood timber imports from the country. The us salvo is the latest move in a protracted dispute spanning almost 20 years. Its significance for Canada can be gauged from the fact that softwood exports from the country account for approximately us $10 billion annually - a third of the us lumber market.

The decision is the culmination of a year-long investigation by the us department of commerce which found that Canadian timber harvested from government-owned forestland was priced low, thus creating an unfair market. Thereafter, the us International Trade Commission unanimously agreed that cheap timber import from Canada was affecting the us industry and imposed countervailing and anti-dumping duties on softwood lumber with effect from May 23, 2002. Under the Canadian licensing system, companies pay a fee for harvesting government-owned timber. These 'low stumpage fees' are the bone of contention, with usa contending that they spur a greater demand in the American market at the cost of domestic timber.

The Canadian government has decided to fight the decision tooth and nail. It intends to raise the issue in forums such as the World Trade Organisation (wto) and the North American Free Trade Agreement (nafta). Leading companies such as Tembec of Quebec have, meanwhile, gone proactive by initiating trade action against the tough step. They claim that it will have a grave impact on the timber industry and result in the loss of 50,000 jobs. Frank Dottori, Tembec's chief executive, alleges that the "ruling has been dictated by the us lumber lobby".

The Canadian government and us retailers feel that the stiff duty would push up the price of an average house by $1500. On the other hand, us companies maintain that thousands of workers have been retrenched and 100 mills forced to shut down because of the cheap Canadian imports.

In 1996, an agreement was reached where Canada imposed a five-year export restraint on raw logs. In return, the us had agreed to withdraw certain retaliatory trade actions taken against Canadian lumber imports. However, a day after the expiry of the pact in March 2001, the us timber industry sought curbs on such imports.

Canada has 418 million hectares of forestland, which account for 10 per cent of the world's forests. The provincial government is responsible for 71 per cent of these tracts, while the federal government oversees 23 per cent; the rest is under the control of private owners. With a 23 per cent slice of the forest produce trade, Canada is a major player in the global market. But the American industry is set to chip away at its us $45-billion share.