To Everything a Season

To everything there is a season. A time to laugh a time to cry. Seasons of elections are not a time to negotiate trade agreements. So, it might be the time to cry as we read more reports of fading hopes for a Softwood Lumber Agreement (SLA 5) to be reached.

In their May 16th Industry Update, CIBC World Markets projects, “At some point (maybe late June/July), negotiations will simply cease due to the upcoming U.S. elections. Such a freeze is unlikely to be lifted until a new U.S. president takes office and even then, potentially only after a new U.S. trade representative is confirmed by Congress (maybe March/April 2017). With the window for reaching a deal closing, we expect the U.S. industry will petition for a trade case in five months when the standstill on litigation ends on October 12, 2016, after which Canadian producers could then get hit with 25%-30% preliminary duties as early as February/March 2017.”

In today’s Vancouver Sun, Vaughn Palmer reports Americans prefer a quota on Canadian softwood imports to the U.S., while Canadians prefer an export tax tied to lumber prices and exchange rates.

FEA analyst Henry Spelter has addressed exchange rates here: “This world we are living in – this nightmarish world where you have to focus on every nuance and accent on the part of central bankers and how they are going to control the exchange rate – is having a huge impact on business profitability. It obviously has disadvantaged the U.S. producers of lumber and greatly advantaged Canadian producers of lumber. This development is totally independent from everything else.”

So this season too shall pass; although unlikely before October.

“No matter who is the next president, the incoming administration will have to show it will be tougher on enforcement. And it will be completely disorganized and unfocused for months into 2017. The U.S. Lumber Coalition will have an unimpeded run down the field until the countervailing duties rates and AD margins are announced, and maybe thereafter. The pressure to negotiate and compromise is entirely on Canada. The Coalition benefits from any delays.” – Peter Clark, iPolitics.ca (15 May 2016)

3 thoughts on “To Everything a Season

  1. The negotiations might go better if we acknowledged that Canadian forest tenure and to a lesser extent restrictions on log exports give the forest industry an advantage in the form of security of supply. While not a direct subsidy, the large evergreen forest licences and management agreements represent a public policy that supports existing industry and excludes new entrants to the milling sector.

    There was a time when these policies served provincial and national objectives, but now they mainly benefit the existing industry and annoy the Americans.

    Industry has undue influence over stumpage policies as well, although this is less of an irritant than it once was.

    We need more competitive award of timber cutting rights or the lumber wars will never end.
    QR

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