Canada initially balked at the idea of export quotas as part of a new softwood lumber agreement with the United States, but public discussion increasingly points to quotas being part of a potential deal being discussed behind the scenes.
And while quotas would have been a disadvantage to British Columbia’s forest industry previously, some analysts believe they might be more tenable now, considering limits to the province’s timber supplies.
That deal to resolve the dispute, which many thought could grind on for years, might be struck before Canada, the U.S. and Mexico reopen the North American Free Trade Agreement in August.
B.C. Premier John Horgan hinted at that possibility in an op/ed article for Postmedia, which said “it would serve everyone if we made a deal — a fair deal — and quickly, before the softwood issue gets tangled” with NAFTA.
Horgan wrote the op/ed ahead of his Wednesday trip to Washington to press for a deal, suggesting that a 10-year deal is in the works that would give Canadian mills “a fair portion of the U.S. market share,” based on past export performance.
On Tuesday, Horgan was in Ottawa, in part, to confer with Prime Minister Justin Trudeau on the trade file.
The demand for quotas came from the American side, said Susan Yurkovich, president of the B.C. Lumber Trade Council, the organization that represents the interests of B.C. lumber producers, but at this point the industry is willing to listen.
“We don’t love that, but we are interested in reaching an agreement, so we’re happy to consider different approaches that are put forward,” Yurkovich said.
Yurkovich said the previous softwood lumber agreement, which expired in 2015, managed lumber trade in a way that held Canada to about one-third of the U.S. market share, but any new deal would have to recognize that American producers can’t supply their domestic market on their own.
Last winter, the U.S. renewed its argument that Canada subsidizes its forest industry, which touched off a new round in the dispute that now sees Canadian producers paying penalizing duties of up to 30 per cent on its exports south of the border.
And a settlement is particularly important to B.C. which accounts for about half of Canada’s lumber trade with lumber being the province’s biggest single export worth $4.5 billion in 2016.
On Monday, a group of U.S. legislators increased the pressure on talks urging U.S. Secretary of Commerce Wilbur Ross and trade representative Jobert Lighthizer to “negotiate a clean quota agreement,” that would hold Canadian exports “at or below an agreed market share.
“Any long-term agreement must stop the harmful effects of subsidized and unfairly traded Canadian lumber,” reads a letter dated Monday, which was signed by seven top senators on the powerful senate finance committee, and was greeted warmly by the U.S. industry’s lobby group.
Zoltan van Heyningen, spokesman for the U.S. Lumber Coalition, said in a statement that his members particularly appreciated the senators’ push for the “clean quota” system.
“We applaud the senators for speaking up on behalf of the over 350,000 hard-working men and women in the American lumber industry,” van Heynignen wrote.
It was Canada’s resistance to quotas that had stalled talks on a resolution until recently, said Keta Kosman an industry analyst and publisher of the trade journal Madison’s Lumber Reporter, with B.C. one of the strongest voices on that front.
Kosman said some of the figures floated previously on what Canada’s quota should be, some as low as 22 to 25 per cent of the U.S. market share, sounded unworkable since American producers wouldn’t be able to make up for that big of a decline.
However, B.C. might be OK with a quota, considering that its medium-term timber supplies will be reduced in the aftermath of the province’s mountain pine beetle infestation, said Russ Taylor, an analyst and publisher of the trade journal International Wood Markets.
“If U.S. lumber consumption is growing, and our production is flat, we can live with a smaller market share,” Taylor said, especially if a deal can buy 10 years of trade peace.