Softwood lumber deal set to expire

by Phil Ambroziak

Saskatchewan’s forest industry could be in for some hard times depending on what happens after the existing softwood lumber agreement between Canada and the U.S. runs out later this year.

That’s how NorSask Forest Products general manager Dave Neufeld feels as the agreement’s Oct. 16 expiration date approaches.

“It will definitely affect us,” Neufeld remarked. “We’re governed by the softwood lumber agreement and this could have a huge impact on our marketing plans.”

The agreement, which was signed in 2006, dictates the amount of lumber each province is allowed to export to the U.S. when prices are at certain levels. A major portion of the lumber coming from the Meadow Lake area is used in the American housing market.

“As prices decline, export quotas are put in place and border taxes are imposed,” Neufeld continued. “When prices are above a certain threshold, we’re allowed to ship as much as we want. Since March, lumber prices have been declining and we now have to pay more to ship our product south of the border.”

Neufeld said the quota cap varies from month-to-month, but added lumber currently shipped to the U.S. is taxed at a rate of two per cent. That number is expected to rise to three per cent by June as prices drop even further.

“There’s a group in the States called the U.S. Lumber Coalition, which is aimed at making things more competitive and allowing the American lumber industry a greater opportunity and selling its lumber domestically,” Neufeld said. “They’re concerned about Canadians dumping lumber across the border and then selling it in the U.S. at lower prices.”

According to reports, industry analysts have said the chance of seeing the agreement renewed prior to October are slim to none. When it does expire, Neufeld believes there could still be room for future negotiations because the current agreement calls for a one-year standstill period during which Canada and the U.S. will be barred from taking unilateral action.

“Essentially, during that year, we’ll have free trade,” Neufeld said. “There will be no border taxes and no quota caps. Right now, the most likely outcome will see both sides negotiate a new agreement during that year.”

If a new agreement is reached, Neufeld also said Saskatchewan would like to see quota caps increased to ensure all the major lumber producers in the province have a chance to benefit.

“The amount of lumber we sell to the U.S. is in the 60 per cent range,” he said. “If a new agreement is reached that does not allow us to continue to export that amount, we’ll have to find more Canadian customers to maintain the level of operation we’ve become accustomed to. Having that U.S. market is very important to Saskatchewan.”

Also optimistic a new agreement will be reached is Meadow Lake MLA Jeremy Harrison. Although the agreement is a federal issue, the provincial politician said, when it comes to trade, stability and security are extremely important.

“The industry has benefited from this agreement in the past and hopefully it will again in the future,” Harrison said.

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