Tuesday, September 05, 2006

Softwood sellout slams U.S. market shut for value-added manufacturer

We’ve heard lots of talk about how the softwood lumber “agreement” the Harper Conservatives “negotiated” with the U.S. is a sellout, and it is. We’ve heard how the big forest companies have been bullied into surrendering over $1 billion in illegally collected tariffs in extortion to their U.S. bullies, with a good portion of it going into a fund directly controlled in part by the Bush White House, and that’s a travesty. But what we haven’t heard much about is it’s impact on our forest dependant communities, and the small forestry related businesses across Canada. That’s an even sadder story.

The background

Back in March I blogged about the story of Woodland Flooring, an 11-person floor manufacturer in Comox, B.C. Using wood from independent lots that aren’t impacted by stumpage fees, as well as beetle-kill sales and windfall reclamation, owner Steve Roscoe manufacturers wide plank wood floors. Theirs is exactly the kind of business we need to be encouraging in Canada: community owned, environmentally minded, creating jobs in Canada by adding value to our natural resources.

After years of work and investment Roscoe had penetrated the U.S. market, with exports accounting for 30 per cent of his business. A real success story. But then along came Emerson, Harper, and the U.S. government. As I blogged, back in March the Bush White House decided to extend its illegal anti-dumping and countervailing to items that had not previously been covered, and Woodland’s wide plank wood flooring business was suddenly slapped with a duty.

Even though, since their wood comes from independent lots not impacted by the disputed stumpage fees, they shouldn’t have. And to make it doubly worse, the duty was calculated not on the value of the wood they use, but on the value of the product AFTER its processed and manufactured into flooring for sale.

Overnight, their product became 25 per cent more expensive to 30 per cent of their customer base. And the Conservative government elected on a platform of standing up for Canadians? They wouldn’t return his phone calls. I bet Emerson returns Canfor's calls pretty quick.


But now there’s a “deal” in place, so surely, after this period of discomfort, there’s light at the end of the tunnel for Woodland Flooring, right? Wrong. Under the terms of the Harper softwood sellout, the U.S. market is now firmly slammed shut to Roscoe. Here’s what he told the Comox Valley Record recently:

For Steve Roscoe, owner/manager of Comox’s Woodland Flooring Co., it still leaves too much unknown for them to be able to maintain their American business connections.

“We’re a casualty of war here in the softwood lumber dispute,” said Roscoe — whose value-added softwood flooring product is subject to tariffs despite the source of his wood being private lots not qualified for the subsidizing that American lumber producers call unfair. Tariffs for Woodland’s products are also charged on the finished item, not on the raw timber alone that they start off with.

For Roscoe, the biggest problem with the new deal is the use of a quota system — meaning that the export charges (now to be collected by the Canadian government) will largely depend on how much softwood is sent south during a certain time period.

There’s no way of knowing how much duty they will pay until it’s already sent, he said, which means there’s no way to charge for it.

“We don’t know — we can’t tell our customers how much. It could be small, it could be high. It could be triple if the majors (producers) are gluttons,” said Roscoe.

It’s come to a simple solution for them, he added. After working hard advocating for his business — even making contacts with the U.S. Consulate office in Vancouver, whose representatives tried to help — Woodland Flooring has officially had to stop shipping to the States.

“The door’s firmly slammed in our face right now,” he said.

Before Woodland was subject to the 21.24 per cent tariffs, around 30 per cent of his business was for American customers. That’s since dropped to less than 10, he said — and will effectively be zero now that Roscoe anticipates this deal to go through.

For Roscoe though, this agreement is a frustrating example of the country’s politicians not sticking up for their own people.

“We’ve made huge concessions and now we have Washington making policy for B.C. forestry — that’s pretty sad.”

So, while Harper had to bully the forest giants into submission at least they’ll be able to do business with the U.S. again. Well, at least until the protectionist American lumber lobby gets a burr in its saddle again, having modernized its plants with our money. But while they’re getting screwed, it’s the little guys that the Conservatives are supposed to be all about fighting for that are getting doubly screwed.

We’re supposed to be encouraging our small businesses to become exporters, but I’ve talked with Roscoe and he says he's done with foreign markets. As he put it, he doesn’t trust our government enough anymore to risk his business on the politicians. He’s been lucky that the loss of the American market has coincided with a building boom in B.C., so he hasn’t had to lay off any employees. From now on, Woodland will be focusing on the Canadian market. They’re done with “free trade.”

“The fact is, we have thrown away 5 years of money , time and energy marketing to our neighbors to the south when we had a rock solid free trade agreement,” said Roscoe in an e-mail. “Both the US and Canada are to blame for our problems. We had no duty applied to our flooring a year ago, it was only implemented at the time of the settlement! What the HELL is going on here???”

That’s a very good question, and I wish I had a very good answer for him. I know Stephen Harper and David Emerson don’t. Could this agreements defenders explain why the U.S. market should be shut to value-added manufacturers like Woodland Flooring?

Vote it down

This isn’t about picking up votes for a majority, or playing confidence games in the house and trying to look decisive. It’s not about politics. It’s about forest dependant communities in British Columbia, in Ontario and in Quebec. It’s not just about forest giants like Canfor. It’s about small, value-added manufacturers like Woodland Flooring.

I ask every Member of Parliament, and especially Stephen Harper and David Emerson, to look themselves in the mirror and, putting politics aside, ask themselves not just if this is the best deal we can get, but if this is the deal the people of Canada deserve. Can they go into communities like Comox and look the people in the eyes?

he evidence is mounting. Mr. Harper, put this deal where it belongs: in the chipper. Then get back to work getting Canadians a fair and honourable deal. This is a difficult issue. It may mean long, costly court challenges. It may mean a nasty trade war. But no one ever said governing was easy. Nothing worth doing ever is.

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Anonymous said...

excellent, once again, BCer..... but just a start on this, the softhead lumber deal. Hopefully your contacts can add more info .. the real, factual detail on what this deal is all about.
You also hit the nail on the head regarding the next outfall from Harpers Vanity ...
"It could be triple if the majors (producers) are gluttons" ...
expect to learn in the near future that the multi-national US firms do exactly that. Once some of the detail in this "agreement-cum-capitualtion", was revealed the first thing to hit me was US giants with Canadian subsidiaries will make sure and push huge volumes as fast as possible.
Keep up the good work, BCer.

Anonymous said...

I think we'll have to watch out for the Canadian Wheatboard as well.

Lolly said...

Woodland Flooring " say no to rugs" would be very pleased with this blog especially with the Rick Mercer warm up.
It is a serious subject that has an effect on everyone who knows anyone working in the forestry/lumber finishing wood products business.
Thanks for this,Jeff.

Jason Cherniak said...

Well writen. I note, though, that the first use of "softwood sellout" of which I am aware was mine. It may very well be the first time I coined something. Unfortunately, Layton took it first.

Jacques Beau Vert said...

Meh, to be honest, I really believe this is the exact same deal the Liberals would have negotiated. And if they had, you'd be applauding, and most BT's would be saying exactly what you're saying.

I believe it's the same deal either party would get, and so - it's probably the best we're going to get for now, so there we go.

I also think if Harper took your advice and went for a nasty and long trade war, you'd be criticizing him every day.

And, of course, that his supporters would cheer him on - while they would also criticize Martin daily for doing the same. Sometimes I really wonder if this is just a game to all you guys.

Penelope Persons said...

Jason sez: "I really believe this is the exact same deal the Liberals would have negotiated..."

Well, they didn't negotiate it, Jason, so it's a pointless speculation. I do wish you guys could come up with more useful discussion points than that overused conservative mantra that the Bad Guys did it, so it's OK if the Good Guys do it now...

Here's how Paul Martin actually did put it to the Americans last fall:

"Canada has won panel decision after panel decision under NAFTA’s process for the settlement of disputes. Recently, we won an unanimous decision which confirmed these findings – this, in NAFTA’s “Final court of Appeal,” which included a majority of U.S. judges. The problem is, instead of honouring this decision, the United States has decided to ignore it.

"Forgive my sudden departure from the safe language of diplomacy, but this is nonsense. More than that, it’s a breach of faith.

"Countries must live up to their agreements.

"The duties must be refunded. Free trade must be fair trade."

Before the election in January, the Canadian (Liberal) Government had also won from the WTO the right to retaliate if the U.S. did not bring themselves in line with their WTO obligations.

So what has happened since then?

The editorial of the Canadian Centre for Policy Alternatives summed up the situation on August 25th of this year.

Apart from a small group of large continentally integrated companies, Canadian lumber producers had spent hundreds of millions of dollars on litigation and finally thought they could see light at the end of the legal tunnel.

However, the Canadian government, now led by Junior Bush's buddy, Steve, pulled the plug just as they were on the cusp of winning the legal war.

His government has "kneecapped them into submission: offering cash advances only for those who sign on, and ominous threats to the holdouts -- no cash advances, no cooperation, no support."

This latter information was news to me. But check out the rest of the article for other possible negative effects!

This is what the present government has done, all on its own. I'm afraid you can't give the credit to the Liberals on this one....

Jacques Beau Vert said...

I wasn't giving any credit to the Liberals - I said it was the same deal the Liberals would have gotten. And it pretty much is.

I'm not a CPC member, I don't have a party.

Your ridicule of speculation is false. When it comes to deciding where to vote, the only real tool one has is speculating what the other parties would have or might have done. Speculation is important if you're not a partisan and are looking to make a decision. If you're not a brainless parrot for a party, speculation is all you have when deciding where to park your vote.

Anonymous said...

So I can speculate that Jason Bo would be a card-carrying Tory had they revolutionized the idea of making Canada the 'Funnest State in the Union'?
They signed no deal. Emerson has always been the one pushing to sign a deal. Chretien and then Martin have been provided numerous quotes and acts of backing the Canadian lumber industry in the legal battle to reclaim fair and free trade.
Jason Bo must actually be Warren K or someother insider to know the exact details of the supposed 'deal'. Because if he was just listening to the Tory/NDP sources, he'd also believe the Billion Dollar Gun Registry overruns (check with Sheila Fraser), the Grumant Grewal tapes and a hundred other exaggeration/mistruths they've spun over the years as our 'faithful opposition'.
To receive his 'Done Deal' with GWB, Harpor told the Canadian companies that those who refused to accept this offer would receive NO support in their fight for a better deal.
That is not acceptable. Period. Unless of course your main interest is protecting the holdings of American subsidiaries.

Eric said...

I agree with Jason Bo on this one. And I read somewhere that the Liberals were willing to accept less than the Tories on this issue.

Quite frankly, there was no 'light at the end of the tunnel' with regards to litigation, it would just go on and on and on... until eventually Canadian industries stopped doing business in the US anyways. The US Senate was not willing to accept the dozens of legal fights we won. Ever.

Oh and Penny on those 'retaliations' what do you propose we do? Stop buying US CDs? Stop selling our cars to them? Anything in particular you can think that the US desperately needs from us?

I know, we can cut off our noses to spite our face!

From a non-partisan, lets face it. We're screwed when it comes to dealing with the US on trade. Hell, we can't even get them to stop subsidizing their corn farmers excessively either.

Oh, and I doubt you all would be complaining so loudly if the Liberals got this deal... partisan political types are always that way...