Stopping the Giveaway of Canada's Forests

Canadian provincial governments have a long-standing policy of subsidizing their lumber mills, to the detriment of the U.S. lumber industry, U.S. landowners and the environment. Recently, a coalition of Canadian lumber companies, some lumber consumers, and others have aimed to change the longstanding U.S. policy of combating those subsidies. Under the veil of protecting consumers, this group aims to terminate the current U.S.- Canada agreement, which contains the damage from Canada’s forestry regime, and ensure that no action is taken to offset the subsidies. With the U.S.-Canada Softwood Lumber Agreement (SLA) due to expire in March of 2001, a spirited debate on Canadian lumber subsidies and the measures taken to counter them is likely in the coming months.

Although it has garnered limited attention in the United States, this dispute is nearly two decades old. In 1986, to counter subsidies, the United States imposed a 15 percent duty on Canadian softwood lumber imports. Subsequently, the U.S. and Canadian governments reached a series of agreements designed to offset these subsidies. The most recent of these is the 1996 SLA.

At the heart of this dispute are different means of charging for the use of forest resources. In the United States, timberlands are held by private landowners and state and federal governments. The right to cut timber from public and private land is sold at auction or through other competitive means. Though there are some restrictions on log exports from public lands in the Pacific Northwest, the United States is the world’s leading exporter of logs and unprocessed timber.

In Canada, the vast bulk of timberlands are owned by Canadian provincial and federal governments. The prices for the right to cut timber from this land -- known as stumpage fees -- are set administratively. These Canadian stumpage rates are set very low - only one-third to one-fourth of the market value of the rights -- in order to subsidize the Canadian lumber industry. To further boost production, Canadian companies are obligated by their government licenses to cut trees even when prices are low.

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