January 24, 2011 8:20 AM, EST

U.S. Seeks Arbitration, Says Canada Unfairly Subsidizing Lumber Industry

By Sean McNally, Senior Reporter

This story appears in the Jan. 24 print edition of Transport Topics. Click here to subscribe today.

The United States resumed the long-running lumber trade dispute, accusing Canada last week of unfairly subsidizing its softwood lumber industry and requesting formal arbitration.

Canada is “providing an additional benefit to exporters of softwood lumber by selling timber harvested from public lands for prices below those provided under the timber pricing system” in violation of the two countries’ 2006 agreement on softwood lumber, U.S. Trade Representative Ron Kirk stated Jan. 18.

The dispute is the third over the trade of lumber since the 2006 agreement was enacted. In the first case, Canada was ordered to pay more than $68 million in export duties, and the second is still being litigated.

Imports of wood from Canada by truck dropped to $2.41 billion in 2009 from about $5.91 billion in 2005, according to the U.S. Bureau of Transportation Statistics. Over the same period, exports of wood and articles of wood to Canada by truck have fallen to about $1.45 billion in 2009 from roughly $1.75 billion in 2005.

According to the USTR, the current violation stems from the practice of selling timber harvested from public land in the province of British Columbia for less than market value.

“This type of benefit harms U.S. workers and firms in the lumber industry, and is inconsistent with Canada’s obligations under the 2006 Softwood Lumber Agreement,” Kirk said. “When we believe our trading partners are not living up to their obligations, we will not hesitate to enforce our rights under our trade agreements.”

Peter Van Loan, Canada’s minister of international trade, said that U.S. complaint “deals with a pricing system that is no longer in place,” and blamed the increase in discount sales of timber on insect infestations.

“The increased proportion of low-value longs in B.C.’s timber harvest is due to the unprecedented infestation of the mountain pine beetle,” Van Loan said. “I am disappointed that the United States has rejected cooperative dialogue on this matter in favor of formal dispute settlement.”

Pat Bell, the British Columbia minister of forests, mines and lands, said the province “has always honored and continues to honor its commitments under the softwood lumber agreement. I am confident the arbitrators will find the same.”

“I believe U.S. lumber producers would be better off if they continued to work with Canadian producers to grow the market for wood across North America, instead of putting their resources into costly, groundless litigation,” he said.

“The B.C. government’s ex-panded and unfair subsidy to B.C. Interior mills has had devastating effects on the rest of the industry outside of B.C. — both in the United States and Canada,” said Steve Swanson, chairman of the Coalition for Fair Lumber Im-ports and president of the Swanson Group, an Oregon-based lumber company.

Bob Russell, vice president of government affairs for the Oregon Trucking Association, said the trade dispute may have an effect on trucking in the region, but that the overall market for lumber is a more pressing issue for carriers.

“The economy has been just been devastated, and because the industry is housing-based, they’re not hauling any wood. Many of our log-truck members are reporting being down 60% and they’re desperate,” he said. “My members haven’t talked to me about this particular issue, but until the housing market really starts to rebound in a big way, I’m not sure what difference it makes.”

In a report released Jan. 20, the U.S. Commerce Department re-ported that new housing starts fell 4.3% in December to an annual rate of 529,000 — their lowest level since October 2009.