Canada-US Softwood Lumber Dispute

Transcription

1 Canada-US Softwood Lumber Dispute September 26, 2017 UBCM Convention Jason Fisher Associate Deputy Minister, Forest Sector Ministry of Forests, Lands, Natural Resource Operations & Rural Development Susan Yurkovich President and CEO, BC Council of Forest Industries President, BC Lumber Trade Council WORKSHOP OVERVIEW BC Lumber Trade Council Forestry in B.C. Softwood Lumber Dispute History Market Context Province of B.C. Litigation Negotiations Government actions 1

2 FORESTRY IS FOUNDATIONAL TO THE BC ECONOMY 140,000 direct and indirect jobs 140 BC communities depend on forestry 1 in 4 manufacturing jobs (28%) $12.9 billion to the provincial GDP $1.4 billion invested annually FOREST PRODUCTS ARE 1/3 OF B.C. S EXPORTS 2

3 B.C. SHIPS OUR FOREST PRODUCTS TO MORE THAN 100 COUNTRIES B.C. IS THE LARGEST PRODUCER OF SOFTWOOD LUMBER IN CANADA 16,000, Softwood Lumber Production (MFBM) 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 - BC AB ON PQ Other 3

4 WORKING HARD TO DIVERSIFY B.C. S MARKETS China + Japan s share of B.C. S softwood exports 11% % ,000,000 BC Softwood Lumber Exports (MFBM) 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000, US China Japan South Korea EU India Other 4

5 WORKING HARD TO DIVERSIFY B.C. S MARKETS US Share of softwood exports 84% % ,000,000 BC Softwood Lumber Exports (MFBM) 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000, US China Japan South Korea EU India Other MAINTAINING ACCESS TO THE U.S. IS CRITICALLY IMPORTANT 5

6 SOFTWOOD LUMBER DISPUTE: A long history Four Countervailing Duties investigations Lumber I 1982 (8 months) Lumber II 1986 (8 months) Lumber III 1991 (35 months) Lumber IV 2001 (67 months) Lumber V 2017 Three Managed Trade Deals 1986 Memorandum of Understanding (5 years) 1996 Softwood Lumber Agreement 1 (5 years) 2006 Softwood Lumber Agreement 2 (9 years) Three Periods of Free Trade Jun 1983 Apr 1986 (34 months) Sep 1994 Mar 1996 (19 months) Nov 2015 April 2017 (18 months) In last 30 years, we have had only 37 months of free trade 6

7 2006 SOFTWOOD LUMBER AGREEMENT 7 year deal with 2 year extension Based on Canadian market share of 34% Two options: export tax or quota with lower tax rate; B.C. chose export tax Expired October 2015 One year standstill ended October 2016 POST 2006 SLA Efforts to extend 2006 agreement not successful US election results in change of government US lumber lobby filed petition November 25, 2016 Preliminary CVD on April 24, 2017 Preliminary anti-dumping June 26,

8 How has the market responded? LUMBER MARKETS $625 $575 $525 Random Lengths Framing Lumber Composite Price (C$/mbf) Random Lengths Framing Lumber Composite Price (C$/mbf) Expiration of 2006 SLA Market Begins to Price in Duties $475 $425 $375 $325 $275 $225 Jan- 11 Apr- 11 Jul- 11 Oct- 11 Jan- 12 Apr- 12 Jul- 12 Oct- 12 Jan- 13 Apr- 13 Jul- 13 Oct- 13 Jan- 14 Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15 Jul- 15 Oct- 15 Jan- 16 Apr- 16 Jul- 16 Oct- 16 Jan- 17 Apr- 17 8

9 U.S. Homebuyers Pay the Price of Duties U.S. CONSUMPTION IS GROWING Billion Board Feet US Domestic Consumption US Domestic Production Actual < > Forecast Potential Supply Gap of Approx. 6 Billion Board Feet by Would require the equivalent of 30+ new mills in the US in under 3 years rd Country Imports Canadian Imports Source (historical data and forecast US domestic consumption): Forest Economic Advisors LLC 18 9

10 Source (historical data and forecast US domestic consumption): Forest Economic Advisors LLC 20 10

11 US HOUSING, LUMBER DEMAND IS INCREASING REBUILDING WILL FURTHER DRIVE DEMAND 11

12 B.C. INDUSTRY BCLTC fully supports Canada s efforts to reach a new agreement with the U.S. Any new agreement must work for B.C. Working closely with Province B.C. has a heavy legal burden 3 of the 4 mandatory respondents in B.C. Supporting governments with injury case We have a lot at stake LITIGATION NEGOTIATIONS GOVERNMENT ACTIONS Jason Fisher Associate Deputy Minister, Forest Operations Ministry of Forests, Lands, Natural Resource Operations & Rural Development 12

13 THREE CASES UNDERWAY Injury U.S. industry claims Canada either materially injuring or threat of injury Countervailing Duty (CVD) Allegations of subsidy Anti-dumping Duty (AD) Allegations of dumping, i.e. selling below costs LUMBER V TIMELINE Nov 25, 2016 U.S. lumber lobby filed petition 13

14 ALLEGATIONS OF US INDUSTRY Canadian timber is subsidized Canadian imports distort US market When markets are bad, imports push out domestic production; when demand increases, Canada takes the lion s share of the increase US industry is unable to make enough money to invest over the business cycle Claim that Canadian imports are injuring US domestic industry LUMBER V TIMELINE Nov 25, 2016 April 24, 2017 U.S. lumber lobby filed petition Preliminary countervailing duty announced 19.5% to 24.12% for B.C. companies 90 days retroactive duties for most 14

15 LUMBER V TIMELINE Nov 25, 2016 April 24, 2017 June 26, 2017 U.S. lumber lobby filed petition Preliminary countervailing duty announced 19.5% to 24.12% for B.C. companies 90 days retroactive duties for most Preliminary anti-dumping duty announced 4.59% to 7.72% for BC companies Combined duty rates ranging from 26.75% to 30.88% for BC producers DUTY RATES Company CVD AD Total West Fraser 24.12% 6.76% 30.88% Canfor 20.26% 7.72% 27.53% Tolko 19.50% 7.53% 27.03% Resolute 12.82% 4.59% 17.41% J.D. Irving (New Brunswick) 3.02% 6.87% 9.89% All others 19.88% 6.87% 26.75% 15

16 U.S. WILL RULE ON INJURY THIS FALL Decision by November 14 If affirmative, final duty rates will come into force and Canada will begin appeals If negative, no duties are applied We have a compelling case US CLAIMS OF INJURY UNFOUNDED In the US, the data shows that Demand for lumber is up Lumber production is up Operating income is up Employment is up Profitability is up 16

17 US LUMBER INDUSTRY IS STRONG AND IMPROVING 215 but this is lumber 17

18 LITIGATION APPROXIMATE TIMELINES ADMINISTRATIVE REVIEWS AND APPEALS Annual administrative reviews by Department of Commerce to set duty rates Appeal options: NAFTA Chapter 19 World Trade Organization (WTO) US Court of International Trade 18

19 NEGOTIATIONS NEGOTIATIONS BC and Canadian governments have made softwood a priority David Emerson BC s trade envoy Premier Horgan met with key players in Washington, July 27/8 Ambassador David MacNaughton s meeting with Canada s trade envoys, Aug 24 Secretary Ross extends final duty rate determination to Nov 14 to allow more time for negotiation 19

20 KEY ISSUES FOR B.C. Canadian share of US market B.C. s share of Canadian allocation Ensuring that US doesn t limit Canadian imports only to create opportunities for third countries like Russia WHAT ABOUT NAFTA? Parallel negotiation to softwood Chapter 19 dispute resolution mechanism is key Aggressive timelines set, but complicated negotiation may extend timeframe 20

21 SUPPORT FOR WORKERS, COMMUNITIES Federal-provincial task force formed, June 2017 $867 million in funding announced Federal loans & loan guarantees Expanded overseas marketing to diversify markets Extension of work-sharing agreements to reduce layoffs Supports for affected workers to upgrade skills/transition B.C. ACTIONS Working closely with industry Continued focus on market diversification Investing in forest lands Wildfire fighting, salvage and recovery 21

22 MORE INFORMATION Regular updates are online at: bclumbertrade.com 22