Tuesday, August 23, 2005

Ottawa too slow to raise pressure on softwood

VICTORIA - B.C.'s forest industry has a right to be steamed at the way our governments have handled the softwood dispute.
The federal government, and even the province, haven't done enough for the industry and the communities that depend on it. And both have been slow to acknowledge the need to pressure the U.S.
There's no easy solutions. But it's been clear for a year that Canada's approach to the dispute - supported by the B.C. government - has not been working. Only now has federal Trade Minister Jim Peterson said Ottawa might change tactics and retaliate. Prime Minister Paul Martin may even call George Bush to talk about the issue.
Ottawa was reacting to the U.S. announcement that it will simply ignore what was supposed to be the definitive NAFTA ruling on the dispute. The NAFTA panel dismissed the Americans' case, and said the 21-per-cent duty should be lifted, and the $5 billion already collected returned to Canadian companies.
Get lost, the U.S. government said. We don't like the decision, so we're going to ignore it. What are you going to about it?
That's been the question for some time now. Resolving the dispute through legal appeals under NAFTA or the World Trade Organization has looked increasingly unlikely. The Americans are willing to ignore the judgments.
That leaves a negotiated settlement.
But a deal reached now would be bad for Canada, which has no bargaining power. For three years the U.S. government has collected the duties with no real response from Canada, politically or economically. Both the B.C. and federal governments rejected trade retaliation. Legal efforts have failed. So have lobbying campaigns, and attempts to involve U.S. consumers, who are paying more for homes because of the duties.
The Americans can leave the duties in place indefinitely without fear. Any deal would be on their terms.
Unless Canada and B.C. are able to increase the pressure on the U.S., politically and economically.
Trade wars are risky and destructive. Canada exports about $300 billion worth of goods and services a year to the U.S. American companies only sell about $200 billion into Canada. An escalating trade battle would be much more damaging here.
And retaliatory tariffs on U.S. imports will cost consumers, who will pay more for the affected goods.
But there's no realistic alternative.
The U.S. government has been tough on softwood because the American lumber producers are effective lobbyists with political muscle.
Canada has to impose duties that encourage other U.S. industries with political clout to demand Washington find a solution. The U.S. wine industry is already struggling; a 20-per-cent duty on exports to Canada would see them pushing for a quick end to the trade dispute. (Though it may also see B.C. wines facing more barriers to U.S. markets in retaliation.)
The federal government has been slow to take any action, and B.C. has been quiescent and equally reluctant to act. Former forests minister Mike de Jong said the government might tell the Liquor Distribution Branch to quit buying California wine, a $60-million gesture. Nothing happened.
Ottawa has also been slow to provide aid for affected workers and communities, or for companies facing both reduced cash flow and the need for capital investment to increase their efficiency.
Now, three years after the dispute began, the Ontario government has succeeded in getting Ottawa's attention where B.C. failed. The federal government is considering an industry aid program, after Ontario announced its own plan and called for a similar federal effort.
The aid program is likely too late for Interior companies, which have already invested to increase their efficiency, though it may help Coastal operators. But it also raises new risks. Provincial incentives in Ontario, and not in B.C., could put pulp mills in that province, for example, first in line for investment.
But aid plans aren't the answer. A more effective push to resolve the dispute holds the best hope for a real solution.
Footnote: Gordon Campbell will get a few minutes to raise the softwood issue when he meets U.S. Vice-President Dick Cheney next month at a Calgary fundraising dinner for the Fraser Institute, a rightish policy centre. (You can sit with the premier for a $10,000 donation to the institute.) Cheney is also touring Alberta's oilsands.


Anonymous said...

The thing is that this behaviour on the part of the US is not unusual in today's world. Expect it to intensify and affect more and more sectors as time goes by and the US' ability to rely on their own resources diminishes.

It's not that hard to predict. Steel, wheat, wood...soon to come oil and gas...but from an entirely different slant. They want more oil and gas, not less, as was the case with all the others. The Kinder-Morgan takeover of Terasen may well turn out to be the early wake-up call.

So, now that we know beyond a doubt that as far as the US is concerned NAFTA is at best a situationally malleable document and at worst, irrelevant to their interests, how do we proceed?

We back down, as we always do.

Canada has become little more than a nation of timorous shop keepers whose first priority is to placate the customer.

And soon, a US Attorney in Washington State will be confiscating land in Canada. Canadian soil will belong to the government of the USA.

Wedges, wedges, wedges...and we will do nothing.

Anonymous said...

The US response to the softwood ruling is as revealing as a candid camera snapshot of the Emperor strolling along with no clothes.

Yet most continue to avert their eyes from uncomfortable reality. I agree with the first poster. We can expect more of such brazenness, not less, as competition intensifies and as competitors learn that cheating does pay.