Thursday, July 06, 2006

No way out of the bad softwood deal

VICTORIA - The bad softwood deal is turning into a giant mess for the forest industry, Stephen Harper' and the Campbell government..
There will be lots of political fallout.
But the practical consequences are damaging for hundreds of communities. Canadian forest companies were looking for two things from a softwood deal - certainty, so they could make plans for the future, and a chance to compete in the U.S. market.
The agreement gives them neither. The deal can be killed by either side within three years; no company can confidently invest in Canadian forestry on that basis. And the barriers to the U.S. market included in the agreement are potentially greater than the duties now being imposed.
And for this, the industry is expected to drop all its legal action against the U.S. and hand over $1 billion in duties collected over the last four years. (Illegally, according to the B.C. and federal governments.)
If the deal goes through - and that's almost certain - companies will get back $4 billion in duties collected since 2002. Good news for the shareholders, but perhaps not for B.C. communities. Companies will be making decisions on how to use that money. Investment in B.C. will be less likely because of this softwood deal.
That's particularly bad news for the coastal industry, which needs investment in more efficient mills. The risk is that companies will take their share of the $4 billion, look at the prospects here and walk away.
How did this happen? It looks like the U.S. side saw that Canada was desperate to do a deal and took advantage. It doesn't matter why they judged Canada desperate - whether Ottawa was seen as keen to set up a good Harper-Bush meeting, anxious for a success for controversial Trade Minister David Emerson or hoping that settling softwood would win U.S. co-operation on some other file.
The U.S. guessed right and Canada is trapped in a bad deal.
Theoretically, forest companies can sink the agreement by refusing to give up their lawsuits against the U.S. over the current duties. But then what? The Harper government will be unlikely to champion the case for a better deal, and in any case it now lacks bargaining power now. Without strong government support for continued challenges under NAFTA and through the World Trade Organization industry has dew options.
Meanwhile the B.C. government is left looking much like an ineffectual junior partner. Premier Gordon Campbell says now says B.C. won't support the agreement unless the terms are changed.
He's a little late. Forest Minister Rich Coleman has been praising the agreement. B.C. played a big role in reaching the agreement and it had "huge" support from the industry, Coleman told the legislature in May. He dismissed questions from NDP forest critic Bob Simpson that echo the concerns being raised by industry today.
Somehow, the B.C. government lost touch with industry and got in over its head. Harper's claim that he had B.C.'s support seems reasonable based on Coleman's raves.
(Emerson says the deal hasn't changed significantly since a draft was negotiated in April.)
Federally, Harper's softwood stumbles have handed the opposition a great election issue. The Liberals, Bloc Quebecois and NDP all oppose the deal. Harper has said the vote on it, expected this fall, will be a confidence motion. If the Conservatives lose, there would be an election.
It's a big opportunity for the opposition. A softwood deal that caves in to the Americans, signed, over the objections of provinces and industry, in a rush before a birthday visit to President George Bush.
But don't expect the government to fall. The Liberals' leadership vote will be Dec. 3. They'll want to wait until that's settled.
Mostly, this is embarrassing. The U.S. managed to negotiate a deal that's won wide acceptance.
Ottawa - encouraged by the B.C. government - has signed a bad deal, one already been rejected by provinces and industry.
Footnote: Liberal leadership candidate Michael Ignatieff will likely be an incidental casualty of the softwood deal. Ignatieff's return to Canada after decades in the U.S. and some of his written comments have already raised questions about whether he's too pro-American for some Liberal delegates. If the Liberals party plan a campaign attacking Harper's ties to Bush, Ignatieff is not their man.


Anonymous said...

Seems like we like getting shafted.
I recall Moe Sihota and Norman Spector talking on TV a couple of years ago on the subject. At the time they basically said the BC team was out to lunch.And the Fed was no better.
I guess that would be DeJong. when a fairly far right guy calls them poor negotiators and agrees with a Lefty like Moe you got to wonder.

Steve Harper( as George has taken to calling him)can and will do what he wants until the Liberals get a leader as you said Paul, because of course they are afraid to call an election. This leaves the coastal and Island workers on pretty shaky grounds, and of course the companies one billion dollars poorer. Next federal election might get interesting Ain't politics grand!!!

Gazetteer said...

Paul, here's something I've beeen wondering about for a while now.

Let's say prices fall and the American market shutout occurs.....where is all that beetle wood going to go?....will raw log exports go through the roof?...and if so, does that mean the loss of even more mill/processing jobs?


HearHere said...

Does the deal allow the United States to dump cheap lumber into Canada and undercut our local producers?

How would we like that?

That is what the United States producers are worried Canada will do with the glut of beetle damaged product.

If the shoe was on the other foot what would you suggest?

deaner said...

"If the shoe was on the other foot what would you suggest?"

Like they do with cheap mass-media products, cheap software, cheap computer components, cheap wine, cheap aircraft, cheap textiles, or cheap agricultural products?

I'd say - "hey, that's how a market works; the low-cost producer sells a bunch of stuff."

Anonymous said...

I agree, it's free trade or not. Free trade benefits the buyers, regardless of where it is produced. A buyers- market type of capitalism produces cheap products and small profits for businesses.

There's no healthier market than a competitive one. It's the basis of a well functioning capitalist society.

Anonymous said...

It will be interesting to watch Forest Minister Rich Coleman do the spin dance.

Coleman sees himself as 'premier' material - perhaps he forgot that leaders lead.

CuriosityKilledTheCat said...

The alternative to the craven New Tory party's capitulation to Bush on the softwood issue is very simple.

The NDP, Bloc and Liberals have the majority votes in Parliament. They could agree to pass legislation which would direct the government to table the following revised proposal with the Bush government:

1. Term - The term should be ten years, with no early termination possible unless both sides agree, and the Canadian government is to agree only if a majority of MPs through a free vote (on a non-party basis) in Parliament for an earlier renewal.

2. Automatic renewals - Renewal period should be for automatic five year periods, unless notice of termination is given by either side 12 months before the end of a term (and the Government of Canada would need a majority vote of MPs to give such notice, through a free non-party vote).

3. Payment - Full payment of the $5 billion (yes, that is right, the amount owed under the applicable laws), plus interest on overdue amounts at 5% p.a..

4. No litigation - American lumber companies to agree not to litigate the settlement.

5. Reaffirmation of NAFTA - American government to reaffirm its commitment to the NAFTA treaty.

6. Failure of US to agree -

a. Should the US government not agree to this proposal, then Canada to continue with litigation.

b. Canadian government to fund such litigation by Canadian companies.

c. If the USA takes steps to penalize lumber imports from Canada due to failure to reach agreement as above, the Canadian government is to appoint a Royal Commission with a mandate to review what steps should be taken by the Canadian government to uphold the NAFTA, including whether to terminate the NAFTA (what is the point of an agreement with a government which does not honour its commitments?).

d. Royal Commission to report by February 28 2007.

e. Canadian government to review the findings of the Royal Commission and take such steps as the majority of MPs agree to through a free non-party vote.

f. Canadian government would use taxpayers money to assist Canadian companies who needed assistance due to the non-payment by the Americans of the debt they are refusing to pay.

So, you see: the answer is really simple. All you need is a bit of backbone as the Prime Minister of a country which entered into a treaty with another government in full expectation that the other government would honour its obligations, and not welsh when it suited it.

Our MPs would be in a position where they could reflect the views of their various constituents, as the later votes would be a non-party vote on the issues set out above.

Who will take the lead to stand up for Canada?

Anonymous said...

It seems each time one reads anything on the subject or listens to the news, the deal gets less support. Emerson keeps saying it's a done deal and won't be reopened, while senior forest companies in quebec and analyists keep saying it is a give away. So what happens next? I guess the Liberals better get together with the Bloc and the NDP and blow Steve out of the water, failing that the companies could keep theri court dates.

Anonymous said...

Keep the court dates.
Elect someone competent to negotiate on the world stage.
Let Emerson defend the new deal, when he not so long ago defended the old deal.
Someone said this is not a political issue. It is an economic and trade issue, and we have NAFTA to back us up.
This is an issue which will test the mettle of our Canadian resource companies and business interests.

We may even see the opposition parties get together for once for the good of Canada and in the interests of the people.

In the immortal words of Judy Tenudi: "Hey, it could happen!"

Paul Willcocks said...

Just a quick thanks to all for the thoughtful comments and civil tone.

Anonymous said...

Hey Paul, I just read the Prince George Citizen ( Wednesday)and it seems the local Conservative MP thinks it's a great deal. He is the chair of the forestry caucus but admits he hasn't read the 80 page report. How silly. A MP who is foresquare behind something, is the caucus chair but hasn't read the report. Man on man it's great to have such talent around.

Anonymous said...

Just read V. Palmer's column today. Seems the BC government that was so gung ho for the deal has finally figured out that "Steve" and his side kick Emerson( I crossed the floor for a better deal) have decided there will be no revisions and if so they will blame the companies. I guess that is supposed to show leadership. Even WAC Bennet had sober second thughts now and again.

It took the BC Government spin doctors a few days to find a scapegoat and it's to be the companies. Yesterday we hear that if push comes to shove Harper will have it made into a vote of no confidence and try to stick handle around the Liberals while they have no leader. Would be an interesting vote as all the businesses, in the provinces involved agree they are getting shafted. Ain't politics grand!!!