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.