Lumber Tariffs

A few years ago, the following would have been big news in Southern Oregon. It still is, but to our bustling home building industry, not our timber industry, which is on life support.

The World Trade Organization sided with Canada Monday in a dispute with the United States over lumber duties.

A WTO dispute panel ruled that some U.S. duties on Canadian lumber are illegal under international rules. Washington has the right to appeal.

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The U.S. commission ruled in May 2002 that imports of lumber from Canada were subsidized and threatened to damage the domestic lumber industry by depressing prices. It also said there was an "imminent" threat of a big increase in the level of imports.

Based on that finding, the Department of Commerce imposed extra duties on Canadian lumber imports.

Canada took its case to the WTO in May 2003. It claimed that the USITC's findings had failed to take into account all the causes of reduced prices and that the decision was not based on an "objective examination" of the evidence, as required under WTO rules.

Monday's ruling is the latest in a series of disputes over Canadian lumber being heard by the WTO and the North American Free Trade Agreement.

While most U.S. timber is harvested from private land at market prices, in Canada the government owns 90 percent of timberlands and charges fees - called stumpage - for logging. The fee is based on the cost of maintaining and restoring the forest.

U.S. timber companies contend that Canada's stumpage fees are artificially low and amount to subsidies that allow Canadian mills to sell wood below market value.

What this means is that it's cheaper for Canada to deforest itself to satisfy our insatiable demand for lumber products. In a few years (or moments) when environmentalists decry the ravaging of Canadian boreal forests, remember that Canada fought for the right to damage its environment in exchange for securing dangerous, low-paying lumberjack and mill jobs. But, I'm sure most environmental activists won't blame Canada.

Meanwhile, the reaction here in timber country was muted.

A local wood products spokesman says the World Trade Organization ruling on Canadian lumber tariffs is unfortunate and will further hurt domestic manufacturers, but it won’t have much effect in Southern Oregon because the commodity lumber industry here is pretty much gone.

Canadian manufacturers have a distinct advantage with long-term supply from Crown lands and can acquire timber at much lower prices than manufacturers here, said Dave Hill of Southern Oregon Timber Industries Association in Medford.

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Bret Moore of the Homebuilders Association of Jackson County said the tariff had tripled the price of OSB (oriented strand board) and plywood in just the past year and a half by jacking up the cost of raw materials and crimping supply. "It’s run our costs sky-high," he said, adding that the tariff was "political" and happened because the timber industry demanded it.

Although of different views on the striking down of the tariff, the two industry leaders were unified on the cause of the problem — U.S. timber policy.

"The problem is that 80 percent of federal timber lands are off-limits to active timber management and the growth rate so badly exceeds the removal rate by harvest and natural means," said Hill. "If there were an active thinning program, we would produce more product, resulting in a healthier forest and improved fisheries and habitat."

Moore concurred, saying "The timber policy is what’s hurting the U.S. timber industry. We just don’t produce enough. We put duties on Canadian imports because we don’t produce enough. Just in the Rogue River and Siskiyou National Forests, we hardly cut any timber like we used to. People want homes, and we have to get it from somewhere else."

I do have a couple quibbles with what our local folks said. OSB prices were impacted not only by the tariffs but by the demand in post-war Iraq. Speculators anticipating that demand caused prices to rise further than they should have, and indeed prices have sagged some as the froth has settled.

When it comes to active timber management, the comment above oversimplifies the situation. Our history of aggressively fighting forest fires has indeed had a negative impact on how severe many of our fires are today. Sometimes aggrieving that situation is how environmental restrictions have changed how we manage forests.

Many forests, including parts of national forests, were replanted (with little diversity) at densities optimized to rapidly regrow forests for their next harvest. Halting the logging of those forests (the harvesting of those fields) lets them lie fallow. There have been some very good reasons for halting some of that harvesting, like to prevent the silting of salmon streams, to preserve habitat for endangered species, etc.

However, trees are a perennial crop that tries to keep on growing past harvest size. Not harvesting results in very dense forests full of trees fighting each other for the basics, like enough water. Add to that our history of aggressive firefighting, and we have a number of large, thirsty forests (primarily in the West) just waiting for a dry spell and the right spark to burn. Letting replanted forests burn naturally is oxymoronic since such forests aren't natural. Yet, some of these replanted areas have been repopulated by endangered species we want to preserve...obviously there are no simple answers.

Unless we're going to outsource all of our lumbering needs, we need to treat some of our nation's forests as sustainable resources, like corporations do with some of their private forestlands. The vast majority of government-owned forestlands are already identified for preservation, yet there are endless efforts to further restrict any type of timber cutting (some Oregon examples here) on the remaining "matrix" lands.

Since we're certainly doing little to cut our use of wood, maybe the answer is to continue deforesting willing places like Canada. Canada is much better at regrowing its forests than are nations like Indonesia and Brazil. Their regrowth forests will consume more carbon dioxide than do the slower-growing mature forests they'll cut, helping to pull more of that greenhouse gas from the atmosphere (see the Feb '04 National Geographic article on the carbon cycle, p.88...blogged about this in the update at the end of this post).

I'm sure Canada will figure out some way to justify their increased timber cutting and resulting environmental damage, prominently including blaming our rampant consumption. There would be some truth to that claim, but if they cut us off, we'd just find another supplier. If we're going to outsource something that would damage our environment, at least we're outsourcing to a country which will take environmental restoration seriously.

So, is outsourcing timber jobs is a good thing?