Sunday, September 30, 2007

Softwood Sell Out

Say it ain't so...

In its rush to smooth relations with the U.S. government, Canada's newly elected Conservative government sold out the country's forestry industry when it signed the softwood-lumber agreement, even though legal victory in the long-festering dispute was only months away, a leading softwood lawyer contends in a blistering new commentary.

"The [Canadian] government didn't care about lumber," said Elliot Feldman, a Washington, D.C., lawyer who represented Ontario's forest industries before the softwood agreement was made last April. "The government cared about its foreign-policy agenda with the United States and wanted to clear this out of the way. That's all that mattered."

In his paper, to be published in a coming issue of the Journal of International Trade Law and Regulation, he details how Canada abandoned a round of litigation whose "end was more than in sight. It was imminent."

Had Canada stuck with the various cases underway, it would have seen, at worst, all but 2.11% of the U.S. duty stricken by August, 2006, and the already-collected duties -- a total of about US$5.5-billion, including interest -- returned by November, 2006, he argued.

Instead, he said, the Canadian government agreed to allow the U.S. industry to hold on to $1-billion of the duties -- $4.4-billion was repatriated -- and create a regime in which Canadian lumber exporters now face a punishing export tax and quotas that have further crippled profits already hamstrung by 15-year-low lumber prices and the soaring loonie.

And that one billion allegedly went into Republican election coffers via the White House.

The bribe failed and the U.S. government is again taking Canada to the international court of arbitration over the new agreement. Using that one billion to pay for it.

One of the provinces named in the suit is Alberta, Harpers home base. And in fact Alberta producers have not benefited from the softwood deal. The irony would be delicious if it wasn't pathetic.

Beaten down by poor markets, low prices, dollar parity, continuing disputes with the U.S. over softwood lumber and the mountain pine beetle, Morton said the forestry sector is in "the perfect storm" of economic woe.
How bad is the softwood deal for the rest of Canada's producers? It too is part of a perfect storm.

One of Canada's biggest lumber exporters, Tembec Inc. (TSX: TBC), has temporarily pulled all its lumber from sale in North America because of falling prices and the surging Canadian dollar. In addition, Canadian lumber faces an export tax when it crosses the border into the United States, a measure imposed a year ago by the Canadian government to settle a longstanding softwood lumber dispute with the United States.

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