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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Softwood Redux

Harper said this would never happen again when he forced Canada's Lumber industry to accept his billion dollar bribe to the Americans with his Softwood Lumber Accord.

The U.S. asked an independent panel to resolve a dispute over a softwood lumber accord with Canada, saying the country is ignoring a cap on exports to the U.S. and that Canadian firms are still getting unfair subsidies.

Just like Harpers new formula for Provincial transfer payments were to end the years of bickering over equalization.

Didn't happen.

This is a government that likes to say it doesn't just talk it takes action..... forgetting Newtons Third Law.



SEE:

How The MacDonald Commission Changed Canada

Job Loss It's The Environmentalists Fault

There Is No Free Market

Behind the Eight Ball

US Housing Market Crash

Between a Bloc and A Hard Place

Softwood Republican Slush Fund

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Bad Forest Management And Climate Change

What is worse climate change or climate change and pine beetles? Well according to industry sources the later. But note the highlighted section of this article, the industry itself is to blame for the beetle infestation because of its forestry practices. You don't need a weatherman to know why the forests don't grow.

Industry says climate change already impacting forests

Governments and all industry sectors in Canada must quickly "re-tool" to deal with climate change, says the Forest Products Association of Canada.

Avrim Lazar, the association's president, said the forestry industry is already witnessing a manifestation of climate change -a mountain pine beetle epidemic -destroy massive tracts of valuable forest.

"Canada has been protected by its cold weather forever," said Jim Fyles, scientific director of the Sustainable Forest Management Network and McGill University professor.

But now, in addition to the pine beetle, "there may be all sorts of bugs ... whose populations, always kept low by these cold winters, will increase as the temperatures rise," he said.

The development of useful policies and practices is required, Fyles said. In the forestry sector, for instance, the creation of a forest that is resistant or resilient to pests, should be a prime goal.

In Western Canada, past practices involving forest management and forest fire management have often worked to create "almost pure stands" of one species of tree.

A mixed forest featuring different species and trees of all ages creates "a landscape that is much more difficult for these epidemics to propagate in," Fyles said.

See:

Environment

Environmentali$m

Aspen Mystery

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Lumber Consolidation

Keta K has an interesting article on the consolidation of Abitibi and Bowater, two competitors in the lumber industry in Canada.

Once again confimring what Herr Dr. Marx had to say about the nature of centralization of competing capitals.

That production rests on the supreme rule of capital. The centralization of capital is essential to the existence of capital as an independent power. The destructive influence of that centralization upon the markets of the world does but reveal, in the most gigantic dimensions, the inherent organic laws of political economy now at work in every civilized town. Marx

And the merger of Abitibi and Bowater is only the begining of consolidation in the lumber industry in order to compete globally. Having been hewers of wood for America, the lumber industry in Canada failed to develop secondary and tertiary industries and markets that could meet global demand. It was easier to just sit back and sell to the Americans.

Watch for Canfor to be the next tree to fall in the M&A forest.

Newsprint maker Abitibi-Consolidated's merger with Bowater, announced Monday, may seem like the union of two dying elephants in a dying industry. A less cynical view would be that it continues a healthy trend. Domtar's big cross-border deal with Weyerhaeuser, set to close this month or next, will double the Montreal firm's sales. In B.C., West Fraser Timber forked out $325-million (U.S.), one-quarter of its market capitalization at the time, for 13 mills in the southern United States. There's more deal making to come because all of these companies are still too small, and for investors, one question lingers: Where's Canfor?

So why isn't Canfor larger already? For that matter, why doesn't any domestic forest company rank in the top 20 on PwC's global ranking? The Finns are there, as are the Japanese, the Aussies and the Singaporeans. Sweden's Svenska Cellulosa has a market cap of about $15-billion (Canadian) -- that's more than Canada's largest nine forestry companies put together.



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