In response to the U.S. imposing new penalties on Canadian softwood lumber imports, Premier Christy Clark is asking Ottawa to ban the shipment of all thermal coal through British Columbia, but a Calgary-based economist says this is a risky move.
Clark made the announcement after the U.S. Commerce Department concluded that Canadian softwood lumber imports are unfairly subsidized. Canadian lumber companies are expected to face new duties ranging from three to 24 per cent, starting May 1.
In an April 26 letter to Prime Minister Justin Trudeau, Clark said Ottawa should retaliate by banning the transport of thermal coal through B.C., something her government has been considering for some time.
Clark’s letter states that American thermal coal exports moving through Canada have been increasing due to a shortage of capacity at American ports.
“It’s not good for the environment, but friends and trading partners cooperate. So we haven’t pressed the issue with the federal government that regulates the port,” she said. “Clearly, the United States is taking a different approach.”
According to Clark’s letter, in 2016, 6.2 million tonnes of U.S. thermal coal passed through the Port of Vancouver. That figure is expected to rise as demand for coal in Asia increases and as U.S. port capacity remains stagnant.
But Trevor Tombe, an assistant professor of economics at the University of Calgary, said banning coal shipments would invite retaliation from the United States.
“It’s a dangerous road to go down because this would lead to a tit-for-tat trade war with the United States,” he said. “That would only leave consumers on both sides of the border to be worse off.”
The root cause of the decades-long softwood lumber dispute is the U.S. industry’s contention that Canada unfairly subsidizes its lumber by providing cheap access to Crown land as most American lumber is harvested from private property.
Tombe argued that scrapping the old system and moving to a market-based approach would end the dispute.
“If they were to just auction off timber rights then that component of the dispute would disappear, which is the backbone of their complaint,” he said. “We should focus on how we can ensure that trade between Canada and the United States is free and ensure that we have the appropriate policies to make sure that British Columbians are getting what they are entitled to, which is the value of the resource.”
On April 24, the U.S. Lumber Coalition released a statement applauding the new tariffs the American government has imposed on Canadian softwood lumber.
“Today’s ruling confirms that Canadian lumber mills are subsidized by their government and benefit from timber pricing policies and other subsidies which harm U.S. manufacturers and workers” said Cameron Krauss, the legal chair of the U.S. Lumber Coalition and a senior vice-president of Oregon’s Seneca Sawmill, in a release.
The tariffs arrived after the U.S. Lumber Coalition filed a petition with the U.S. Department of Commerce last November, which alleged Canadian lumber was being sold at below market prices in the United States.
The petition stated that U.S. industries and workers were suffering because of unfairly traded Canadian softwood lumber imports in the aftermath of the expiration of the last U.S.-Canada Softwood Lumber Trade Agreement, which was in effect from 2005 to 2016.
An investigation by the Committee Overseeing Action for Lumber International Trade or Negotiations (COALITION), looked at the top five Canadian companies that export to the U.S. and concluded that tariffs would be applied to these companies, based on how much they hurt U.S. industry.
The companies include West Fraser, J.D. Irving, Tolko, Canfor and Resolute Forest Products.
The committee decided that Canfor will pay 20.26 per cent, Resolute will pay 12.82 per cent, Tolko will pay 19.50 per cent and West Fraser will pay 24.12 per cent. J.D. Irving, which operates in Atlantic Canada, will pay 3.02 per cent. All other exporters will pay 19.88 per cent.
Susan Yurkovich, president of the B.C. Lumber Trade Council, fired back at the Americans and called the additional tariffs “punitive.”
“These duties are unwarranted, and this determination is completely without merit,” she said in a statement. “This new trade action is driven by the same protectionist lumber lobby in the U.S. whose sole purpose is to create artificial supply constraints on lumber and drive prices up for their benefit, at the expense of the American consumers.”
The U.S. Department of Commerce also found “critical circumstances” which means duties will be retroactive 90 days for all but the larger companies.
“The finding of critical circumstances in this case represents an unprecedented departure from the (Department of Commerce’s) typical approach and produces an entirely arbitrary result,” added Yurkovich.
Here in the Elk Valley, sawmills are preparing as best they can.
Charles (Bud) Nelson, president of Jaffray’s Galloway Lumber Co. said his company of about 60 employees sells up to 95 per cent of their products to the U.S.
Galloway produces dimensional lumber, which is used for home building.
Nelson said the company has yet to calculate what tariffs it owes but he expects the number to be in the thousands.
“We’re still working through the numbers,” he said. “I don’t have all the answers right now. It’s too early.”
Nick Morris, owner of Morris Sawmill and Lumber, is less worried. His small company of only a few workers does not rely on the U.S. market as he produces higher quality lumber used for decorative or structural purposes.
“That’s what separates me from some of those bigger companies,” he said. It’s not really hitting me that hard because I’m doing the fancier stuff.”