Montana’s two U.S. senators tried this week to convince the International Trade Commission that an influx of cheap, Canadian government-subsidized lumber imports threatens Montana jobs and the state’s wood products industry.
Jon Tester, a Democrat, and Republic Steve Daines testified Tuesday that Montana lumber mill workers are facing unfair trade practices, and spoke of the importance of removing subsidized Canadian lumber from the American market.
The Canadian Softwood Lumber Agreement expired in 2015, and since then, Canadian firms have been sending lumber into the United States at prices with which companies here can’t compete.
Unlike the competitive-bidding, free-market system here, the Canadian timber industry is heavily subsidized by the government, which gives access to timber to companies based on lotteries and long leases. The currency exchange rate has also been favorable for Canadian companies that export products here.
“U.S. producers purchase timber in a free market that constantly fluctuates in terms of availability and price, while Canadian producers rely on their government for subsidies and access to cheap timber,” explained Chuck Roady, vice president and general manager of the F.H. Stoltze Land & Lumber Co. in Columbia Falls.
“The lack of a level playing field is the sole reason Canadian mills can invest and encroach on American market share while the U.S. industry weathers market ups and downs," he said.
Roady said that his company has not been able to run at full capacity for many years now.
“Our neighbors north of the border do not have to constantly worry about procuring sufficient timber to operate their mills, but that very concern is what keeps me up at night,” he said. “Located just 40 miles from the Canadian border, we at F.H. Stoltze Land and Lumber Co. have seen significant volumes of lumber pour across our border on a daily basis for decades. While we work exponentially harder to sustain our own operation, I watch as more than 30 carloads per day of Canadian lumber pass our sawmill on the railroad.”
According to Julia Altemus of the Montana Wood Products Association, nearly 7,000 jobs depend on the wood products industry in Montana.
Back in June, the United States imposed countervailing duties and anti-dumping duties on imported softwood lumber from Canada. The hearing on Tuesday was for the ITC to gather more information before they make a final determination.
Zoltan van Heyningen, a spokesperson for the U.S. Lumber Coalition, said a new trade agreement must be reached soon.
“Lumber mill owners from across the country today made it clear that unfairly traded softwood lumber from Canada causes very real harm to U.S. producers and their workers,” he said. “While Canadian producers enjoy massive government subsidies, their abuse of the U.S. trade laws results in lost profits, and lost ability to expand and grow production and jobs in the United States.
"As long as Canadian producers continue to ignore U.S. trade laws to suppress prices and capture growth in the American market, the U.S. government must level the playing field for U.S. workers by enforcing our laws," he said.
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Roady said that the United States and Canada have been fighting over this issue for 30 years, and the Canadians are reluctant to come to the table for a new agreement because they don’t have any incentive to upend the status quo.
“We, the U.S. industry, are not asking for a handout, or a leg up, we simply want to earn our business — fairly,” Roady said. ”We cannot allow Canada to continue to operate under very different rules and distort the market to their advantage without leveling the playing field. The administration, our trade representatives and Congress must enforce current trade laws in order to revitalize the U.S. lumber industry and restore the strength of manufacturing in America.”
Daines told the ITC that the U.S. Dept. of Commerce has already found that Canadians companies have been “dumping” lumber into the U.S. market in an effort to capture market share.
“I support the ongoing negotiations currently taking place to reach a new softwood lumber agreement,” Daines said. “That being said, an agreement is not an end in and of itself. It needs to be a fair and effective agreement that creates a level playing field for Montana producers and supports Montana jobs. Until such an agreement is reached, the U.S. should enforce all existing and appropriate U.S. trade laws.”
Tester said that Canada needs to be held “fully accountable” for flooding the market with cheap, subsidized softwood lumber.
“To limit the onslaught of subsidized Canadian lumber into our markets, we must immediately deploy our trade enforcement tools,” he said during his testimony. “Our mills and our economy simply cannot afford to wait any longer.”
Tester said that Canadian softwood lumber imports have surged since the agreement expired, which has caused U.S. softwood lumber prices to fall even while demand has been growing.
“The loss of market share is especially troubling because Canada does not use a fair market system to prices in raw timber,” he said. “Unlike the United States, where a large majority of timber is sourced from private lands at a fair market value, most Canadian timber is on public land and the Canadian provincial governments artificially set the harvesting prices.
"The system, known as stumpage fees, provides a sizeable competitive advantage to Canadian mills. Stumpage fees amount to the Canadian government providing a subsidy to businesses that are directly competing with unsubsidized American businesses," Tester said.
After the United States slapped anti-dumping tariffs on Canadian lumber in June, Canadian Natural Resources Minister Jim Carr and Foreign Affairs Minister Christia Freeland said in a statement that the government was deeply disappointed, according to the Canadian Broadcasting Corporation.
“We will vigorously defend Canada's softwood lumber industry, including through litigation, and we expect to prevail as we have in the past,” they said.
The U.S. International Trade Commission is an independent, bipartisan federal agency that oversees and determines the implementation of U.S. tariffs. The commission’s primary responsibility is to examine the benefits and consequences of U.S. tariffs to different sectors of the economy.