By Michael Lynch
Thousands of Northern Ontario jobs are hedging on whether the lumber market in the United States will be able to absorb steep duties that have been imposed on Canadian imports, softwood lumber producers say.
In May the U.S. International Trade Commission (ITC) made a final determination to begin collecting cash deposits for countervailing and anti-dumping duties of 29 per cent on Canadian lumber imports.
“No business can sustain those kinds of tariffs for any period of time,” says Hartley Multimaki, a vice-president with Buchanan Forest Products in Thunder Bay.
Buchanan is the largest single producer of softwood lumber in Ontario. A large percentage of the company’s 5,000 employees work at seven softwood mills in northwestern Ontario. It is a privately held company owned by Canadians, and the only major forest products company with a head office in Ontario.
Multimaki will not discuss the company’s market share in Ontario, other than to agree it is probably around 50 per cent. Ontario has 10 per cent of the softwood lumber market in Canada.
“At this point, we have to wait and see what happens in the U.S. lumber marketplace,” Multimaki says.
Multimaki says the dispute can be laid at the doorstep of southern U.S. lumber producers who purchased wood lots at inflated prices when the price of lumber was at record high levels.
“Now that the price has dropped they are attempting to drive the price up by eliminating the competition,” Multimaki says.
Multimaki says he is pleased at the federal government’s $95-million support package developed to assist the Canadian lumber industry.
“We’re grateful for this support and the position the federal government has taken with the dispute that free trade is free trade.”
“Wasn’t the whole purpose of (the North American Free Trade Agreement) to have free trade across the border?”
The federal support has been described as a “first-step response” to the steep duties and includes funding for research and development, expansion of alternative markets, and lobbying activities to advance Canada’s position in the trade dispute in the U.S.
Ottawa is considering a second phase of loan guarantees and other support to lumber companies damaged by the dispute. However, the government is being cautious with its support because it could trigger a new round of retaliatory measures by the powerful U.S. lumber lobby.
The U.S. lumber lobby alleges government unfairly subsidizes Canadian producers and that they dump below-cost lumber into the U.S. market - an allegation that annoys Multimaki.
“We’re not a subsidized industry,” Multimaki says. “Three times these same allegations have been before the World Trade Organization and we have been exonerated each time.”
Martin Michaud, Tembec Inc.’s vice-president of business development and planning, agrees with Multimaki that it is “too early to decide the fate of softwood sawmill jobs in Northern Ontario.”
Tembec operates 16 softwood sawmills in Canada, including six in northeastern Ontario. Tembec recently reported a first-quarter loss of $54.6 million, before unusual items, compared with net earnings of $20.6 million a year earlier. The company blames the loss partly on duties on lumber shipments.
Frank Dottori, Tembec’s president, announced in May that his company was planning to sue the United States for at least $200 million Cdn in damages over the softwood dispute.
“The action (by the ITC) is tantamount to expropriation of our markets,” Dottori says. “It diminishes our value and it causes loss of market share, loss of customers. Our investments aren’t worth as much because I can’t sell a product with a 30 per cent tax on it.”
