PM's Stupid speech on softwood lumber angers Americans
Paul Martin may have angered George W. Bush with his blunt talk in New York last week defending Canada's position in the softwood lumber trade dispute, a senior government official said yesterday.
National Post

October 16, 2005: At the behest of the U.S. lumber industry, the U.S. Government has imposed tariffs on imports of Canadian softwood lumber. This is contrary to NAFTA rules. So what? Does Canada propose to pull out of NAFTA because of the breach? Certainly we would if it paid us to, but Prime-Minister Paul Martin has provided not a scrap of evidence to suggest that it would. As U.S. Ambassador to Canada, David Wilkins, has pointed out, lumber is a very small fraction of Canada: U.S. trade, the world's largest trading relationship. The best thing for Canada to do, therefore, is to negotiate and settle the dispute. The Prime Minister's implied threats to sell our energy surplus to China if the Americans won't adhere to NAFTA rules on lumber is all hot air. Self evidently, if we could make a better deal on oil with China than with the U.S. then we would. Softwood lumber doesn't come into it. What's more, as Ralph Klein has pointed out, oil isn't Ottawa's to sell. The Prime Minister is taking a phony position of antagonism to the U.S. because he thinks it will bolster his popularity in the run up to an election. But for Canada, such posturing risks serious damage. The dispute is portrayed by Paul Martin as one between a bullying U.S. trying to force its own way against the interests of a rule-abiding Canada. This is baloney. Canadians are, it is said, very like Americans. The fact remains, however, when it comes to trading lumber, Canadians and Americans have ideas that are about as far apart as they could possibly be. In Canada, depending on the province, between 85 and 95% of all land is government owned. That's right; Canada is probably the most communistic country in the world when it comes to land ownership. Because the population of Canada is small, socialized ownership of most of the land does not prevent a vigorous free enterprise economy thriving on the 5 to 15% of the land in each Province that is not publicly owned. But public ownership of land has a huge impact on the forest industry. Because the Provinces own the forests, they manage them to maximize the return to the Government, both financially and politically. That is best achieved through employment stability, which ensures a constant stream of taxes from wages and corporate profits, and minimal social costs resulting from layoffs and mill closures in what tends to be a highly cyclical industry. How, do provincial governments maintain stability in the forest industry? They do so by fiddling stumpage rates. When the industry is doing well, the provinces receive only a modest revenue from timber sales but a large income in the form of taxes on forest industry wages and profits. When demand falls, stumpage rates are lowered to maintain output, without great impact on government revenue. In British Columbia, for example, stumpage rates have often been essentially zero, if not lower, after accounting for allowances for "silvicultural" (mainly harvesting) expenses. How does that impact the American industry? Very damagingly. In America, most timber is privately owned. Thus, when demand is low and stumpage prices fall, timber is held off the market and the forest industry suffers a slump. When British Columbia and other Canadian provinces, which collectively supply about one-third of the American market, maintain output by cutting stumpage, the severity of the slump in the American industry is greatly accentuated. It is the adjustment of stumpage rates to maintain near constant output that prompts the American industry to claim that Canada unfairly subsidizes its forest industry. And from their free market perspective, that is exactly what the Canadian provinces do. Canadians, so used to their socialized system of land ownership, probably fail to grasp how offensive that system is the Americans. The softwood lumber dispute results from a clash of cultures. Neither culture need be judged best. But it better be understood by Canadians that America's tariff on Canadian softwood lumber is not just an arbitrary and bullying tactic by an intimidating neighbor. It is a rational action, as Americans see things, in defense of their legitimate interests. To threaten the Americans, our biggest trade partner by far and closest ally, for failing to see things our way is trashy politics and damaging to Canada's interests. George Bush is not a popular president in Canada, and that for very good reasons. Nevertheless, Bush did Canada a favor in appointing the astute and likable David Wilkins as Ambassador to Canada, a man who's avowed aim is to improve Canada: US relations during his tenure in Ottawa. We should take him at his word and help him in his mission by negotiating a durable understanding with the U.S. on trade in softwood lumber.

Return to Home Page

The Canadian Spectator is optimized for viewing with Firefox Version 1.02.

Please address correspondence to .