The Softwood Lumber Agreement (SLA) that settled a long-running dispute between Canada and the U.S. is being extended by two years. Canadian Trade Minister Ed Fast and U.S. Trade Representative Ron Kirk made the announcement at a ceremony in Washington, D.C. on Jan. 23, 2012.
The agreement that ended many years of trade disputes over duties and other barriers to selling the wood was set to expire in 2013, but will be extended until 2015, and industry associations across Canada are pleased with the news.
President and CEO of the Forest Products Association of Canada (FPAC), Avrim Lazar, says the softwood agreement provides stability and predictability in terms of getting access to Canada's most important market, the United States.
"The industry is of the view that at a time of ongoing market uncertainty, it is a good idea to extend the deal by another two years to provide a degree of certainty in market access to the U.S.," he says.
In a statement released the same day of the announcement, Lazar notes that Canadian forest companies have gone through an economically challenging time with mill closures and job losses in the face of the global recession and the changing marketplace. However, the sector has had significant success in diversifying their markets especially in Asia. Wood exports to China have increased by 46 times since 2000 and the sector is now the largest Canadian exporting industry to both India and China.
The U.S. still accounts for about two-thirds of the exports of Canadian forest products.
"The truth of the matter is that by renewing this deal, the government has got it right," says Lazar.
In 2010, softwood lumber exports to the US were 9 billion board feet down from over 21.5 billion board feet in 2005.
FPAC, which provides a voice for Canada's wood, pulp, and paper producers nationally and internationally, continues to support the government's ongoing push to reach free-trade agreements with Europe and a number of individual countries in both Asia and in Latin America.
Individual Canadian provinces like Ontario, Quebec, and British Columbia, share the views of FPAC.
"This endorsement of the extension by the Central Canada Industries is based on current economic conditions which have, even without the competitive constraints of the SLA, shuttered much production and reduced substantially Central Canada's export capacity," says Mrs. Jamie Lim, President and CEO of the Ontario Forest Industries Association (OFIA)."
Experts believe this announcement removes an uncertainty that hung over the forest sector.
"It does not solve the problems of market or economic conditions, but at least our companies exporting softwood lumber to the United States are now aware of the rules that will apply until October 2015." says M. André Tremblay, President and CEO of the Council of the Québec Forest Industry (QFIC).
It is worth noting that Canada's softwood lumber industry paid a very significant initiation fee of $1 billion for the SLA that was, according to the Congressional Research Service, split with half going to the U.S. lumber companies and the rest used for joint North American lumber initiatives. This initiation fee was paid despite a legal ruling that would have seen all duty deposits returned to Canada. Since 2007, under this agreement, Québec and Ontario companies have paid more the $190 million in border taxes on their exports of softwood lumber to the United States. Central Canada, in light of its prior payment and sacrifice, now looks to whatever continuing benefits may be derived from the SLA according to the already agreed terms.
Lim and Tremblay concluded by stating, "The renewal of the Agreement on Softwood Lumber until 2015 is good news for those Central Canada companies who continue to export lumber to the extent it provides certainty around access to the U.S. market. Economic analysts forecast a steady and consistent growth in the U.S. home building sector and an increase in consumption forecasted for 2013 should benefit Central Canada companies."
The British Columbia Lumber Trade Council (BCLTC), which represents 85% of interior lumber production and a substantial proportion of coastal production, also supports the extension.
"Because the SLA is operating substantially as expected, the BCLTC supports an extension," said John Allan, President.
Allan further noted that "Canada's softwood lumber exports to the U.S. have fallen significantly, and our lumber exporters are developing new markets in Asia. However, an extended SLA will help to provide a stable foundation for Canadian lumber trade with the U.S. when housing and lumber demand recovers."
"We thank Canadian Trade Minister Fast and BC Minister Bell and their staff for achieving this extension," said Allan.
Unless extended even further, the SLA will now expire in October, 2015.