Canada, U.S., consider two-year extension of SLA 2006, announcement expected early next year

Wendy Lisney

LOS ANGELES , December 12, 2011 (Industry Intelligence) – An announcement is expected early next year on the 2006 softwood lumber agreement between Canada and the U.S. that could extend the deal into 2015, according to a report by the Canadian Press.

The seven-year agreement, which seeks to retain fair cross-border lumber trading conditions between Canada and the U.S., is due to expire in 2013. Industry and government sources in the U.S. and Canada have indicated there are no major issues that would prevent a two-year extension.

Zoltan van Heyningen, spokesman for the U.S. Lumber Coalition, said the industry wanted another two years to decide whether it is worth keeping the agreement in place, as it has not prevented disputes.

During a visit to Ottawa, van Heyningen said that, if the U.S. has to keep seeking arbitration over the next two years, it could make more sense to go back to full-scale litigation. He added that the U.S. industry wants to keep the status quo for another couple of years in the hope that mills on both sides of the border will be on sounder financial footing by 2015.

Avrim Lazar, president of the Forest Products Association of Canada (FPAC), said Canada's lumber sector took a similar view. He added that, while neither side really likes the agreement, they accept that it is better than not having it.

Producers in Canada would prefer unimpeded access to the U.S. market, said Lazar, but he said both sides were prepared to extend the agreement to retain predictability and stability.

The U.S. has won favorable judgment on two complaints before the London Court of International Arbitration, and a ruling on a third complaint is expected in January. That case is an allegation by the U.S. that British Columbia has effectively reduced stumpage fees by downgrading the classification of wood harvested from forests infested with the mountain pine beetle. Both Canada's trade minister and the B.C. Lumber Trade Council denies the U.S. claim.

Earlier this month, the U.S. lumber coalition launched another complaint, that British Columbia delayed setting prices for 2011 in the Coast region because they were about to go up.

Van Heyningen says stumpage fees were likely to remain at the center of Canada-U.S. disputes as most of Canada's lumber comes from government-owned land, while stumpage fees in the U.S. are determined by auctions.

Lazar noted that, while the the U.S. housing downturn has led Canada to establish new export markets, notably China, India and Brazil, the U.S. is likely to retain its position as Canada's biggest and most desirable market. The U.S., he said, is still the world's most successful economy, builds its houses from timber and has a relatively stable government. "A lot of our companies have mills there, added Lazar, "They are as close to family as you can get."

The primary source of this article is The Canadian Press, Ottawa, on Dec. 9, 2011.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.