October 8, 2010 / 6:29 PM / in 7 years

U.S. hikes pressure on Canada in timber pricing spat

WASHINGTON (Reuters) - The United States accused Canada on Friday of unfair timber pricing practices that it said violated a 2006 bilateral softwood lumber agreement and took the first step toward arbitration to resolve the dispute.

U.S. Trade Representative Ron Kirk said the United States has asked Canada for formal consultations on its concern that the province of British Columbia was charging too low a price for timber harvested on its public lands.

British Columbia is home to major lumber producers Canfor Corp West Fraser Timber Co and Tolko Industries.

“The decision to move to consultations is intended to emphasize the importance of resolving this matter,” Kirk said in a statement that followed what he said had been months of unsuccessful bilateral talks on the issue.

Canadian Trade Minister Peter Van Loan said he was disappointed with the U.S. decision and Canada would argue forcefully in the upcoming consultations that there is “no justification for arbitration.”

“The U.S. complaint deals with a pricing system that is no longer in place,” Van Loan said in a statement in Ottawa.

The fight stems from different timber ownership structures. In the United States, much land is privately held. In Canada, provincial governments own most timber and charge fees to log it.

Under the rules of the 2006 pact, the two sides have to begin talks within 20 days and either side can ask for binding arbitration if a deal is not struck within 40 days.

Kirk said it appeared that British Columbia was selling timber at an unfairly low price to Canadian softwood lumber producers to circumvent certain export measures required under the 2006 bilateral lumber pact.

Lumber imports are a top political issue in U.S. border states including Maine and Montana, and Kirk had telegraphed this summer that the government could proceed with a case.

MOUNTAIN PINE BEETLES

Some U.S. lumber producers have complained that rival firms in British Columbia have unfairly benefited from the reduced prices the provincial government is charging for access to trees killed off in a decade-long infestation of mountain pine beetles.

The province says the reduced stumpage rates reflect the lower value of the wood, which is more difficult to process in sawmills. But U.S. producers have charged that the prices are too low and applied to trees that are still in good condition.

The fees are also intended to encourage harvesting of dead trees that pose a forest fire danger and will become unusable for logging if they remain too long in the forest.

The United States and Canada for decades have fought in courts over lumber trade, but in 2006 agreed to a deal to end litigation and solve disputes through arbitration.

“British Columbia’s stumpage practices depress already weak lumber markets at a cost of U.S. jobs in communities that can least afford such losses,” Steve Swanson, chairman of the Washington-based Coalition for Fair Lumber Imports, said in a statement welcoming Kirk’s announcement.

This group, an alliance of softwood lumber producers from around the United States, was formed in 1985 to respond to what it calls “the devastating effects of Canada’s lumber subsidies on the U.S. lumber industry.”

The British Columbia Lumber Trade Council, an industry group, said it is “not a coincidence” that the announcement came just weeks before the November 2 U.S. congressional elections, and said allegations of unfair trade ignored that Canada’s share of the U.S. market has fallen since 2006.

“It appears that once again softwood lumber has become a political football given recent demands by several senators for the U.S. to commence dispute resolution under the SLA (softwood lumber agreement),” John Allan, trade council’s chairman, said in a statement.

Sawmills in western Canada that once shipped nearly all of their production to the United States have recently found a new export market in China. The Chinese have become more interested in wood for housing construction.

Additional reporting by Roberta Rampton in Washington, David Ljunggren in Ottawa and Allan Dowd in Vancouver; Editing by Will Dunham

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