Canada, U.S. reach framework agreement on softwood lumber

[tuvor]

Canada and the United States have worked out a "framework" agreement to negotiate an end to the long-running softwood lumber dispute between the countries.

The agreement would see Canada allowed access to roughly 34 per cent of the U.S. softwood lumber market.

Canada will also collect an export tax on softwood lumber shipped to the United States if the price drops below $355 per thousand board feet. The tax would be at least five per cent of the price per thousand board feet.

The U.S. government has also agreed to return 78 per cent of the $5 billion it has collected in countervailing duties and dumping fees on Canadian lumber since May 2002.

(snip)

"Why would you give 22 per cent to your competition?" BMO Nesbitt Burns analyst Stephen Atkinson said, referring to the 78 per cent figure. "I've never heard of it, where you have your competition making record profits south of the border and Canada has to give 22 per cent. This money belongs to the companies and their shareholders, and the Canadian government is giving it away."

http://www.cbc.ca/story/business/national/2006/04/26/softwood-060426.html

[rockymountaindem]

1. So, there's a tarrif, but it's imposed by Canada on its own exports.

That's a nice VER, isn't it?

[tuvor]

2. Please explain to the stupid.

i.e., me.

[rockymountaindem]

3. What it sounds like in that article

is that Canada will collect a tax from it's own sellers should they start selling above a certain limit in the United States. Ordinarily, a tariff is levied on imports by the importing country to both to raise the price for that good in the importing country (to protect domestic producers) and to collect revenue for the government. What this deal proposes to do is force Canada to put a tax on its own exports, thereby raising the price of the Canadian goods (protecting US producers) while the Canadian government collects the revenue. I guess that's a good compromise, because the US was putting tariffs on softwood lumber anyway, and with the compromise the tariff remains but the revenue goes to Canada. OTOH, it really is a win for the US, because we imposed the tariff to protect producers, not because of the revenue. This makes it look like Canada somehow gains, but I bet Canada really won't because the revenue collected from this will probably hardly be noticed in the halls of Parliament, but the Canadian lumber companies will still be plenty mad as their product will still be more expensive in the US market if they pass the threshold.

On edit:

What I meant by VER in the original post:
A VER is a "voluntary export restraint". As tariffs are discouraged/illegal under WTO rules and are generally bad public and foreign relations, powerful importers (such as the US) have negotiated VERs with certain exporting countries. For example, in the 80s I believe the US negotiated for the Japanese government to put voluntary restraints on exports of cars to the US, or else the US threatened to levy an even tougher tariff. Japan gave in to the VER, thus protecting US auto manufacturers and shielding the US from anti-tariff agreements under what was then the GATT.

On further edit:
I knew Harper would cave on this issue. Thanks buddy!

[tuvor]

4. Gotcha.

Thanks for taking the time to explain.

[Monk06]

5. Here's a story you might find interesting..........

http://www.cnw.ca/fr/releases/archive/March2006/28/c4262.html

Special attention to Canadian Lumber producers buying up
US mills.

[rockymountaindem]

6. That makes sense

Canadian companies have an incentive to buy mills in the US so they can operate in our market without paying tariffs. That's fine with me, because anything produced in this country, regardless of where that firm's parent company is based, goes on the US side of the trade ledger. Besides, if this foreign investment is keeping open mills that would otherwise close, and employing Americans who would otherwise be laid off, that's fine by me.

Canada used to have a high tariff for the same thing, and it worked.

[Monk06]

7. Canadian companies would not just bring jobs but.................

high technology.

My brother runs the Canfor mill in Mackenzie BC
Their efficiency rate is 97% in terms of board ft of lumber per log.

The saw blades are only a few mm thick and are monitored by heat
sensors. When the blade gets hot the saw reduces speed and a scanner
resets the blade for a different cut on the next pass. It's all
automated. They sawyer's only responsibility is to keep the saw running.
Sounds easy but if one saw goes down the whole production line goes
down with it.

All the training is in house and Canfor gives preferential hiring to
local workers before outside employees are brought in.

The used to sell their sawdust for particle board. Now they don't have
enough waste to make is profitable.